The school district has a separate savings account of nearly $1.2 million, which would more than cover its expected revenue shortfall of $767,016 for the upcoming school year. The fund is reserved for capital improvement projects, but it is within the school board’s purview to reallocate the funds if needed.
The district has been building the fund since 1998, with only small withdrawals in recent years.
Without major new revenues or spending cuts, the district’s operating budget reserve fund — a separate account from the building improvements fund — is expected to hit zero sometime during the 2026-2027 school year.
If the school board were to reallocate the money from its capital improvements fund (CIF) to its dwindling operating budget reserves, the board could buy the district some time before needing to make substantial budget cuts. Ultimately, it needs the state to increase its contribution toward local school districts to help fill its annual budget gap.
The school board has not raised the issue of pulling money from the CIF account to help cover operating expenses in any of its recent meetings.
The borough is responsible for maintaining the school buildings, though there is no specific definition of maintenance. The lack of clarity has been a point of discussion between the school district and City Hall. Currently, the borough funds “major maintenance,” while the schools pay for smaller, day-to-day upkeep and preventative maintenance projects.
The district started the fund in 1998 with a balance of $140,000, according to Kristy Andrew, the district’s business manager. The $1.2 million reserve is invested, with the district earning about $50,000 a year from the savings.
The district has dipped into the fund a couple of times recently. In 2022, the fund covered a $52,000 expenditure for heating and ventilation system repairs and upgrades. Last year, money from the fund was used to reimburse the borough for an engineering firm’s survey of the school buildings. The reimbursement cost the district $181,000.
Borough officials want to see a clearly defined threshold for what maintenance is covered by the district’s fund and what is paid by the borough.
“There needs to be a fine line drawn between what’s considered maintenance and major maintenance,” Borough Manager Mason Villarma said. “In my mind, that’s a $50,000 threshold, but we can set it at whatever it needs to be.”
Burr appeared less on board for this type of agreement.
“If it’s only (the borough’s) responsibility if it’s over $50,000, then it puts an artificial mix to it. What if there are 100 projects that are $49,000?”
In 2024, the borough received a $695,000 federal grant to rebuild the 30-year-old middle school roof, around half the estimated cost. As a major maintenance project, the borough will cover the rest with money raised in a voter-approved 2022 school repairs bond issue.
While it’s beneficial for the school district that the borough covers major costs, it raises the question of the purpose of the million-dollar CIF account.
Burr said the district sees the account more as an “emergency fund.”
“For example,” Burr said, “A boiler blows out and we have to get it fixed now.”
He said financing through City Hall can be a time-consuming process and that maintaining a standing balance in the fund gives the schools some flexibility.
However, as the school’s financial situation deteriorates, the district may no longer afford the luxury of holding onto that standing balance. Burr did not give a definitive answer whether or not he would recommend to the school board that it reallocate money from the account to cover its operating budget shortfall.
“I think we would be looking at everything in the budget to find out where we could try and make things exist,” he said.
But a $767,016 operating budget deficit that’s projected only to increase the following year does not give the district much time to find substantial new revenue sources.
Even if the school board reallocates the CIF money to the operating reserve fund, that would likely only buy the district a year or two (unless more state funding comes through or significant spending cuts are imposed). The district’s operating reserve fund is projected to end the 2025-2026 school year at just $51,299.
The borough is not allowed to change line items or spending decisions in the school budget, though it is the second-largest contributor to the district after the state.
Wrangell is not alone in grappling with school budget woes. Last year, Petersburg’s school budget included staffing reductions after they faced similar funding shortages. Juneau, also up against funding issues, consolidated middle and high schools to make ends meet. In Sitka, the district laid off 16 teachers in 2024 to survive amid budget cuts.
“There's lots of different ways that they could save money,” Villarma said. He added that he has suggested sharing City Hall’s IT, maintenance, human resources and finance departments with the school district.
“If they don’t,” he said, “I think it’s just going to hit them like a brick wall, similar to those other communities.”
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