School board work session focuses on FY26 budget: health insurance shortfall, class-size tradeoffs and North Star College

Fairbanks North Star Borough School District administrators and board members spent a work session reviewing the proposed FY26 budget and scenario options, focusing on an increase in the district's benefit rate to shore up its risk fund, potential restorations to classroom staffing and the future of programs such as North Star College and transportation subsidies.

The discussion centered on the district's health-insurance risk fund and the percentage charged to each dollar of salary, a formula the administration calls the "benefit rate." Mr. DeGraw, district staff presenter, explained that the risk fund "is really the most important metric here in my opinion. It's really the measuring stick or the gauge" of whether the benefit rate is generating enough revenue to cover claims. He said the district has carried volatile balances over the past decade, briefly reaching multi-million-dollar highs after plan redesigns and later drawing down; administration reinstated an additional charge to bring the fund balance back to about $3,000,000 at the end of FY24 after a recent drop.

Why it matters: administrators said annual claims moving through the risk fund can range widely and that a typical annual transaction rate is roughly $35 million to $40 million, which supports holding roughly 5 to 10 percent of that ($3 million to $4 million) as a fund balance. Board discussion tied those numbers to the proposed benefit-rate change for FY26 and to contract negotiations over how costs are split between employers and employees.

Administration's explanation and board questions Mr. DeGraw walked the board through a 12-year benefits-rate history and the related risk-fund ending balances. He described a 2017 plan redesign that produced unusually large savings and allowed the district to reduce the benefit rate at that time; later years of higher claims and a reduction in inflows left the fund near $1 million before the administration charged the general fund to restore the balance. On how the district measures adequacy, he said the benefit rate is the percentage charged on each dollar of salary and that the district currently uses about 30.86 percent as that rate.

Board members pressed for causes of the recent deficit and the impacts on employees. Mr. DeGraw attributed the primary cause to industry-wide increases in health-care costs and said the district's "hard cap" on liability limits exposure going forward. He also clarified the difference between the benefit-rate formula (how much is collected from payroll to fund claims) and negotiated premium splits with employee groups (what employees pay directly).

Balancing-act scenarios: revenues and program trade-offs A central portion of the meeting reviewed the district's "balancing act" tool and several board-member scenarios. Board members tested combinations of local borough contributions, state BSA (Basic Student Allocation) increases, and program cuts or restorations. Several recurring elements in board scenarios: - Local revenue: some members modeled a borough contribution near $60,000,000; one scenario tested up to $64,000,000. Several board members said $60 million is the mayor's ask and that amounts above that are unlikely. - State BSA: board discussion included $680, $800 and $1,000 per-student BSA-equivalent increases; members said an $800 BSA increase was frequently described as realistic in Juneau conversations, while $1,000 was described as the governor's proposal in some offices. - Transportation subsidy: several board members modeled reductions to the district's local transportation subsidy assuming state increases; administrators said the governor's proposed transportation boost would not fully cover needs but could reduce the local subsidy requirement.

On the expenditure side, board members proposed restorations and cuts including: - Elementary pupil-teacher ratios (PTR): several members tested lowering elementary PTR to 25 (some urged even lower), citing class-size as a major factor in retaining and attracting families. - Secondary PTR: modeled ranges varied (6'8 to 30 for grades 6'8; 31'33.5 for grades 9'12 depending on scenario). - High-school counselors, activity funding and districtwide supply budgets: some scenarios added back counselors or supply budgets when revenue allowed. - Kindergarten aides: one board member asked the cost of reducing kindergarten aides from one per classroom to a shared aide model; administration gave differing scenario estimates in the meeting (one comment estimated roughly $800,000 in savings; administration later characterized a related adjustment as producing about $250,000 in surplus in the tool) and said they would refine those numbers for the board.

North Star College and dual-enrollment discussion Board members debated North Star College's role in the district budget and student opportunities. Several points from the discussion: - North Star College is operated in partnership with the University of Alaska Fairbanks and provides juniors and seniors access to UAF courses and dual enrollment. UAF staff and district staff described the program as offering students a full college experience and access to UAF courses rather than a restricted set of classes. - Administration said an apples-to-apples revenue comparison showed that, under some redistribution scenarios, closing North Star College and returning students to their attendance-area high schools could produce net savings for the district (administration noted the revenue differences and the cost of tuition/fees and program staffing when modeling the scenarios). Administration also warned that closing North Star College would reduce the unique course availability the program currently offers. - Board members raised safety and student-support questions; administration said UAF and North Star College provide active supervision, advising and guardrails for minor students on campus.

Charter, magnet and choice models Board members also discussed how magnets, schools of choice and potential charter approvals (including state-level appeals) factor into enrollment and budget planning. Administrators reminded the board that standing up new magnet or focused models typically requires community stakeholder work and that realistically major changes for a school like Hutchison are more feasible as a planning project for the next budget cycle rather than an immediate fix. Members asked administration to model magnet/focus options wherever communities have already done prior planning.

Process and next steps Board President Burnett and other members asked administration to collect each board member's balancing-act scenario and to add only those items for which a board member expressed support into the shared tool. Administrators agreed to email supporting slides and the updated tool to the board and to capture scenarios and return refined calculations (for example, the kindergarten-aide and charter-related revenue interactions) at a future work session.

Quotes "The risk fund is really the most important metric here in my opinion. It's really the measuring stick or the gauge," Mr. DeGraw said when explaining why the benefit rate was being adjusted.

"So in short, huge savings from those plan redesigns," said Mrs. Hardy, a board member, recalling the earlier benefit-plan changes that temporarily boosted the fund balance.

"So the benefit rate is the percentage that we charge each dollar of salary that is paid out to employees district wide," Mr. DeGraw explained when a board member asked for a definition of the term.

Ending No formal votes were taken at the session; the meeting was a work session to test revenue and expenditure scenarios, clarify assumptions and gather direction for the next steps. Administration will collect individual scenarios, refine estimates (including the kindergarten-aide and North Star College calculations) and return updated materials to the board for follow-up work sessions.