AML Municipal Matters

The Alaska Department of Education (DEED) has proposed new regulations for the Board of Education to consider that Alaskans should be aware of and concerned about. DEED would like the board to approve a regulatory change that would require school districts to count all in-kind contributions to the district as a local contribution.

Basically, if a local government provides services that aren’t part of its required and voluntary local contribution (local tax dollars) – which go to supporting the delivery of public education – it could count toward reaching the “cap” faster. DEED’s proposal to count these as local funding means that districts would hit the cap more quickly, and force local governments to have to give less to schools or risk the State doing so to compensate. It could mean millions of dollars in lost funding for the public education system.

You might ask why there is a cap? Why shouldn’t local governments just be able to give what schools need, based on what communities can afford? It makes some sense that where local governments collect local taxes and local elected officials respond to local needs by making those funds available to local schools that provide local services… they should be able to. State law limits this local decision-making.

There’s a cap because federal law allows the State to reduce its own funding relative to federal funding received by school districts. These federal funds are known as Impact Aid. Impact Aid is meant to reimburse school districts for the loss of a tax base due to extensive federal lands, as well as attendance in schools by a federal workforce. Essentially, these federal funds are meant to make up for what would otherwise be taxable, and which should be available in addition to the State’s determination of basic need.

It’s important to understand that where Alaskans with municipal school districts pay local taxes, taxes are higher because of this non-taxable land. If these lands were taxable, the overall tax rate could be lower. This federal offset could also be used to reduce the pressure on the local contribution, which is currently made up of local taxes. Instead of having all of these federal funds available to a district, it actually ends up with less money than it would otherwise have, because the State counts it toward their constitutional obligation. How much money are we talking about? $81 million – in what’s meant to make up for lost local taxes, and which instead increased local taxes (for some) make up for.

Alaska is the last state in the nation to do this, accomplished through something called an equalization process. To protect the State’s access to this local funding, it has to make sure that local decision making doesn’t result in some communities having too much more than others. It’s a lowest common denominator approach that means that because some communities don’t have or haven’t accessed the tax base they do have, all other districts will have less as a result. It’s done in the name of equity, and there’s a disparity test that the State has to pass to retain these funds. Because State funding hasn’t kept up even with inflation, there is an increased risk that they don’t pass this test.

Think about that. The State uses the federal funding meant for schools to offset their own responsibility, increasing Alaskans’ taxes in the process. Yes, we should care about unevenness across districts, but that’s the State’s job to appropriately resource schools where communities have less or haven’t accessed their tax base. There’s a geographic cost factor that takes this into account, to some extent. Ultimately, not only should Impact Aid be considered fully local, but the State should still be responsible for meeting basic need, so that all districts are kept whole and those that receive this federal offset can make choices on their own for how to use it to improve their schools. Alaska should not be focused on holding all communities back but working toward unleashing more opportunities for all.

The State should chart its own path when it comes to addressing the funding needs of its school districts. As the last state in the nation to withhold federal funding meant for local schools, this self-limiting approach does nothing to advance academic achievement. When the Legislature’s education funding task force meets, AML hopes they’ll wrestle with how to do this better and propose new solutions that don’t disadvantage some without actually increasing benefits to any. In other words, let’s set up a system that works for Alaska, where the State fulfills its obligations to maintain a system of public education, fairly and fully funded, while preserving local autonomy to meet the needs of our communities.

We plan to develop and discuss this more in the months ahead, as we continue to learn from our members and other partners while working together towards solutions that would best support Alaska’s local governments.