Juneau School District administrators and board members review the updated budget for the current fiscal year during a Board of Education meeting Tuesday night at Juneau-Douglas High School: Yadaa.at Kalé. (Mark Sabbatini / Juneau Empire)

Juneau School District administrators and board members review the updated budget for the current fiscal year during a Board of Education meeting Tuesday night at Juneau-Douglas High School: Yadaa.at Kalé. (Mark Sabbatini / Juneau Empire)

The Juneau School District had a $9.5M projected deficit this year. It’s now a $633,185 surplus. How is that possible?

Resignation of 34 employees since January, health insurance savings among reasons, officials say.

This story has been corrected to state the school district is turning over the Marie Drake building, not Dzantik’i Heeni Middle School, to the City and Borough of Juneau in addition to two other buildings as part of a consolidation plan.

The Juneau School District’s budget for this year has gone from a projected $9.5 million deficit in January to a $633,185 surplus now for some unexpected reasons, including the resignation of dozens of employees. Some residents are extremely unhappy as a result, declaring it shows actions officials took such as a consolidation of schools are unnecessary.

District leaders are pushing back strongly on such assertions, citing the unknown developments that occurred since a massive projected deficit was revealed in January. They also emphasize the current year’s budget is a separate matter from the legitimately dire fiscal situation for the coming year and future years that was the motivating force behind the consolidation plan.

“We got an email earlier today suggesting that now that the financial crisis is nearly resolved the district doesn’t need to enact the steps that resolve the financial crisis,” Superintendent Frank Hauser told members of the Juneau Board of Education during its meeting Tuesday night, where the updated budget figures were presented. “This is a logistical fallacy.”

“They can’t just say that we took six steps on a journey to reach a destination and now that we reached the destination we didn’t need to take those six steps…Without those steps, the district will no longer be at its destination. It will remain mired in financial crisis.”

The board is scheduled to consider official approval of the revised budget for the current year at its next regular meeting May 14.

Ultimately, the most notable board action from the budget update is the district is likely to borrow only $1 million from the City and Borough of Juneau — or possibly less or nothing at all — rather than the $4.1 million maximum authorized by the Juneau Assembly. That will put less of a burden on the district during the next four years as it pays back the loan.

However, there are also real-world impacts already occurring, including the effect on classrooms due to the resignation of nearly three dozen employees since mid-January and a hiring freeze that is preventing replacing them.

“When I speak with the administrators that is their number one concern, that our certificated and paraeducator staffs are really struggling with workload capacity because of that,” Will Muldoon, chair of the school board’s Finance Committee, said in an interview Friday.

The major adjustments to this year’s $67 million operating budget since January — when district leaders said they were facing an impossible scenario in overcoming the $9.5 million shortfall by June 30 — are $3.5 million in savings due to lower-than-expected employee health insurance payouts, nearly $1.4 million in savings due to the unexpected resignation of 34 district employees since January, nearly $1 million in savings due to a hiring freeze since then and about $1.5 million in other cost-cutting measures.

In addition to that combined savings of well over $7 million, the Assembly approved taking over $3.9 million in “shared costs” for buildings used by both CBJ and the district for non-instructional purposes such as recreational and cultural programs.

A chart shows revisions to the Juneau School District’s budget for the current fiscal year since a $9.5 million shortfall was projected in January. Officials are now projecting a $633,185 surplus. (Juneau School District)

A chart shows revisions to the Juneau School District’s budget for the current fiscal year since a $9.5 million shortfall was projected in January. Officials are now projecting a $633,185 surplus. (Juneau School District)

The result is a surplus that can be placed in the district’s reserve account for emergencies. District policy calls for a reserve of at least 1.5% of the operating budget — which board members acknowledged was unthinkable this year until now — prompting the call by some officials to take a $1 million loan from CBJ to satisfy that amount.

The significance of the city’s contribution to resolving this year’s deficit crisis was emphasized during the meeting by Lisa Pearce, a financial analyst hired by the district last December who scrutinized and revealed the fiscal crisis presented to the board in January.

“I would have never in a million years thought that we would be presenting a budget at this point in time that would that would be balanced, or that we were going to get to the point nonetheless provide for a small fund balance,” she said. “I can tell you that strictly through operations, through structural changes, through any behavioral changes you would not have gotten there. It would not have occurred. It just was numerically impossible to get there without the collaboration and additional assistance and recognition of the shared services obligation from CBJ. That was the game changer for the district.”

Pearce, in January, said the $9.5 million projected shortfall was due largely to a series of accounting errors in both revenue and expenses, which district leaders have blamed on former Administrative Services Director Cassee Olin, who resigned Dec. 1.

However, Pearce’s figures turned out to be off by millions of dollars as well. She and other district leaders said that was due to incomplete information available when she made the initial assessment and subsequent developments that had unexpected results.

The $3.5 million in health insurance savings, for example, occurred because the district budgeted $14 million for health care payments in the budget passed last year, Pearce said. However, that was based on every district employee using their maximum eligible amount.

“That doesn’t happen,” she said. “There’s waivers, there’s partial payments and so forth. So we’ve kind of got a step-down effect.”

The amount of savings was further influenced by some accounting errors in the original projections, Pearce said. For instance, the actual full amount of all employees using their full benefits would have totaled $12.9 million.

More than an hour of explanations by Hauser and Pearce about the reasons for the updated budget figures failed to satisfy the suspicions of a trio of residents who testified during the meeting. Among other things, they asked school board members to reverse key aspects of the consolidation plan including merging all high school and middle school students into one school apiece instead of the two that exist at each level.

Shannon Kelly noted recall petitions for the school board’s president and vice president were filed with the city April 10 alleging their failure to fully understand the circumstance resulting in this year’s budget crisis, and two days later the board’s Finance Committee was presented with the updated budget figures reviewed by the full board Tuesday.

“Is it possible that the public scrutiny and the recall petition caused a reevaluation of the submitted flawed budget?” she asked. “Or was the school administration aware of the overstatements and just ignored them in order to proceed with a predetermined outcome?”

Shannan Greene, a parent of three students, said the updated budget still isn’t fully taking into account the costs and impacts of the consolidation plan.

“Without independent analysis the board hastily studied and adopted a consolidation model in just 44 days that the Juneau community will be locked into for the next seven years,” she said. “It eliminates neighborhood schools, increases transportation time, and (has) costs that consequently reduce student access to before- and after-school activities. It lacks funding for associated transition costs and violates its contract with the charter school.”

Given that the current budget now balances “why the continued push for the consolidation plan that has divided the community and is pulling this school district through a knothole?” Greene asked. “None of this upheaval is necessary, especially at this rapid pace. Why are you proceeding? Why are you steamrolling over valid community concerns?”

Hauser, during his presentation, emphasized that projected deficits for next year and beyond are for reasons beyond the causes of this year’s shortfall, including flat state funding and a long-term decline in student enrollment. Muldoon, on Friday, said such problems have been building up over years and the district is finally in a situation where drastic action is required.

“We’ve had a deficit for years and it’s been my opinion that part of the driver of that is that we couldn’t afford the district as it was currently configured, and that was a big driver for me on consolidation,” he said. “And that is a direct result of the Legislature’s inability to provide adequate and stable funding…Had we not made big changes I think we would be doing this every single year and then I worry about the slow spiral that comes from that.”

The consolidation plan, officially approved by the state Department of Education and Early Development earlier this month, puts all students in grades 9-12 at Juneau-Douglas High School: Yadaa.at Kalé, and students in grades 7-8 and the HomeBRIDGE program at what will renamed Thunder Mountain Middle School.

State law prohibits reopening closed schools for at least seven years — which in this instance will apply to Thunder Mountain High School, Floyd Dryden Middle School and Dzantik’i Heeni Middle School — and the district would have to show JDHS and/or TMMS are exceeding capacity for that to occur.

The district is turning over Floyd Dryden, the Marie Drake building and its administrative building to CBJ as part of the consolidation, with city officials now in the planning stages of how to use those buildings.

There remain some significant unknowns that could potentially improve the district’s situation in both the short- and long-term future.

The most immediate is an increase in the state’s Base Student Allocation, set for $5,960 next year — only $30 more than the amount set in 2017 — with an additional $680 in budgets proposed by both the House and Senate. However, Gov. Mike Dunleavy has already vetoed one bill with such funding this session, which the Legislature failed to override, and is indicating he will not support such an increase unless other policy priorities of his such as more support for charter schools are also approved.

A $680 BSA increase would result in an additional $5.2 million for the district next year, according to Hauser. He and board members have said such funding would allow the district to avoid most of the layoffs occurring in addition to the consolidation — which will increase the pupil-student ratio at all grade levels if they take effect — but not the consolidation itself.

Another factor that could reverse the decline in enrollment within a few years is the recent announcement of funding to purchase an icebreaker the U.S. Coast Guard would homeport in Juneau, resulting in an estimated 190 personnel plus their families being stationed here.

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

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