Fairbanks district proposes FY27 budget that restores class sizes, adds music and before-school care amid $11.4M fund-balance dispute

The Fairbanks North Star Borough School District on Feb. 3 unveiled its FY27 proposed budget, outlining investments to lower class sizes, restore elementary music and add before-school care while warning of a possible $11.4 million administrative transfer of district unassigned funds to a borough maintenance reserve.

Chief Operations Officer Andy DeGraw told the school board that the district projects enrollment at roughly 11,042 students for next year and built the proposal on three main assumptions: a Base Student Allocation (BSA) of 6,660, an enrollment decline of 158 students and a status-quo local contribution request of $62,780,000. DeGraw said those assumptions, together with a combination of recurring and one-time savings, make the reinvestments possible.

The most significant proposed investment is a reduction in the pupil-to-teacher ratio (PTR): lowering K–5 PTR from 26 to 23, which the administration says would fund about 21 additional elementary classroom teachers. At the secondary level, the proposal would reduce middle school PTR from 29 to 28 and high school PTR from 32 to 30, adding the equivalent of roughly 8.6 classroom FTEs across secondary grades.

The budget also proposes restoring elementary instrumental music (about eight FTE), adding an ELP teacher at Barnett, expanding general-education pre-K supports, increasing discretionary supplies by 25% at secondary schools, building reading supports and dedicating approximately $250,000 to districtwide before-school care at elementary schools. A $1.2 million subsidy from the general fund to the transportation fund is included to help cover a recurring operating gap in school transportation.

DeGraw attributed the district's improved fund balance for FY25 to several factors: unanticipated savings in the district's risk fund due to fewer health-plan enrollees and favorable stop-loss reimbursements, additional federal impact-aid receipts and vacancy-related savings after staffing restructures and outsourcing of custodial services. He cautioned the board that some of those gains were timing-driven and could not reliably be budgeted until recorded.

A parallel issue surfaced in the borough assembly report earlier in the meeting: Liz Reeves, deputy presiding officer of the borough assembly, said borough administration intends to administratively move about $11.4 million from district unassigned fund balances to the borough's maintenance reserve fund following acceptance of the annual financial audit. DeGraw said the borough calculation of allowable reserves differs from the state calculation because the borough includes multiple funds and does not permit subtracting year-end encumbrances, and that move could limit the district's flexibility.

Board members pressed administration for greater granular data on how much of the FY25 fund-balance rise is recurring versus one-time. DeGraw said impact aid and some risk-fund changes provided recurring benefit, while other items such as custodial contracting were one-time. He reiterated that the FY27 proposed budget was not contingent on the borough's administrative action but acknowledged that any lapse or sweep of reserves would reduce the district's ability to dip into fund balance for future shortfalls and to smooth premium or program impacts.

On process, the administration said it will use an interactive balancing tool through upcoming work sessions so the board can evaluate trade-offs and stage hiring or program restorations as direction is given. The district estimated average annual cost for an additional certified position at about $122,000 including salary and benefits.

Next steps: the board will review the proposed budget in work sessions and public hearings before voting on a recommended and then an approved budget later this spring. The borough's formal audit acceptance and any resulting administrative transfer remain separate processes and will be reported as they are finalized.