The way state funding for the Kenai Peninsula Borough School District is calculated was the subject of the first of an informational “Budget 101 Series” that the school district debuted earlier this month.
KPBSD announced the series after the district’s last budget process prompted community backlash over proposed cuts and confusion about how the district budget is crafted. Each installment looks at a different component of the district’s budget process and is aimed at helping better inform residents about how school funding works.
The first presentation, given by KPBSD Finance Director Elizabeth Hayes during the KPBSD Board of Education’s Sept. 11 meetings, focused on the State of Alaska’s Foundation Funding Formula. Hayes said more than 70% of KPBSD’s general fund budget comes from the state through that formula, which was developed to help address state funding disparities among Alaska school districts. The formula adjusts a school district’s enrollment for things like school size and location. The final number produced by the formula is then used to determine how much money the state will give that district.
Heading into the current fiscal year, KPBSD faced a $13.1 million deficit that it offset with budget cuts, federal COVID-19 funding and money from savings. The district heavily lobbied the Alaska Legislature last session for a meaningful increase to the base student allocation, or the amount of money the state gives school districts per student, which has been flat since fiscal year 2017 with the exception of a $30 increase approved for the current fiscal year.
State lawmakers instead provided $175 million in one-time funding for school districts, half of which was vetoed by Gov. Mike Dunleavy in June.
Hayes said during the Sept. 11 presentation that, unlike last budget cycle, KPBSD doesn’t have any more COVID money to use to offset future budget deficits. That means KPBSD will again start next fiscal year with — at least — a $13 million deficit.
“Right up out of the gate starting for FY25 school year, we will be facing a minimum of a $13 million deficit if we go status quo,” she said.
As a result, state funding will play a bigger role than last year in shaping KPBSD’s financial future.
Calculating state funding
In a step-by-step format, Hayes outlined how the number of students enrolled in KPBSD schools is adjusted by the state and used to determine the district’s funding. For the current fiscal year, Hayes said KPBSD’s preliminary average daily membership was 7,411 students. After being run through the foundation formula, KPBSD’s adjusted average daily membership was about 17,225.
KPBSD’s average daily membership refers to the actual number of students attending KPBSD schools during an annual 20-day count that takes place every October. Conducting an enrollment count over 20 days, Hayes said, allows the district to get a more accurate picture by including in its final total students who may be absent on a given one-day enrollment count.
The district’s average daily membership is then run through Alaska’s foundation formula, which produces an adjusted version of that number, called the adjusted average daily membership. It’s that adjusted number that is then multiplied by the base student allocation to determine funding.
Because the 20-day count occurs in October — well after the school year starts in August — the district has to do a bit of guesswork at the beginning of each fiscal year as it starts work on the annual budget document.
“The problem that we currently have is that we don’t know our funding until the 20-day count of the school year we’re actually currently in,” Hayes said. “So we’re taking an educated guess when we’re setting our budget because we don’t really know how many students will be here.”
Once KPBSD has its average daily membership number, Hayes can start running it through the foundation formula.
The first part of the state’s formula adjusts a district’s average daily membership for school size. That adjustment, Hayes said, is designed to help with economies of scale. Based on how many students attend a school, a school falls into one of eight categories that determines what formula will be used to find that its adjusted average daily membership.
Next comes a district cost factor. The district cost factor is meant to recognize that the cost of educating a student depends on where in Alaska that student goes to school; the formula uses Anchorage costs as a base amount. For example, because the cost of educating a KPBSD student is 17.1% higher than the cost of educating a student in Anchorage, KPBSD’s adjusted average daily membership is multiplied by 1.171.
After that, the adjusted average daily membership is again multiplied by a special needs factor of 1.2. That factor accounts for additional expenses districts incur through programming for students with special needs. Hayes said state funding for those programs was previously provided on a reimbursement basis, but that the state was concerned about districts overreporting the number of special needs students to get more state funding. So, a flat factor of 1.2 was adopted.
The flat rate also has its shortfalls, though, Hayes said. For the current fiscal year, Hayes said the special needs factor boosted KPBSD’s budget by about $13.6 million. The actual KPBSD budget for special education programming, however, is about $29.2 million.
Once KPBSD’s average daily membership has been adjusted for school size, district cost and special needs programming, it is further adjusted depending on whether or not the district offers career and technical education. In the case of KPBSD, which offers CTE programs, a CTE factor of 1.015 provides funding for such programs. Hayes said that state money is used in conjunction with Carl D. Perkins grants the district pursues independently.
The next factor that determines state funding is the number of special education students that have intensive needs. Rather than presenting as a number that the district’s adjusted daily membership is multiplied by, the funding is determined by multiplying the number of students who qualify for such programming by 13. The resulting product is then added to the adjusted average daily membership.
The last step of the formula accounts for KPBSD’s correspondence, or home-schooled, students. Districts receive less funding for home-schooled students, so the adjusted average daily membership of the KPBSD’s correspondence enrollment is multiplied by 0.9. That amount is then added to the total adjusted average daily membership.
The number produced once all six foundation formula steps have been applied is then multiplied by what the State of Alaska has determined to be districts’ basic need per student — the base student allocation or BSA. For the current fiscal year, the BSA is $5,960.
Hard decisions ahead
From that final amount, districts must subtract however much must be contributed from local sources — in KPBSD’s case, the Kenai Peninsula Borough. Each year, the borough is presented with a minimum and maximum amount at which it can fund the school district. The minimum amount is what it is legally required to provide, while the maximum amount is how much the borough could contribute if approved by the borough assembly.
For the current fiscal year, the Kenai Peninsula Borough Assembly fully funded KPBSD at about $54 million. One hundred percent of the money the borough takes in from sales tax goes to funding schools.
After Hayes’ presentation, multiple board members said the district is in a tough spot when it comes to finishing a budget document. Kenai Peninsula Borough code requires the school district to submit to the borough assembly a balanced budget document in April — roughly one month before the Alaska Legislature typically adjourns.
That means the district must balance its budget before it knows how much money it will receive from the State of Alaska for the corresponding fiscal year. In the case of the current fiscal year’s budget, that meant sending a budget with major cuts to the assembly for approval, but later being able to add those cut programs or positions back.
Board member Jason Tauriainen said the board works to keep cuts as far away from classrooms as possible, which often means proposing cuts to extracurricular activities or other programs that are popular. Pushing back on the idea that extracurricular cuts are proposed to make people upset, he said cuts to such programs are “the last thing” he wants to do.
“If we have to make cuts because we’re not going to get the funding that’s needed to be able to meet our payroll obligations and paying our utilities and paying for maintenance then … that’s just the reality of what we’re going to have to do,” he said.
Board member Virginia Morgan agreed.
“I hope the public understands this and understands that this is no scare tactic — that the board is trying to cut the popular programs to get people out,” Morgan said. “This is just the reality because of the timeline and what the current decisions are of our legislature. We’re going to be looking at some really scary cuts very soon.”
KPBSD’s informational budget presentations occur before the school board’s regular meetings, on the first Monday of each month. The next board of education meeting is on Oct. 2. “Budget 101” presentations can be streamed on the district’s BoardDocs page.
Reach reporter Ashlyn O’Hara at firstname.lastname@example.org.