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As Anchorage School District prepares for layoffs, a look at how it got $23 million in the red

Michelle Theriault Boots
A large crowd of protesters gather Tuesday, March 26, 2013, at the state Capitol in Juneau, Alaska, to call for additional funding for public education in Alaska.
Joshua Berlinger
Schoolmates cheer encouragement as fifth graders take the stage to demonstrate the Festivus Fitness routine developed by their physical education teacher Caela Nielsen during the spring kickoff for the statewide Healthy Futures Challenge at an assembly Monday morning Feb. 4, 2013 at Ravenwood Elementary School in Eagle River.
Erik Hill

The Anchorage School District, facing a $23 million budget gap, is expected to announce a budget Tuesday that includes more than 200 layoffs.

School leaders have been sounding an alarm about funding for months, warning that deep cuts would be necessary and classroom teaching jobs -- spared in recent rounds of layoffs -- would be among them.

Here's a primer on the district's financial situation and how it is likely to affect students and teachers:

WHERE DOES THE ASD GET ITS MONEY?

Next year's projected operating budget -- the money used to run schools on a day-to-day basis -- is about $566 million, according to the district.

The biggest slice of that, about 56 percent or roughly $318 million, comes from the state through a funding formula known as the "base student allocation," a chunk of money that districts receive for each enrolled student.

The base student allocation rate is set by the Legislature. For the past three years, the allocation has been held to $5,680 per student.

The second biggest piece of funding comes from local property tax revenues, a total of about $194 million, or 34 percent, of the operating budget.

Another slice comes from federal and state grants for "Title" programs, serving special education, English-as-a-second-language and low-income students.

Federal money is declining, according to Mark Foster, the district's chief financial officer.

As recently as 2008 and 2009, the federal government contributed $70 million to the Anchorage school budget. That number has fallen to roughly $45 million, or about 7 percent of the budget, a result of "sequestration" and the end of recession-era stimulus programs, Foster said.

Student activity fees, facility rental costs and grants make up the rest of the operating budget revenues, he said.

How did we get into this situation?

With major funding sources flat or declining and costs rising, the district is $49 million short of what it would need to extend current levels for the next two school years.

"It's an inflation story," Foster said. "On some fundamental level, when we get flat to declining dollars from state, local and federal sources and inflation continues, particularly in medical care, in order to cover that we're laying people off."

As major funding sources like the base student allocation have stayed the same, the district is spending more on expenses like natural gas and health insurance for employees.

Health care costs have risen at an "extraordinary" rate, sometimes up to 18 percent a year, Foster said. The district is trying to cut down on its health care expenses by negotiating with employee unions for individual employees to pay a higher proportion of their insurance costs.

Some progress has been made, and savings will start to show up in next year's budget, he said.

The ASD spends about 88 percent of its operating budget on salaries and benefits for staff.

Over the past four years, the district has cut 491 full-time equivalent positions, or 718 employees, sometimes dipping into savings to avoid reducing teachers.

Most of the cuts have come from administrative and support positions, like school counselors.

This year, the school board has authorized the spending of $2 million from savings, leaving $21 million to be cut from expenses.

IS THERE ANY WAY TO AVOID THE CUTS?

Layoffs could be avoided if the Legislature were to offer more long-term funding, Foster said.

In the past, the Legislature has come through at the last minute with extra funding that helped the district roll back layoffs -- sometimes after pink slips had already gone out, said Carol Comeau, who was superintendent from 2000 until she retired in 2012.

In recent years, legislators have offered one-time grants to the district, but have balked at a long-term commitment to increasing the baseline funding formula; that makes planning difficult, she said.

"The chaos of trying to plan ahead and build a budget based on speculation has been the number one frustration of school boards, superintendents and educators forever," Comeau said.

This year it seems unlikely that the Republican-led Legislature will increase the base student allocation by what Foster says would be needed to catch up with years of inflation: about $400 dollars a student.

"With the mood in the Legislature, I almost want to say we're going to be lucky if we just continue to be flat-funded. It's going to take a huge outcry from constituents, parents, teachers all over the state to every legislator and the governor," said Rep. Harriet Drummond, an Anchorage Democrat.

In 2012, Gov. Sean Parnell called an increase to the formula "the ultimate giveaway," which wouldn't require "anything transformational in the system."

Rep. Tammie Wilson, a Republican from North Pole, said in an e-mail that she thinks it's too early to say whether the formula will be increased.

"The House Sustainable Education Task Force, as well as the Finance Education Sub-committee, will be having hearings on what the state is spending currently (operating and capital) and looking at current revenue to make the determination on what the state can and cannot afford to do," she said.

Others have asked: Why can't Anchorage pony up more money locally?

We can't, Foster said, because a little-noticed state law passed in 2012 capped the amount a municipality can give to its schools through property taxes.

In Anchorage, a local tax cap already existed, Foster said. But the state cap established by Senate Bill 182 was even lower.

Part of the idea behind Senate Bill 182 was to provide equity for districts statewide, so property-tax-rich districts like Anchorage and Valdez didn't have an advantage over poorer areas.

Anchorage currently taxes up to the state cap, which generates about $8 million less than would be allowed under the municipal cap.

Anchorage has turned to local taxes to ride out fluctuations in state funding before, Foster said; in 1986, the district weathered an oil-price crash by upping the property tax rate.

While the district is asking for voter approval of a $57.2 million bond package for improvements at 19 schools in Anchorage, Girdwood, Chugiak and Eagle River on the April 2014 ballot, bond money can't be used for operating costs, so that's not an option, Foster said.

How will this affect students?

The district hasn't said exactly where the cuts will be made. That will happen Tuesday, when the specifics of the 2014-2015 budget are presented.

But in recent months, district officials have said more than 200 positions will be lost, and some of those will be classroom teachers.

High school principals were told in January to begin preparing fall schedules that include seven class periods. Each teacher would instruct one more class during the school day, which could help offset layoffs by keeping the number and scope of course offerings consistent.

That suggests that the district will attempt to increase class sizes while preserving offerings like foreign languages, arts and other electives rather than eliminating whole programs.

Whatever happens, former superintendent Comeau says, the cuts will be unlike anything Anchorage residents have seen in a generation.

"I worry that now they are (cutting) into the bones of the district," she said.

Reach Michelle Theriault Boots at mtheriault@adn.com or 257-4344.

 


By MICHELLE THERIAULT BOOTS
mtheriault@adn.com