Public Opinion on School District Funding and Sales Tax Revenue

For Fiscal Year 2025 the Craig School District has calculated that they will have a $1,289,342 deficit.  This is after making some cuts to the budget and cutting several vacant staff positions.  The school district has asked the city to increase the local contribution starting in fiscal year 2025 (beginning July 1, 2024) to fill this deficit.  Full funding would require an additional $1.15 million in municipal revenue for sustainable funding at this level.

Without additional revenue the sustainable funding level for the city’s contribution is about $800,000 per year.  The city has contributed between $550,000 and $685,000 for the past several years.

The city is considering placing a ballot question on the October 2024 ballot that would allow for a sales tax increase or increased sales tax based on a seasonal rate to allow for some increased funding for the school district.  If there is no increase in sales tax the city may have to move back to a smaller contribution to the school district or look at other revenue sources such as increased user fees or property taxes.

The school district has also made a number of substantial cuts to the FY2025 budget, including staff cuts.  Approval of a sales tax above the amount needed to fill the budget deficit could be used to undo some of these cuts in FY2026.

Craig City School District (CCSD) is currently facing a budgetary crisis. After several budget development workshops, significant reductions to operating costs, and elimination of seven teaching positions and one half-time administrative position, the CCSD must still address a shortfall of approximately $1.15 million.

Alaskan school districts have limited revenue sources and rely primarily on state funding from the Base Student Allocation (commonly called the BSA). Electrical costs, shipping fees, fuel costs, and insurance premiums (liability, property etc.) have significantly increased. As facilities are aging (the “new” high school is now almost 25 years old), maintenance requirements have increased along with associated costs.

Since 2017, there has been no significant increase to the BSA. This is what is referred to as “flat funding.” While operational costs for schools have increased dramatically, there has been no increase in state funding in 7 years.

The second substantial source of school funding comes from local contributions by municipalities. The amount a municipality contributes is decided by local governments and is based on a formula that sets a minimum and an upper cap. Currently the City of Craig funds more than the minimum, but approximately 33% of the cap.

Every district in the state is facing significant financial hardship. Considering its flat revenue streams, CCSD’s ability to present a balanced budget until now is a testament to sound budgeting practices and financial responsibility on the part of the current superintendent and past school boards. Federal COVID relief funds offset budget deficits for several years, but these were temporary measures.

CCSD is required by state law to submit a balanced budget to the Alaska Department of Education. In the absence of funding to cover the deficit, possible actions include elimination of additional teaching and/or support staff, elimination of various extra and co-curricular activities and associated travel, combined elementary classrooms, combined job responsibilities for various positions, elimination of some elective programs, and facility closures.