The Alaska Supreme Court will hear arguments Wednesday on the constitutionality of requiring Alaska's municipalities to help pay for education, in a case that could upend how the state finances public schools.
In November, Ketchikan Superior Court Judge William Carey invalidated the required local payments. He ruled that the millions of dollars paid each year by local governments to their school districts -- including Anchorage, Ketchikan and others -- violated a provision of the Alaska Constitution that bans the state from earmarking revenue from a tax or license for a specific purpose.
That part of Carey's ruling marked a victory for the Ketchikan Gateway Borough and the four residents who sued the state in January 2014 over the required payment. However, Carey also ruled the payment did not violate two other constitutional provisions and the borough could not get a refund of the roughly $4 million it paid in 2013 toward education.
The state appealed to the Alaska Supreme Court, as did the borough. The attorneys will present their arguments in Anchorage at 1:30 p.m. Wednesday.
The arguments center on the state constitution and boil down to two questions: What roles do local and state governments play in education funding? And can the state require the local government to help pay for its schools?
If the Supreme Court rules in favor of the Ketchikan Gateway Borough, the cash-strapped state may have to shoulder more of the education bill. At the same time, it may also level education spending across the state.
Under state law, cities and boroughs must pay a certain percentage of taxable real and personal property to their local schools in order to get state aid. This does not apply to 19 school districts in the state's unorganized borough, which have no borough governments with the power to levy taxes.
This school year, the required local payment amounts to a projected $235 million statewide. The state pays an additional $1.2 billion and the federal government pays nearly $69 million in impact aid, according to projections from the Alaska Department of Education and Early Development.
In documents filed with the Supreme Court, attorneys for the Ketchikan Gateway Borough argued the required local payment violates the state constitution's appropriations clause because the Legislature cannot appropriate the money for any state purpose -- it must go toward education.
The payment violates the veto clause, the attorney said, because the money goes right from the municipality to the school district, so the governor doesn't have the chance to veto it. In arguing the borough's $4 million payment should be refunded by the state, the Ketchikan borough said the payment was unconstitutional and "paid under protest."
"Contrary to the Superior Court's conclusion, the State received a tangible benefit from the payment of the (required local contribution) because such payment facilitated the State's ability to maintain public schools, an exclusive duty and responsibility of the State under the Alaska Constitution and this Court's precedent," the borough's attorneys said.
In October 2013, the borough sent Mike Hanley, then-commissioner of the state education department, a copy of its check to the school district and wrote on it: "dedicated tax paid under protest," said an opening brief filed by the state's attorneys.
The attorney general's office argued the state must maintain schools under the Alaska Constitution and it joins with local school districts to share control and funding of those schools.
The dedicated funds clause, the attorneys said, does not apply to local money and only concerns state revenue.
"If given credence, the borough's dedicated funds clause argument would mean that the dedicated funds clause stealthily wrought a drastic change to education funding that was not discussed at the constitutional convention during the dedicated funds debate, the education clause debate, or the local government debate, and then went unnoticed for the following sixty years," the brief said.
The state said the Ketchikan borough should not have its required local contribution refunded, because the borough "explicitly waived" any argument about the state's obligation to fully fund public schools, and the constitutional delegates intended that local governments would help fund their own public schools.
Further, attorneys argued the veto and appropriation clauses apply to the removal of money from the state treasury. The local contribution should not be deposited in the state treasury and therefore is not subjected to appropriation by the Legislature or veto by the governor.
A number of organizations have filed friend-of-the-court briefs with the Supreme Court in support of the state's case, including NEA-Alaska, the statewide teachers union; the Citizens for the Educational Advancement of Alaska's Children, a coalition of school districts and educators; and the Association of Alaska School Boards, Alaska Council of School Administrators and Alaska Superintendents Association.
The Fairbanks North Star Borough joined the case in support of the Ketchikan Gateway Borough, asking the court to uphold the Superior Court's decision invalidating the required local contribution because it overrides local decision-making power over funds.
"While not paid directly to the state's treasury, it is paid to an educational system established and supervised by the state," the Fairbanks borough said.
Assistant Attorney General Kathryn Vogel, who will present the state's argument Wednesday, said she didn't know whether the Supreme Court would rule on the case before the Legislature convenes in January and the debate on school funding for next school year resumes.
She said the court has put the case on expedited schedule, but "there's no actual deadline."
Scott Brandt-Erichsen, an attorney for the Ketchikan Gateway Borough, said the borough has paid the required local contribution as the lawsuit continues.