Alaska Overhauls School Construction Funding to Help Rural Districts Compete

Alaska education officials announced Tuesday they are overhauling the state's school construction funding formula to help rural districts compete more effectively for capital project money.

The Bond Reimbursement and Grant Review Committee approved changes that shift from using building age as the primary factor to measuring actual facility conditions. The new system also redistributes points to support districts without resources for advanced design work, addressing concerns that wealthy districts manipulate the system by completing projects before applying.

"The key here is to not punish those who are doing good work, but also to reward those who do not have the ability to get there," said Heather Heineken, finance and support services director for the Department of Education. She told the House Finance Committee the intent is to make the process more equitable.

The most significant change replaces the weighted average age system with a Facility Condition Index that measures actual building condition rather than relying solely on age. Officials said this will improve their ability to identify true need across Alaska's diverse school infrastructure.

The committee also increased emphasis on life safety concerns, ensuring projects addressing structural issues, code deficiencies and safety risks rise more clearly to the top of funding priorities.

Under the current system, districts with capital funds can complete projects first, then apply for reimbursement with detailed applications that score higher than districts submitting conceptual proposals. The new formula redistributes points so districts receive maximum scores at earlier design stages.

"Several of the projects are reimbursable projects. So some districts have the funds to put the projects forward," Heineken explained. "If you put a project forward that is completed, the application is a much more complete application because you know all of the details. So they effectively get higher points for a project that is already done."

The changes come after legislators raised concerns about technical requirements and costs preventing schools from adequately submitting projects for consideration. The department provides spring workshops and answers questions until the September 1 application deadline, but some rural districts still struggle with the complex process.

Representative Calvin Schrage questioned whether the state provides enough technical support to help schools navigate the application process. Heineken said the department has tried to increase outreach, but noted she has had three staff vacancies in the last six months that have limited capacity for additional support.

The nine-member committee, established in statute in 1993, includes the education commissioner or designee, two legislative members and six public members with expertise in construction and facilities management. The committee reviews capital improvement project priorities, makes recommendations on grants and bond reimbursement requests, and develops criteria for cost-effective school construction.

During Tuesday's presentation, committee members also discussed concerns about the state's bond debt reimbursement program. The state suspended reimbursements from 2017 to 2021, forcing local districts to raise taxes to cover bond payments. Alaska repaid all outstanding debt in 2022.

Representative Jamie Allard questioned how the Anchorage School District handled its $79 million reimbursement, noting the district kept the funds in a capital savings account rather than providing tax relief to residents who had covered the bond payments during the suspension.

"Instead of reimbursing the taxpayers when the school district was reimbursed for debt bond, bond debt reimbursement, they put it in the savings," Allard said. "So not only did we increase the taxes to the taxpayers in the Anchorage School District, but they also kept the money as well."

Commissioner Deena Bishop, who previously worked for Anchorage schools, explained that districts can legally place operational funds into capital accounts and that the reimbursed funds came from bonds passed 20 to 30 years ago when the state guaranteed 60-40 cost sharing.

The new application changes take effect for the fiscal year 2028 rating period. The committee will roll out the updated application at training sessions April 28 to 29 in Anchorage, with a virtual option available for the first time. Applications are due September 1.

Heineken said the committee will continue reviewing the process annually. "This is an annual process. So next year in April, the committee will get together and look at the application, look at the changes we made this year, come together with other recommendations, if there are any, and continue to help this process evolve into something that really can address all the needs in the state."