House Education Committee briefed on Alaska school funding, foundation formula mechanics

The House Education Committee met at 8 a.m. Friday, Jan. 24, 2025, in the Betty Davis Capitol Room 106 for a briefing on education funding. Alexi Painter, director of the Legislative Finance Division, and Connor Bell, a fiscal analyst with Legislative Finance, described how the state’s foundation formula, local levies and federal aid combine to fund school districts across Alaska.

The committee was told the state supplies the largest share of school funding: "the state provides about 62% of school district revenue in the current year," Painter said. He and Bell explained that the foundation formula — which includes the base student allocation and a set of multipliers applied to student counts — is the single largest direct funding source for districts but that substantial portions of district funding also come from local property taxes, federal aid and occasional one-time state appropriations.

Why this matters: Committee members said they need clearer, recent data to evaluate policy choices. The formula’s structure determines how resources flow to urban, suburban and very small rural schools, affects how districts can handle inflation and bargaining settlements, and shapes recruitment and retention in districts that cannot raise local taxes.

How the formula works and what lawmakers heard Connor Bell described the mechanics at the center of the briefing: the October student count (average daily membership, or ADM) is adjusted by several multipliers to produce an adjusted ADM (AADM), and AADM is multiplied by the base student allocation (BSA) to produce each district’s “Basic Need.” Bell said: "The foundation formula and pupil transportation formula ... flow to districts from the public education fund according to the statutory formula without further appropriation." The committee was advised that the legislature provides appropriation authority into the public education fund but can still fund less than the statutory formula amount in any year; in that event the statute calls for prorating among districts.

Key formula components described to the committee: - Base student allocation (BSA): currently $5,960 per adjusted student (as stated in the briefing). - School-size factor: provides higher per-student weighting for smaller schools; Bell said the original school-size multipliers date to the 1998 formula and have not been updated in substance since then, though some smoothing provisions were added later. - District cost factor: a geographic cost differential intended to reflect higher local costs in some regions; statute calls for review every two years, but committee testimony said the last comprehensive study underlying current factors used data from the early 2000s and was implemented in FY09–13. - Special needs (block grant): a 1.2 multiplier applied statewide (a block grant rather than a per-student entitlement), and a separate intensive special-education multiplier of 13x for students who meet that intensive threshold. - Career-and-technical education factor: a 1.015 multiplier (a block grant). - Correspondence enrollment: counted at 0.9 ADM for purposes of formula calculations.

Painter and Bell also explained funding that does not appear as direct district revenue but is paid on districts’ behalf, such as PERS and TERS retirement costs beyond employer caps, school debt reimbursement and the REAA construction fund. Painter cautioned that national comparisons can vary depending on whether these indirect state-paid items are counted.

Numbers and examples discussed Painter and Bell provided statewide and district examples used by Legislative Finance: - State/local/federal shares (FY25, per the briefing): roughly 62% state, 25% local, 11% federal, 2% other. - The presentation noted roughly $174.7 million of outside-the-formula (one-time) state funding in FY25; one-time increases to pupil transportation were cited (approximately $7.3 million in that example). Those one-time sums raise total dollars available to districts for a given year but, officials warned, are not the same as an ongoing increase to the BSA. - Example: Fairbanks School District’s FY26 calculation in the packet showed an October ADM of 11,626 and an AADM of about 23,187 after applying school-size, district-cost, block multipliers and the intensive special-education add-ins, then multiplying by the BSA to get Basic Need.

Policy and implementation issues committee members raised Committee members pressed staff on several recurring policy questions: - District cost-factor review: lawmakers repeatedly asked why the district cost multipliers have not been updated; Painter said the statute requires review every two years but the last comprehensive study underlying the current factors used data from the early 2000s and was implemented in stages FY09–13. Committee members and staff discussed that an updated study would likely cost several hundred thousand dollars and would create winners and losers among districts once geography and wage differences are recalculated. - One-time (outside-the-formula) funding vs. ongoing formula funding: several members observed that one-time money can be hard for districts to use for recurring personnel costs because contracts and personnel are recurring commitments. Staff noted districts typically budget to the statutory BSA and treat outside-the-formula funding as add-back money if and when it becomes available; members raised the risk of layoffs or contract instability when one-time funding disappears. - Special-education intensive students: members expressed concern about the rising number of students counted as “intensive.” The committee asked the Department of Education to provide a one-page description of the criteria used to classify an intensive special-education student; Chair Andy Story said staff would request that from the department. - Local contribution caps and the federal disparity test: Painter explained that the statutory local contribution cap (commonly referenced as the 23% optional local cap) and the method of deducting federal impact aid are structured so Alaska passes a federal disparity test; staff estimated that failing the test and ceasing to deduct impact aid could increase state costs by about $81 million in a hypothetical scenario while also redistributing federal dollars directly to some districts. - Enrollment and demographic trends: staff showed a long-term enrollment decline in raw student counts that, because of rising weighting in the formula (most notably the growth in intensive special-education counts and other multipliers), has not led to a proportional fall in AADM. Staff noted a particularly large one-year spike in AADM driven by COVID-era changes (hold harmless and correspondence programs) that produced a short-term anomaly in FY21.

Committee directions and next steps - Staff to provide the committee the 2015 ISER (Institute of Social and Economic Research) analysis referenced in the briefing and to request from the Department of Education a one-page description of the criteria that qualify a student as an "intensive" special-education student. (Direction recorded during the meeting.) - Legislative Finance offered to return with follow-up answers to specific member questions, including the number of districts currently in hold-harmless status and more detail on the last district-cost-factor studies and their costs.

No formal committee actions or votes were taken during the Jan. 24 briefing. The committee set its schedule for upcoming meetings and public testimony on an education funding bill that will be held at the committee’s next session.

Ending note The committee adjourned after scheduling additional hearings, including public testimony times intended to allow working families to participate. Members signaled they will continue to pursue updated cost studies and more detail on the classification and cost of intensive special-education services before making targeted statutory changes.