Juneau Assembly members and city administrators confer during a finance committee meeting Wednesday night about specific wording for portions of a proposed financial bailout package for the Juneau School District. (Mark Sabbatini / Juneau Empire)

Juneau Assembly members and city administrators confer during a finance committee meeting Wednesday night about specific wording for portions of a proposed financial bailout package for the Juneau School District. (Mark Sabbatini / Juneau Empire)

Assembly members back $4M loan, taking over 3.9M in costs to fix school district’s 7.9M deficit

District still facing steep cuts such as school consolidations to prevent future shortfalls.

The blueprints of a bailout plan for the Juneau School District were approved by Juneau Assembly members on Wednesday night, including taking over nearly $4 million in shared costs this year and a $4 million loan, but a range of concerns were also expressed about how the district is going to make long-term changes to fix multimillion dollar year-to-year deficits.

The district is facing a nearly $8 million deficit for the fiscal year ending June 30 — even after making a range of immediate short-term cuts — and possibly higher deficits next year without assistance, Superintendent Frank Hauser told Assembly members during a meeting of their finance committee at City Hall. The request for a loan and takeover of shared costs was sent to the Assembly by the Juneau Board of Education during a special meeting on Monday.

[School board asks city to take over $4 million in ‘shared costs,’ provide zero-interest loan]

While specifics of the district’s request were debated for nearly three hours, with some significant changes recommended both by some Assembly members and City Manager Katie Koester, ultimately the finance committee voted by large margins to take steps toward approving the district’s request for the current year with only slight modifications.

The committee asked city administrators to draft three ordinances for introduction at a special Assembly Committee of the Whole meeting on Feb. 26:

• Paying up to $3.92 million in maintenance, utilities and insurance costs at facilities used by the City and Borough of Juneau as well as the school district for the current fiscal year. Koester had recommended only $1.65 million in such costs be covered due to questions about whether the state will allow the additional amount due to a cap on “instructional costs” the city can provide.

• Providing a zero-interest loan of up to $4 million, essentially covering any remaining deficit in the district’s budget this year so its books balance by June 30 as required by state law. Repayment would occur during a three-year period beginning in fiscal 2026 (which starts July 1, 2025). Koester had recommended a $6.3 million loan to cover the gap due to the smaller amount of recommended shared costs funding.

• Paying up to $1.65 million in shared costs for the 2025 fiscal year that starts July 1. Assembly members voted 6-3 against increasing the amount to match the FY24 allocation, stating they want to revisit the issue once the district finishes its proposed budget for the coming year, which must be submitted to the Assembly by early April.

Strong feelings about district actions resulting in the financial crisis, which has been largely attributed to accounting errors, as well as countering arguments about needing to provide assistance for the overall benefit of the community were voiced by Assembly members as they evaluated the request for help.

Mayor Beth Weldon said taking over nearly $4 million in costs is equal to 0.64 mills (the current property tax rate is 10.16 mills) which may have to be passed on to residents if it’s an ongoing yearly cost.

“So I just can’t get behind this,” she said. “And I’m disappointed that the Assembly is OK with doing this because, while I’m sorry for the school district and I know that there are circumstances that weren’t necessarily all their fault, (this) can’t be dumped on us to pay for it all.”

Weldon, Deputy Mayor Michelle Michelle Bonnet Hale and Assembly member Wade Bryson voted against increasing the city’s “shared costs” contributions to $3.9 million instead of $1.65M for FY24, resulting in a 6-3 vote in favor. Weldon and Bryson also subsequently voted against having city staff draft an ordinance implementing the policy for future Assembly consideration.

Members supporting the city taking on a higher amount of shared costs noted that, in addition to the accounting errors, the district’s finances are being hurt by the state providing nearly flat per-student funding for the past decade and declining student enrollment. Furthermore, supporters said, at a time when outmigration and workforce shortages are critical problems, good schools are essential to luring and retaining residents and investment.

“At the end of the day, the city is the district and the district is the city,” Assembly member Ella Adkison said. “And if we want to look at this — not from a ‘who did something wrong’ and ‘who is making mistakes that we need to pay for them’ — this is something that affects our kids and it affects our city at large. We want the icebreaker to come here. We want people to move here to the city to grow and we want Juneau to be a strong capital city, and our school district is a huge part of that.”

A critical element of any bailout plan is it will need the approval of the Alaska Department of Education and Early Development, as well as from the Assembly and school board.

The plan approved by the Assembly Finance Committee, for example, takes over 100% of the district’s facilities maintenance costs for FY24 (about $1.65 million), 78.9% of utilities costs (about $1.63 million) and 50% of property insurance costs (about $646,000). State officials will have to agree those amounts and percentages are representative of the “sharing” of facilities by the city and district, and aren’t being used as a way to dodge limits on how much the city can provide for instructional purposes.

The state, in addition to setting caps on instructional contributions from the city, enforces the requirement that school district budgets are balanced and has the ability to impose fines for failure to do so. However, the department has agreed to give the district up to five years to resolve its current situation under a plan meeting legal requirements.

The district’s operating budget for the current year is expected to be roughly $75 million, after about $700,000 in cost cuts were made in recent weeks, meaning mathematically expenses would have to be cut about 25% during the remaining few months of the fiscal year to balance the books — which local officials agree is a practical impossibility. The bigger long-term concern is substantially cutting future year-to-year costs to avoid recurring deficits, which is being proposed through measures such as school closures/consolidations and a four-day school week.

Parents and teachers, in community input meetings during the past two weeks, have generally expressed strong opposition to most of the proposed consolidation options. Among a wide range of concerns are reduced academic and extracurricular options impeding students’ college prospects, high school students being consolidated into a single building without sufficient parking for those driving across town, and regrouping of schools by grade (such as separate K-3 and 4-6 elementary schools) causing logistical problems for parents with children in both age groups.

• Contact Mark Sabbatini at mark.sabbatini@juneauempire.com or (907) 957-2306.

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