An overview of adequate funding for K-12 schools

January 2006

From 1983 to 2002 the Legislature failed to fund K-12 education in Alaska at a level sufficient to keep up with inflation.  In fact the schools lost 47.3% of their purchasing power to inflation over those two decades.

For fiscal years (FY) 03, 04, 05 and 06 the legislature has provided increases to school funding (operating costs) that have covered inflation.  In FY 05 the $82 million increase covered inflation, the increase in the employers' contribution to TRS and to PERS, and $26 million for instructional programs.  Thus for the first time in two decades the funding gap created from 1983 through 2002 was partially addressed.

However, at the same time a change in pupil transportation funding meant many school districts had to take funds from instruction to pay for pupil transportation.  For FY 06 the $70 million appropriated by the legislature covered inflation, TRS/PERS increases and provided an additional $8 million for instructional programs.  Thus, over the past two years the funding gap of $675 million has been reduced by $34 million.

Today the Legislature must deal with K-12 funding as a three-legged stool:

1. Increased employers' contribution to TRS/PERS – According to the actuary for the Administration, the employer contribution must be increased 5% a year for the next four years.  It must then be maintained at that level for the next 20 years if the retirement systems are to be fully funded.  For FY 07 that number is $39.7 million .
2. Inflation – The annual inflation rate used by the state for calculations for the Permanent Fund and the retirement systems is 3%.  Thus each year the increase to funding must be at least 3% to maintain the purchasing power of school districts.  For FY 07 that would be 3% of $832.3 million or $25.0 million .
3. Recovering from the 1983-2002 Funding Gap – There are at least three ways to calculate this funding gap or better yet, to determine an adequate funding level for K-12 schools.  Recent studies place the funding gap between $675 million.  Given that it took two decades to create the gap, it would be reasonable to take eight (8) more years for the recovery.  This would coincide with 2014, the year each school district should comply with the provisions of “No Child Left Behind.”  That means an annual increase of at least $80 million (($675 - $34 million)/8) beginning in FY 06.

Thus, for FY 07 the increased funding level for K-12 should be $144.7 million ($39.7 + $25.0 + $80), which would increase the Base Student Allocation by $692 ($4,919 to $5,611) and provide a total funding level of $977 million in FY 07 .

Using the same rationale, the funding for the next seven years would be as follows:

FY 08  $40.9 M (TRS/PERS) + $29.3 M ($977 x .03) + $80 M = $150.2 M

FY 09  $31.4 M (TRS/PERS) + $33.8 M (($977 + $150) x .03) + $80 M = $145.2 M

FY 10  $0 (TRS/PERS)* + $38.2 M (($1127 + $145) x .03) + $80 M = $118.2 M

FY 11  $0 (TRS/PERS)* + $41.7 M (($1272 + $118) x .03) + $80 M = $121.7 M

FY 12  $0 (TRS/PERS)* + $45.4 M (($1390 + $122) x .03) + $80 M = $125.4 M

FY 13  $0 (TRS/PERS)* + $49.1 M (($1512 + $125) x .03) + $80 M = $129.1 M

FY 14  $0 (TRS/PERS)* + $53.0 M (($1637 + $129) x .03) + $0** = $53.0 M

* The employer contribution does not need an increase at this point, according to the Administration's actuary.
** The Recovery of the Education Funding Gap is complete.

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Basic facts about adequate funding.