Alaska

Pressing state issues

Alaska's 31^st Legislature opened to continued pressures to address budget challenges in a state without an income tax, and where each resident expects an annual cash dividend from a state investment portfolio called the Permanent Fund Dividend (PFD). To further complicate matters, significant numbers of residents in the state reside on land not subject to property tax. The state relies heavily on oil revenue, investment earnings, and federal funding for its operating revenue. Less than half of the state's operating budget is paid for with undesignated general funds that come from taxes and an annual transfer from the Alaska Permanent Fund Corporation's investments. In an attempt to keep his campaign promise to not raise taxes and to increase the amount of the PFD check for each resident, the governor introduced a budget cutting more than $1 billion in state spending. Overall, the legislature passed four budgets for FY2020 containing appropriations for education.¹ The Alaska Department of Revenue estimates showed sufficient funds to run the state, but using the traditional formula to pay out the PFD to residents would leave a deficit. The governor exercised line-item veto on each of the budgets, resulting in a $244.8 million or 3.2% decrease for the FY2020 state budget.

Funding priorities

The top four budget line items remained constant in 2019, with funding for K-12 as the largest budget item ($1.3 billion), health and social services following closely ($1.2 billion), the PFD payout to residents at third place ($1 billion), and the university system in fourth ($658 million). The budget for 2020 currently reflects changes in state funding priorities with the PFD moving to the second largest budget item at $1.1 billion (an increase of 50% from 2018) and health and social services reduced to the third largest budget item ($1 billion), although the budget shows heavy cuts to Medicaid that may result in a later supplemental appropriation.

The 2020 budget for education will feel the impact of other funding priorities, most notably the $25 million cut to the University of Alaska system, and the legislative intent for the Board of Regents to develop a plan to transition the system from three separately accredited institutions to one accredited institution with multiple community campuses.²

Overall numbers for P-12 will see a 0.1% increase for 2020, however, due to line-item veto deep cuts will be experienced by libraries, education support and administrative services, and the Mt. Edgecumbe Boarding School. The boarding school cuts by line-item veto resulted in the most drastic reduction in education funding with a 91.8% decrease in appropriations, which included zero funds appropriated for facility maintenance.³ Other vetoes prevented the boarding school from receiving future appropriations for operation and maintenance,⁴ removed re-appropriated monies for operation of the new Mt. Edgecumbe Aquatic Center and eliminated its receipt authority.⁵ This $26 million facility was open for only a few months before closing its doors, although it is possible the governor's authority to eliminate its receipt authority will be challenged in court.⁶

Changes to the funding formula

To date, no changes have been proposed to Alaska's formula for adjusting average daily membership (ADM), a formula that considers a number of factors beginning with school size, and is then multiplied by a base student allocation (BSA). The result of this formula is a wide range of per pupil expenditures, which last year was between $6,805 and $82,408, depending on the school district. Furthermore, the BSA, currently set at $5,930, remains unchanged.

P-12 Per-Pupil Expenditure (as an average): $16,088

Allocation of State Dollars and Percent of the State Budget for P-12 and Higher Education: The 2019 fiscal year general fund spending on all education agencies, including debt reimbursements and payments on behalf of teacher retirement totaled $2.2 billion, representing 29% of the state budget spending including PFD payments.