Legislative finance briefing highlights foundation formula drivers, rising special‑education and correspondence counts

ANCHORAGE — The Legislative Finance Division on Aug. 25 gave the Joint Legislative Task Force on Education Funding a data‑heavy overview of how Alaska pays for K‑12 public schools, showing state sources supply the majority of dollars, while a chain of formula multipliers and changing student counts drive wide differences in district funding.

The briefing outlined that funding to school districts comes from several direct and indirect sources and that a district’s “adjusted average daily membership” (ADM) — the step after October student counts are multiplied by location and program multipliers — is the core unit used to compute a district’s “basic need.” The division emphasized two recent and related trends that complicate comparisons over time: a substantial growth in correspondence (remote/correspondence) enrollment and an increase in students qualifying for the formula’s intensive special‑education multiplier.

Why it matters: The formula’s structure means a modest change in a multiplier or in how students are counted can shift hundreds of thousands — or in aggregate, millions — of state dollars between districts. That affects classroom staffing, maintenance and capital plans and how the state meets federal requirements tied to impact aid and the federal disparity test.

Most revenue comes from the state, Connor Bell, fiscal analyst with Legislative Finance, told the task force: “62% of funding comes from state sources, 25% from local sources, 11% from federal sources.” Bell reported the largest single line item is the foundation formula payment (about $1.2 billion in the materials presented). He also laid out several recurring formula elements: a district cost factor (to adjust for local cost differences), a school‑size factor (to account for higher per‑student costs in smaller schools), a special‑needs multiplier that is applied as a block grant (1.2×), a career and technical education multiplier (1.015× under current law), and an intensive special‑education multiplier that the division said is currently accounted for as 13× for each qualifying student.

Bell illustrated how those components expand the base student allocation. Using a Fairbanks example, he showed an October ADM of about 11,626 becoming an adjusted ADM of roughly 23,187 after the various multipliers and the intensive special‑education add‑ons are applied.

On correspondence students, Bell said those pupils are currently funded at 90% of a regular ADM. The division and several task force members flagged that the growing share of correspondence students — increasing sharply from pre‑pandemic levels — and the change in how they are counted complicates the state’s internal comparisons and interacts with federal tests the state must pass to claim certain federal impact‑aid deductions.

Federal disparity test and impact aid: Alexi Painter, director of Legislative Finance, told the task force the state conducts the federal disparity test annually; the test determines whether a portion of federal impact aid may be deducted from the state share. Painter said the state’s ability to deduct impact aid hinges on adjusted per‑pupil calculations and a federal rule that constrains the permitted difference between the top and bottom districts on that adjusted basis. Painter said that failing the test in a prior year would have cost the state roughly $80 million if not resolved. He urged the task force to consider how counting rules, correspondence growth and district structure affect the state’s federal filing and exposure.

Special education and counts: The division reported the number of students qualifying for the intensive special‑education multiplier has increased since 2017; Painter said that intensives rose by roughly 730 students (about a 27.7% increase from the pre‑COVID baseline noted in the presentation). Several members pointed out changes in identification rules and eligibility criteria contributed to that rise and that annual verification processes and prior single‑audit flags merit further audit and review.

Block grants and local flexibility: Bell and Painter reminded the task force that some formula add‑ons are block grants — the special‑needs and CTE multipliers create additional dollars but are not statutorily restricted to a single spending line. Representative Ruffridge and others raised that concern directly: they asked whether applying multipliers as unrestricted block grants defeats the point of having a separate multiplier and suggested the task force examine whether funds tied to particular student needs should carry spending restrictions.

Next steps: The task force invited additional technical briefings and outside experts. The division said the task force will hear from the University of Alaska’s Institute of Social and Economic Research and national adequacy experts in November; the task force also asked Legislative Finance for follow‑up material on employer retirement caps, how intensive‑need students are identified and audited, and how the rise in correspondence enrollment affected district revenues in FY21 and after.

Ending: The task force scheduled expert briefings and said it will use those technical sessions to test options — from adjusting multipliers to changing counting rules — but made no policy changes at the Aug. 25 meeting.