The following is an excerpt from last week’s edition of the Alaska Political Report. You can click here for more information about the Political Report. A subscription is $1,299/year per organization. Discounted pricing is available for non-profits and government entities. Our coverage of the budget starts with the governor’s proposed budget in mid-December and we track everything in detail through the entire process. If you have any questions or would like to subscribe, please email jeff@akpoliticalreport.com.

Debate over per student spending, known as the Base Student Allocation (BSA), is not new to the Legislature. Lawmakers have approved several one-time increases over the years. But this year, Senate Bill 52, sponsored by the Senate Education Committee, is proposing to permanently increase the BSA by $1,000, or 17%. The fiscal note attached to the bill estimates this will cost $257 million a year.

However, the BSA, which is currently set at $5,960 per pupil, is not as straight-forward as it seems. Each school district first determines its Average Daily Membership, or ADM. That ADM is determined through 6 multipliers:

1. School Size Factor – Depending on the size of each school, escalators count each student as more or less than a single pupil. In a small school of 25, each student counts as 1.62 students, while in a large school of more than 750, each student counts as 0.84 students.
2. District Cost Factor – Each student counts as anywhere between 1.0 student (Anchorage) and 2.116 students (Yukon Flats School District), as a way to compensate for higher costs in rural areas.
3. Special Need Factor – If the school has vocational, special education and gifted programs, all students are multiplied by 1.20.
4. Vocational and Technical Factor – If the school has vocational training programs, all students are multiplied by 1.015.
5. Intensive Services Factor – Each intensive special education student counts as 13 students.
6. Correspondence Student Factor – Each correspondence student counts as 0.9 students.

At the end of all these adjustment factors, the number of students used for the BSA formula can vary greatly from the actual number of students being educated in the district. For instance, in Anchorage, the 40,944 average daily students count as if they had 73,372 students after these adjustments. The Alaska Gateway School District, meanwhile, has a post-adjustment ADM of more than four times the 325 average student that it recorded last year.

Once this adjusted student count is tabulated, it is multiplied by the $5,930 BSA to get the total need.  Local communities are required to contribute 2.65 mills and their Federal Impact Aid (a program to compensate communities for lost taxes due to large quantities of tax-exempt federal properties, like military bases and national parks). The state covers the rest, which added up to $1.2 billion in 2022.

Prior to 2012, the required local contribution to schools was 4.0 mills. But at a time of high oil prices, the state took a larger proportion of the responsibility to fund schools. Many communities enhanced their own local programs and budgets with the savings in the years to follow. As a result, according to the Legislative Finance Division, the state contributes 63% of the cost of K-12 while other states contribute 48% on average.

Another quirk with the funding formula is the disparity test. Because the state requires that the aid to school districts be reduced by Federal Impact Aid, it triggers a little-known federal rule where Alaska must prove that there is less than a 25% difference between the highest and lowest funded districts. Virtually all other states do not include impact aid in their school formula and therefore avoid this problem. For this reason, an optional additional local contribution to K-12, above the 2.65 mills required, is capped. Some districts would likely wish to contribute more to schools but cannot.

When added all together – each district is receiving a wildly different amount of state funding per pupil ranging from $7,469 at Mt. Edgcumbe to over $183,000 in Galena.

Because of the large difference between actual students and the number of students the K-12 formula is based upon, a $1,000 increase would not be evenly distributed to all school districts.

Based on 2022 student data, and assuming all other factors remain the same, a $1,000 BSA increase equates to $1,792 per student in Anchorage, $2,096 in Juneau, $2,128 in Fairbanks, $2,495 in Sitka, $10,857 in Nenana, and $30,907 in Galena.

According to data from the Alaska Department of Education and Early Development, only 30% of students met English expectations, only 23% met mathematics expectations, and only 38% met science expectations while at the same time, Alaska often tops lists of per student K-12 funding. As a result, some critics claim that increasing the BSA across the board will not result in improved educational outcomes, and that more accountability and targeting funding towards lower performing districts is the key.

Districts also receive indirect funding through several mechanisms. First, the state makes contributions to the pension systems for teachers and school employees. Districts also receive partial reimbursement of their school construction costs through school bond debt reimbursement, the Regional Educational Attendance Area (REAA) fund, and funding for student transportation.

There is significant momentum in the Legislature to increase the BSA. But there is also concern from some legislators about how to pay for the increase (reducing dividends or new revenues), and if an increase will be tied to outcomes.

While SB52 appears to be the vehicle for the increase, Ketchikan independent Rep. Dan Ortiz recently introduced House Bill 65, which would increase the BSA by $1,250. There will be significant debate and attention on these bills in the coming months. Legislators will have to not only determine how to pay for the increase, but must also get GOP Gov. Mike Dunleavy on board to avoid a veto. We will be watching this issue closely and will be providing updates as needed.