The borough assembly and school board met April 23 in a joint work session to discuss local funding for the school district for the 2024-2025 school year.
The school district has requested $1.75 million from the borough, which is the maximum local contribution allowed under state law and an increase from the $1.6 million that the borough contributed each of the past two years.
The minimum local contribution required by the borough is $862,086.
The state sets a minimum and a maximum in an effort to reduce budget and school program inequalities between districts.
Last year, 13 of 54 school districts in Alaska received their maximum local contribution amount.
Like many districts across the state, Wrangell is struggling to balance its budget without any increase in the state funding formula in seven years. Even with a potential local contribution of $1.75 million, next year’s budget will draw down half of the school district’s reserves.
The district’s operating budget for next year is about $6 million.
Wrangell, along with districts statewide, is hoping for additional state funding for next year, but is waiting on the Legislature and governor to make that decision.
The borough assembly will discuss the local contribution at its next meeting, May 14.
Borough Manager Mason Villarma spoke at the April 23 work session from the borough’s perspective about the difficulties of funding the schools. “We know that the rate that we are spending is unsustainable.”
He explained how the borough provided $1.6 million for schools this year: Currently, 20% of sales tax revenues goes to schools, which totals roughly $800,000. Federal dollars also provided $800,000.
The federal money comes from the Secure Rural Schools (SRS) account, a U.S. Forest Service program that distributes funds to municipalities located in national forests that saw a drop in economic activity and revenue from the decline of the timber industry.
The SRS program distributed about $9 million to municipalities within the Tongass National Forest last year.
In addition to providing money for the school district operating budget, the borough also has to make payments on a $3.5 million bond issue that voters approved in 2022 to pay for school major maintenance. The annual payment on that debt is $250,000.
Wrangell had not issued bonds to pay for school repairs and improvements since 2010.
“We promised the voters that this payment would come out of SRS rather than property taxes … which will require dipping into the borough’s reserves to meet the $1.75 million local contribution,” Villarma said.
“It’s very very hard to continue to fund something that’s unsustainable and not address the root cause of the problem,” he said in an interview April 24. “Those are the difficult conversations that need to be had in the long run.”
The borough has roughly $1.5 million in SRS fund reserves, while the school district expects its operating fund reserve balance will be down to an estimated $560,000 at the end of the 2024-2025 school year.
Taking an average of the borough’s contributions over the past few years, Villarma calculated that if they continue spending this way, it’s only about three years until both the borough and the school are out of reserves altogether. “Let’s address it now so we can keep our savings, right?”
The federal money also goes toward road work, and Villarma said the borough owes residents some road repairs. A lot of the underground utilities are anywhere from 20 to 60 years old, and line breaks are happening all the time, he said.
Schools Superintendent Bill Burr and Villarma at the April 23 assembly work session discussed a potential solution to the dwindling reserves that would include better utilizing the school’s capital improvement fund, which currently totals about $1.3 million.
The fund has been set aside for over 20 years for infrastructure improvements and emergencies.
The school buildings, however, are owned by the borough, making major repairs of the buildings the borough’s responsibility. The school district covers maintenance.
Villarma and Burr discussed delineating exactly which functions the borough will be responsible for and what the school district will cover, so that the funds set aside for emergencies could go toward more discretionary projects and the school district operating budget.
Burr shared that it’s crucial to clarify who is responsible for what, so that the school does not end up in a situation where it doesn’t have the funds to cover emergency maintenance.
Now is an opportune time to set these parameters, Villarma said at the work session, mentioning the new people in roles within both the borough and school administration.
This isn’t just “a Wrangell problem, it’s a pervasive state issue, really a national issue,” Villarma made clear. “It's all over, and acknowledging that helps us understand that hey, this isn’t just our fault, this is a state problem and let’s figure out our best way to address it.”
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