Roughly a year after the federal government said Alaska underfunded multiple school districts during the COVID-19 pandemic, the U.S. Department of Education said last month it's dropping its case against the state. One of those districts was the Kenai Peninsula Borough School District, which the feds say the state owed almost $8 million dollars. KDLL’s Ashlyn O’Hara spoke to District Superintendent Clayton Holland, who said they never expected to get the money anyway.
AO: I feel like the maintenance of equity issue was just one that was complex. You know, I feel like I've followed school district finances pretty closely, and they're, you know, I myself have had trouble kind of understanding the back and forth that's been going on here. For folks who maybe haven't been following this issue as closely. How would you summarize, kind of, the path to this point and the announcement that came a few weeks ago?
CH: Yeah, thanks, Ashlyn, I think, well, one I think it's been a little confusing all along and a little bit hampered by lack of communication from the state on what's happening with us. So as far as the district is concerned, we have never budgeted that money into our plans, knowing that the state was disputing what the federal government was saying about this. So we've held back and have just waited for, you know, the information to come to us. You know, we didn't plan on using that knowing there was uncertainty. I think this kind of lets us know now that we shouldn't, you know, we did the right move. We didn't plan on it. And so I think it kind of ends the whole, the whole thing.
AO: What funding were we talking about here that the federal government said the state owed the Kenai Peninsula borough School District?
CH: Basically, maintenance of equity revolved around a state – or a district could do this, too – can't have lowered the amount they're spending out of their general fund, because you're getting grant funding. So for instance, oh, for us as a district, say, in special education, if the district said, ‘Hey, we got all this federal funding, we're now going to cut what we spend on special education by X amount.’ That would be the same kind of issue. And so what they were saying – the federal government – is they lowered the amount given to the Kenai Peninsula Borough and a few other districts when the grant funding, when the ESSER funding came in during the pandemic, that the state should have paid us more and not less. And so that was their contention, that the state had miscalculated the amount that was to be given to us in light of the federal funding that was coming into the state of Alaska.
AO: I think everybody is pretty familiar now with the idea that how much money the school district gets from the state depends on student enrollment. And the Kenai Peninsula borough School District, like a lot of other districts, did see a drop in brick and mortar enrollment during the pandemic. Did you guys see a meaningful reduction in state funding as a result of that drop in enrollment at all?
CH: That’s a great question, because there was a hold harmless factor that was built in for a year on that. So the state did recognize that, hey, you're having a drop that's probably abnormal, and so we're not going to penalize you going to the next year when you can predict that. And so that part of it, you know, they did recognize that and see that happening. So student enrollment was actually accounted for during that time for all districts, and that drop. And so that was, you know, definitely an issue across the stabilize, across the whole nation, essentially, that we did have kids that either just kind of dropped off the radar, and a lot of times you never even knew where they ended up, you know, ended up going.
AO: As a refresher, you know, I know we're kind of heading into the time for budget talks. Obviously, that process has already started, but can you remind me, remind us, what the district's financial situation is heading into FY26 now? Where do things stand with the district’s finances?
CH: I think that's the more pressing question, because we never did budget the maintenance of equity funding, knowing there was uncertainty about it, knowing there was a lot of confusion about it, to be quite frank, about that funding and what truly was owed or not owed. In a lot of cases, I think all our districts were long for the ride. And as I said earlier, they think maybe it's frustration that there was this conversation taking place, that we really weren't informed about through the normal channels. I think that'd be my main issue in a lot of ways. But the big issue for Alaska, the big issue for the Kenai Peninsula Borough School District, is actually what happens now. So, like most of the districts in the State of Alaska, we're facing a huge deficit coming into the next year. We're looking at close to a $17 million deficit to contend with. Our fund balance, you know, unrestricted fund balance, has gone down to the bare, basically bare bones at this point. And, yeah, it's what happens next. I think that's the big issue. You know, the governor can claim what he wants to claim on a ‘big win.’ The federal government can say what they're going to say. I'd say the timing of that was very interesting to me. And it was one-time funding that went to every district, so their explanation didn’t – it was interesting. But I think now it's what happens from here, you know? And what's going to happen to the State of Alaska with the budget? Right now, the governor's budget has no education funding attached to it. He's kind of put his hands up and said, you know, the state’s going to have to figure out this budget that we have. So we don't know. And unfortunately, that means we're going to be going into this year like we did last year, having to look at all the potential cuts, having to string people along with whether you have a job or not, and asking people to be patient, and delays in recruitment and all of that. So, that's the frustrating part. I think that’s the frustrating part for Alaskans, is that we don't have a real vision right now for what the state is going to do with education, or basically in any other sector. So you know, we'll hold on tight and see if something comes through this year and what folks do in Juneau. So that, to me, is the biggest issue out of all this, more than the maintenance of equity. Because, as I said, we didn't count on that, didn't budget for that, but we know, just like the rest of Alaska, we're kind of in dire straits again with our budget and where we go from here.
AO: And I know you're saying the district didn't budget that maintenance of equity chunk, and I remember that the amount had changed a few times – like how much the federal government believed the state actually owed. What would have been the amount that the district would have gotten if this had advanced?
CH: It's been a while since I looked at it. I believe the last time, it was close to $7 million for the two years worth of reimbursement that was supposedly owed to us from the State of Alaska. So it would have been huge. That would have been huge this year to be able to put that in our fund balance so we could offset some of next year's projection. But, you know, it didn't happen. So we're, you know, dealing with the reality that we have to face.
AO: When we've talked about this issue in the past, it's kind of been like, ‘Oh, well, you know, well, we're going to wait and see what happens.’ And there wasn't ever anything that was super sure. But did the district ever take a firm position on whether or not it agreed with the federal government that it was owed this money from the state?
CH: No, we never did that, because it was an issue that was hard to disaggregate from our end – what numbers they were looking at to make that determination. And it wasn't what we had available. It was interesting when I was in D.C. this summer as part of – I’m on the governing board for the National Association – and it was clear from our delegates that we were owed money. But there was also thought that there's, you know, maybe wait out the administration and see what happens next. So I think that's kind of what's happened. But no, as far as us taking a hard stand on that, no. Would we have loved it? Yes, but we didn't have the numbers to really know how they looked at that, how those decisions were made.
AO: When you say administration in that case you're talking about president?
CH: I believe that’s what was being referred to, yes. Would there be a change in the Department of Education and who's running it, and what's required? All of that?
AO: And then lastly, in the press release that I – and I'm sure every other reporter in the State of Alaska got from the governor's office – Dunleavy points to this situation and identifies it as maybe a reason that he supports getting rid of the federal Department of Education. And I guess I'm wondering if you have any response to that.
CH: Yeah, that's a great question. You know, I think it's one of those things that, because we're not in a position to influence that one way or another, that, you know, I think we are in – districts across the country, in the state of Alaska – just, what's that mean? What's that look like? You know, there are still – I think our assurances are, there's still laws backing a lot of what the Department of Education does. And so as far as special education funding, or Title I funding, things like that, you know, that would be a real – you can't just get rid of the department and then get rid of those funding resources that are part of that. Will it mean, you know, maybe some changes with requirements and regulations, as far as reporting requirements, or some of the laws enacted that impact schools? I could see that happening. But for the most part, you know, we're kind of going to wait and see, and how do we adapt and adjust as things change or don't change?
AO: I mean, those are all the questions that I had, unless there's anything on this topic that you wanted to mention or get out there.
CH: I think like all the districts in the state that would have been impacted, we never counted on that, because we knew it was up in the air and the state was battling that and, you know, challenging that decision. And so, you know, I'm thankful that we made those choices and then we never counted on that. And it is, what is. It's kind of one of those problems that are beyond our scope of influence. And so we're moving on.
