Juneau school administrators are facing a severe budget shortfall partly related to flat state funding and declining enrollment. But much of the crisis comes from accounting errors that “drastically” undercounted staffing costs.
The city’s school board learned Jan. 9 that the district is projected to be $7.6 million in deficit for the current fiscal year and carrying over a $1.9 million shortfall from the prior fiscal year. The combined $9.5 million deficit equates to roughly 10% of the district’s total budget, and it’s expected to keep ballooning.
Lisa Pearce, Juneau schools’ new finance consultant, was hired temporarily last month by the district on a $50,000 contract to review the current year’s budget and help the board write the next budget. She previously worked in a similar position at Fairbanks North Star Borough School District.
Juneau’s former administrative services director, Cassee Olin, resigned last month after a November budget audit found the district was $7 million in deficit, the Juneau Empire reported in December.
After another budget review in recent weeks, Pearce said staffing costs had been understated by $5 million. Retirement costs were “mischaracterized” as revenues instead of expenditures and undercounted by $1.5 million, she said.
Pearce noted other accounting errors. The district’s budget did not include funding for the superintendent’s salary and benefits at $252,000. Some special education grants were estimated to be $300,000 when the actual cost has been over $1.8 million for the year to date — similar to figures from prior years, she said.
Enrollment was also expected to be 83 students below earlier projections, which was expected to cause $870,000 less in funding from the state, she said.
Some of Juneau’s school funding challenges have been seen across Alaska. Other districts have reported strained finances from the end of COVID-19 relief, declining enrollment and years of flat state funding.
The Anchorage School District recently projected a $98 million deficit and was expected to have 1,279 fewer students this year. Administrators are examining whether to end programs for gifted students, increase student-teacher ratios and reduce summer school offerings — among other reductions.
KTFV-TV reported that Fairbanks school officials are facing a record $28 million projected deficit; the Peninsula Clarion reported the Kenai Peninsula School District has a roughly $13 million deficit and 148 fewer students.
The Wrangell School District is in its last year of federal pandemic relief funding and faces tough financial choices for the 2024-2025 school year budget, which the school board will put together over the next couple of months.
Some of Juneau’s other financial challenges — like the accounting errors — are more localized. David Noon, a school board member, said he was “incandescent with rage” about the errors and questioned how they weren’t noticed. School Board President Deedie Sorensen said she was “extraordinarily upset” about the district’s budget situation.
Administrators have few options. Pearce urged board members to look forward, but she didn’t think it was mathematically possible to resolve the structural deficit in one year.
Juneau Superintendent Frank Hauser, who was appointed in April after the current budget was written, said 90% of the district’s budget goes to salaries, and 90% of those costs go to classroom teachers. Many of the budget expenses — like those for retirement benefits — are statutorily or constitutionally required and cannot be cut.
Will Muldoon, who chairs the Juneau school board’s finance committee, said Juneau’s budget crisis is “unprecedented.” He said administrators can cut programs, fire staff or close schools — but no combination of cuts could reasonably close the deficit before July.
“We’re insolvent right now,” Muldoon said. “We cannot pay our bills.”
Board member Emil Mackey urged making deep cuts but — saying nobody wants to hear it — that filing for bankruptcy may end up being the best option for Juneau School District.
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