The state has said it will send more money to the local schools this year, but the exact amount still isn’t clear.

The Kenai Peninsula Borough School District received a letter from the Alaska Division of Retirement and Benefits stating the school district would receive a rebate of approximately $945,000. However, those funds, or all of the funds, might not be available for the school district to use because some of them may be restricted based on grant requirements.

At the Kenai Peninsula Borough School District Board of Education’s work session Monday, Assistant Superintendent Dave Jones said administrators had contacted both the Alaska Department of Education and Early Development and the district’s auditors with questions and concerns regarding whether or not those funds were a product of federal grants or charter school appropriations.

“We think, according to the law, we may need to pay those grants back and repay the charter schools back,” Jones told the board. “Our concerns are a number of those funds were paid for with grants and a number of those funds were paid for with charter school appropriations.”

The $945,000 comes from funds that were deposited into the state defined contribution system for teachers and public employees. The defined contribution system began in 2006, with both the employee and employer pay into the account. To become vested, and to receive any amount of what the employer deposits into the retirement account, the employee must have worked for the school district for at least two years.

Employees who leave the district before reaching that two-year vestment mark have the option to withdraw their contributions from the defined contribution system. Now, the state is issuing refunds to school districts for their employer contributions to employees who left before they were eligible to withdraw the retirement funds. This does not affect un-vested employees who did not withdraw their retirement contribution.

“Now all of a sudden the state is saying to us, well here’s some of that money back,” Jones told the board. “But we believe that we may have to refund (some of it). That’s what we’re talking with our auditors and folks… we have to refund that to the federal government in many situations, and so, do you have $945,000 to spend? You don’t and I can’t tell you that.”

Auditors are trying to find individuals who withdrew their contributions and compare it to the district’s payroll records to see if those individuals were being paid using grants or charter school appropriations.

“Over the years, anyone that has been paid for by a grant… that’s not our money to use,” Jones said.

The school board plans to look at the rest of the district’s budget separately, and if any money should be allocated from the state’s $945,000 to the district, then an adjustment to the budget would be made for the 2019 fiscal year.

“Administratively we’d like to deal with the general fund budget and numbers that we’ve gone through all year so people understand what that is,” Jones said. “Then when we get some clarification on the contribution forfeitures, we’d like to handle that as an adjustment to the budget that’s separate so people can understand what that is and it doesn’t confuse what we’ve been talking to them about since October.”

The effective date on the letter from the state was July 1, the first day of the school district’s fiscal year.

The funding became an issue at the Kenai Peninsula Borough Assembly’s special meeting Friday during a discussion about whether the assembly should overturn Borough Mayor Charlie Pierce’s line-item veto of $652,000 for the school district. Jones testified to the assembly in support of overturning the mayor’s veto that eliminated $652,000 in funding for the school district. The district had planned to use the funding to hire mental health and safety counselors for younger students. The mayor’s veto stood after the assembly split 5-4, with at least 6 votes required to overturn a veto.

While the state has notified the school district of the funding, Jones said he explained that the $945,000 is money the district can’t bank on.

“I tried to tell them this really isn’t a solution at this point in time,” Jones said during the school board’s finance committee meeting on Monday. “We don’t feel confident that we can say, ‘Yeah, we’re going to fund new expenditures on it.’ Do I think we’re going to get a good portion of that back that we can use? I do. But do I feel confident enough that’s it’s going to be enough to tell you as my board members, ‘Let’s do it?’ No.”

The school board is waiting to hear back from the district’s auditors regarding the payroll information of the individuals who withdrew their retirement contributions.

Reach Victoria Petersen at vpetersen@peninsulaclarion.com.