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Education

Anchorage School District faces cuts due to $28 million budget shortfall

The Anchorage School District is projecting a $28 million budget shortfall for the upcoming 2021-22 school year, partly because so many students have left the district after schools shuttered due to the coronavirus pandemic.

It’s a large enough gap that a shrunken budget and job cuts will be on the table as the school board begins the budgeting process in January.

“Cuts are going to be made,” school board member Starr Marsett said during a joint meeting of the Anchorage Assembly and school board Monday evening.

“You can’t have this kind of deficit and have it not affect departments or programs,” she said.

The district is projecting it will have fewer students next year, which contributes to the funding shortfall, chief financial officer Jim Anderson said at the meeting.

Thousands of students have already left Anchorage schools this year amid pandemic-related closures, with many switching to state home schools. State funding for the school district changes based on a complex formula that is rooted in student enrollment numbers, Anderson said.

Still, state law also includes a “hold-harmless” provision for school funding, which lessens the immediate impact of large enrollment drops.

The provision kicks in when the average daily membership of students in the district — a number the district measures each year for funding purposes — drops more than 5% below the previous fiscal year. It restores some of the funding that would have been lost at 75% for the first year of the loss, 50% for the second year, and 25% for the third year before being completely phased out.

“It does help soften the pain, but it certainly doesn’t make up for the instant loss of several thousand students,” Anderson said.

This year, the overall average daily membership of students was about 4,150 fewer students than last year, Anderson said Tuesday. With the “hold-harmless” provision, the financial impact is equivalent to losing approximately 1,650 students, he said.

The $28 million estimate does not include the potential for increased costs from six union labor contracts that are up for negotiation this year, which could add another $5 million to $10 million to the deficit, Anderson said.

The majority of district revenue goes to paying workers.

“About 90% — a little bit less of all of our revenue — goes towards people,” Anderson said.

The budget projection assumes that some unexpected costs the district incurred this year due to the pandemic will continue into next year, like paying for Chromebook laptops and online instructional software, and paying for internet access for lower-income students and their families, Anderson said. Some other costs increase each year, including liability insurance, he said.

And state funding does not account for inflation, leading to about a $10 million to $12 million funding deficit each year, he said.

Many students who did stay in the school district this year switched from a neighborhood or charter school into a district home-school program. That impacts funding for transportation, which is also based on enrollment in neighborhood schools, Anderson said. The district does not get transportation funding for students in home-schooling programs.

The projected $28 million gap already accounts for teaching staff reductions based on the drop in enrollment, he said.

Still, necessary budget cuts will impact staffing as it is the district’s largest expense, Anderson said Tuesday. The district will also look for other ways to cut costs, he said.

At the meeting Monday, superintendent Deena Bishop said the district was able to avoid layoffs last year.

“We continue to kick the can down the road,” Bishop said. “This year’s budget was brought to be a balanced budget by over $3 million in CARES money for the health teachers that we included, as well as $8 million, approximately, in fund balance to make ends meet.”

But the district does not expect to have any fund balance left this year, Anderson said. It also used federal CARES Act funding to pay for information technology staff and equipment, Anderson said.

More federal relief aid for schools, like what was provided under the previous CARES Act, is a possibility, and that would help ease the burden next year, Anderson said. He said he is hopeful that federal aid could have a significant impact.

Still, any federal relief would be one-time funding, he said. Any deficit must be eliminated from next year’s budget.

“We have to get it to zero,” he said.

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