The most recent draft of the school district’s 2025-2026 budget shows a deficit of $271,000. With City Hall hamstrung by cuts to federal funding, the school board could need to make sweeping cuts to balance the books.
The district is not legally permitted to operate in a deficit and its operating reserve is nearing empty
The draft budget assumes that the borough will fund the schools at the maximum amount allowed by state law, around $1.8 million. However, both City Hall and the school district anticipate that number will likely be closer to $1.3 million, dragging the schools’ draft budget into a deeper deficit.
It’s not that City Hall is hoarding money. After Congress failed to reauthorize funding last year for Secure Rural Schools, a 25-year-old program that had sent the borough around $800,000 annually the past several years, the borough faces its own dwindling reserves.
According to Borough Manager Mason Villarma on Feb. 26, the borough can only afford to fund the district at around $800,000 for the next school year. City Hall likely will find a way to meet the minimum local funding as prescribed by state law, closer to $1.3 million, but doing so could result in further cuts to the borough’s own budget or a higher property tax rate.
“The school district has put us in this position,” Villarma said. “(Their) failure to adapt a conservative budget within their means will result in probably raising taxes.”
While neither City Hall nor their school district appear pleased with each other, there is one thing both parties agree upon: School funding is the state’s responsibility. The state’s per-pupil funding formula has increased 0.5% in eight years, a fraction of double-digit inflation over that time.
School advocates are pushing hard on the Legislature and governor for a significant increase in state aid for next year. The Legislature faces a mid-May adjournment deadline.
Regardless of what the Legislature decides, one option that could buy the Wrangell School Board some time would be to reallocate the district’s $1.2 million capital improvements fund to the general fund for operating expenses. However, the board appeared unwilling to consider this option at its meeting on Feb. 24.
They view the capital improvements fund as something of an insurance policy that allows them to quickly respond to emergency repairs. At the budgetary workshop on Feb. 24, the Sentinel asked the school board which solution they thought to be more tenable: reallocate the capital projects fund or explore cuts to their workforce and services.
“If the roof caved in tomorrow, we’ve got to have money to fund it,” Board President Wilson said. “The borough is supposed to do all the capital improvement, but we’ve had problems before where they don’t come forth on a timely manner. So we have to have money set aside so that we can take care of it and keep school going.”
However, Wilson added that deciding what’s first on the chopping block is going to be a difficult decision. Around 75% of the school district’s expenses are in salaries and benefits, with about $1.6 million remaining for all other costs, like sports travel, maintenance and supplies.
“I know there’s going to be some hard decisions,” he said. “Unless somebody has a magic wand or somebody has an uncle that gives us an endowment of $10 million, we’re in a tight situation.”
The board said they have discussed the consolidation of schools, such as moving students from the three schools into just two buildings. Several districts across the state have implemented this as a cost-saving strategy. However, board members pointed out that two different borough officials deemed that consolidation would not yield any “significant” savings.
While the loss of Secure Rural Schools has forced the issue of budget cuts this year, City Hall is frustrated that the school district appears unprepared for the expected reductions.
“The alarm bells have been ringing since I’ve been here in 2021 as finance director,” Villarma said. “This school board chose to take a scalpel to smaller scale expenditures … and they really needed to make bigger decisions a while ago.”
Villarma has suggested several ideas to Schools Superintendent Bill Burr and the board, but he said the district hasn’t taken him up on any of those offers.
“With 260 kids in all the schools together, does it warrant having the administrative presence that they do? A superintendent could also serve as a principal.”
The borough assembly and school board are scheduled for a work session to discuss finances on March 24.
The school district has to send its budget and funding request to the borough by May 1. The assembly will consider the request as it builds the borough’s overall budget for the fiscal year that starts July 1.
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