The Alaska House Finance Committee heard testimony Thursday on a bill that would change how the state calculates school funding, using a three-year enrollment average instead of a single October count. Supporters said the shift would smooth budget swings. Critics warned it could cost $113 million without improving student attendance.
House Bill 261, sponsored by Representative Andi Story of Juneau, would allow districts to budget using either the prior three-year average daily membership or the previous fiscal year's count, whichever is higher. The bill also removes the current hold harmless provision that cushions enrollment drops above 5%, replacing it with transition language for affected districts.
Story told the committee the change addresses a "flawed education funding process" that forces districts to finalize budgets and sign teacher contracts before knowing their actual funding levels. Under current law, districts must project enrollment in the spring, hire staff based on those projections, then wait until the October count is verified to learn their final state aid. That verification often does not come until the following spring.
The approach follows recommendations from a 2015 legislative study titled "Review of Alaska's School Funding Program" and was revisited by the Education Funding Task Force in November.
"This fatigue, this push-pull between state and local funding shortages and last-minute fixes is exhausting," Story said, quoting feedback from school communities. "The constant drumbeat of emergency and crisis has worn thin."
The Department of Education and Early Development projected the bill would cost $113.7 million in fiscal year 2027 and $113.5 million annually through 2032. Heather Heineken, the department's finance director, said those figures assume districts take the maximum allowable count under the new formula but do not model how enrollment patterns might shift over time.
Representative Will Stapp of Fairbanks pressed Heineken on the lack of long-term modeling. "The variations in what's being proposed can swing wildly," Stapp said. "Do you not have the resources to model this?"
Heineken said the department based its projections on enrollment data districts submitted in November for fiscal year 2027, then held those numbers flat through 2032. "We can only base it on the current data that we have," she said. "The districts would have to provide" projections beyond that.
Representative Chris Bynum of Anchorage questioned whether the bill addresses the real volatility in school budgets: the intensive services multiplier for special education students, which can account for a third of foundation formula funding. "We're really not addressing it other than to say you can use a previous year's count if it's higher," Bynum said. "If you drop a bunch of students, you keep the money when that funding is actually supposed to be directed toward the intensive need."
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Story said the bill allows districts to use the current year's intensive student count, the prior year's count, or a February recount, whichever is highest. She said most intensive students do not move frequently, and any extra staffing funded by a higher count would still serve students with high needs.
The committee heard from Amanda Brown, vice president of APA Consulting in Denver, who co-authored the 2015 study that recommended Alaska adopt enrollment averaging. Brown said states use averaging to provide budget stability, particularly in states with many small and rural districts where a handful of students can dramatically affect services.
"Providing that transitioning, that cushioning, is helpful in those settings versus trying to make transitions in the moment within a single year," Brown said. She said funding based on membership rather than attendance ensures districts have resources to support students who may struggle with attendance, rather than penalizing communities for serving high-need populations.
Stapp challenged that reasoning, citing California's experience. He said California switched from enrollment-based to attendance-based funding in the 1990s and saw "a dramatic increase in their attendance and decrease in their chronic absenteeism." When California later studied switching back to enrollment funding, Stapp said, the state's nonpartisan Legislative Analyst's Office unanimously opposed the change because it would remove financial incentives for districts to monitor attendance.
Representative Jamie Allard said Alaska's chronic absenteeism rate exceeds 43 percent. "I don't see this bill actually providing any motivation to the school districts to have better attendance," Allard said. She also questioned whether the bill's cost is justified when 15 states use single-day counts.
Story said the bill does not change the October count requirement or the Department of Education's verification process. "DEED still has to verify that these students are where they are every year," she said. The averaging applies only to how districts budget, not how students are counted.
Katie Parrott, president of the Alaska Association of School Business Officials, told the committee the bill would allow districts to plan using actual enrollment data rather than projections. "We're always only planning according to the information we already know about what has taken place with the students who have already been essentially certified," Parrott said.
Parrott said Alaska's special education population has grown 14 percent over the past decade even as overall enrollment declined 1 percent to 1.5 percent. "The cost of providing for the needs of students has changed over time as well," she said. "Creating mechanisms in the system that use what we already know, that we're not doing projections to establish those amounts for budgeting, is really helpful."
Representative Alyse Galvin of Anchorage said the bill would reduce the chaos of pink-slip notices that make it difficult for teachers to focus on family engagement and student relationships. "When I went to schools where they were, especially in the springtime, feeling this sense of chaos, what I noticed is when I brought up things like, 'Well, you need to spend more time calling your families,' frankly, they looked at me with a blank stare, almost like deer in the headlights, because they were already so overwhelmed," Galvin said.
Story said the bill would allow districts to offer teacher contracts earlier in the spring, when recruitment is most competitive. "By having their number July 1st, they're not going to have to see some instability in the latter part of the year," she said.
Representative Sara Hannan of Juneau said the bill addresses a timing problem identified in the 2015 study: districts must notify tenured teachers of layoffs by April, but the legislature may not pass the budget until May, and the October count is not verified until the following spring. "The goal was the predictability of you weren't going to go through that cycle of not knowing the next year whether your untenured teachers were going to be dismissed on the last day because you knew what the next year's funding was," Hannan said.
Allard disputed Galvin's reference to 500 pink slips in Anchorage. She said the district had 270 displaced positions, 80 direct layoffs (56 teachers and 24 staff), and 150 vacant positions that were eliminated. She also noted the Anchorage School District has $79 million in savings and $80 million in debt.
Representative Neal Foster asked how the state would pay for the $113 million increase. Story said the legislature could use one-time money currently in the budget or address the cost through the base student allocation, which is separate from the bill.
Bynum said the bill does not address the real problem. "If you want to fix funding, just put the $450 BSA increase in instead of putting this in, because that's all we're doing," he said. He also questioned the utility analogy Story used, noting utilities cannot immediately raise rates when they lose customers and must absorb losses through staff cuts, reduced capital investment, or savings.
The committee did not take action on the bill Thursday. Foster said the committee will hear public testimony Monday at 1:30 p.m., followed by questions and potential amendments. Foster set an amendment deadline to be announced at Monday's meeting.
The bill also includes a one-time $12,000 appropriation for the Department of Education to draft regulations on the new formula, including reporting timelines for intensive services students and monthly payment calculations.
Mount Edgecumbe High School, a state-operated boarding school, would see a projected decrease in state aid of $143,900 in fiscal year 2027 and $163,000 annually through 2032 under the bill.
Public testimony is scheduled for Monday at 1:30 p.m. in the House Finance Committee.
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