Ruling could impact school funding

PALMER — Mat-Su Borough and school district officials are still struggling to assess the impact of a Ketchikan court decision that could shift the full burden of funding public schools to the state’s budget.

Superior Court Judge William Carey ruled a critical portion of state educational finance — the required local contribution, or RLC — violates Article IX, section 7 of the Alaska Constitution, which prohibits the Legislature from setting aside the proceeds of any state fee or license for pre-determined purposes.

The state of Alaska had argued in court that because the local contribution — set by a 1962 state law at 2.65 mills of a municipality’s total assessed value — is composed of local funds, it didn’t amount to an state license or fee, and was exempt from the provision.

In court filings, lawyers for the Ketchikan Gateway Borough argued that because the borough’s amount was set by a Legislature-ordained formula, it amounted to a tax, and was covered under previous rulings. The borough paid its $4-million amount under protest last year, then filed a lawsuit in January alleging the violations.

Carey sided with the borough.

“The RLC plainly consists of public revenue,” he wrote, in a 26-page summary judgment distributed Monday. “The state’s assertion that the RLC is not a source of public revenue because the statutory scheme only requires that the funds be raised, but does not tell the municipal districts how to raise those funds, ignores reality.”

If Carey’s decision survives a likely appeal before the Alaska Supreme Court, it would affect 34 of Alaska’s 53 school systems, including the Mat-Su Borough School District. The remaining 19 school systems are known as regional educational attendance areas, and funded solely by the state and federal government. Alaska is constitutionally required to provide public education for all of its citizens.

Local officials struggled Tuesday to evaluate the possible ramifications for borough and school system finances.

Without a temporary stay postponing the ruling’s effects until an appeal is completed — which could be granted either by Carey or a higher court — the Legislature is likely to spend significant time this session re-writing portions of the state educational finance law, even while it struggles with steeply declining oil prices.

For example, the borough’s required local contribution is set at about $29.5 million. A separate category, known as the “additional allowable” amount, is essentially voluntary contribution, meaning the maximum amount the borough can contribute to the school system is $67.7 million, according to figures provided by the school system.

The borough has paid about $51 million each of the last two years, according to figures provided by Borough Finance Director Tammy Clayton.

With no interim formula in place heading into this winter’s legislative session, the onus would fall on the state, said Luke Fulp, the district’s assistant superintendent for business and operations.

School districts can’t sell borough-owned schools to raise money, and — unlike school systems in other states — can’t impose taxes, Fulp pointed out. Boroughs and cities hold title to the buildings, Fulp added.

“If the decision was upheld, what it would effectively do would be to require the local contribution to be the state’s responsibility,” he said.

The decision adds an additional degree of difficulty to planning, said borough attorney Nick Spiropoulos.

“It’s always a question every year,” he said, before referencing the state’s contribution, referred to as the Base Student Allocation: “is the BSA going to change, how much is it going to change? It’s always a question every year as to what the Legislature is going to do.”

“We don’t know what’s going to happen,” Spiropoulos added. “It’s simply too early to tell.”

Contact Brian O’Connor at 352-2269 or brian.oconnor@frontiersman.com.