Assembly approves three-year repayment agreement requiring Ketchikan school district to repay about $5.44 million

The Ketchikan Gateway Borough Assembly voted 5-2 on March 2 to approve a memorandum of agreement that requires the Ketchikan Gateway Borough School District to repay $5,441,399 in excess expenditures over a three-year schedule.

The decision followed more than two hours of public testimony and more than an hour of back-and-forth among assembly members over how quickly the district should be required to reimburse borough coffers. Student leaders, teachers and parents urged a longer repayment period to avoid steep cuts to programs; several assembly members pushed back, saying the district had repeatedly missed financial deadlines and the borough must protect its reserves.

"The 5-year plan will mitigate that hurt over a longer period of time," Assemblymember Ortez said while arguing for a longer schedule during the debate. "It'll provide more opportunities for us to retain some of our younger teachers potentially." Student representative Lily Peder told the assembly: "I implore you to choose the 5-year repayment plan as it is the option that will harm students the least." Parent Tiffany Cook warned the assembly that dramatic cuts would drive families away, calling the situation "a watershed moment" for the community.

Assembly supporters of the three-year MOA said the borough could not continue to carry uncollected receivables and that the school district had a history of budgeting and reporting problems. "The FY25 audit confirmed that approximately $5,440,000 is owed to the borough," Assemblymember Dyle said during debate, noting the amount was recorded as a payable; Dyle and other supporters said sequestering and recovering the funds is appropriate and necessary to protect borough operations.

Multiple amendment attempts to extend the repayment window failed. An amendment to substitute the borough finance office''s five-year amortization (the finance director''s proposal) was defeated 4-3. A later amendment to a four-year schedule also failed by a 4-3 vote.

The final MOA motion was moved by Assemblymember Palmer and seconded in the meeting. In the roll call for the final agreement, Matson, Palmer, Thompson, Dial and Arntzen voted yes; Cortez and Bowling voted no. The assembly recorded the measure as approved by a 5-2 margin.

Borough staff said they will implement the payment schedule and apply the borough''s adopted policy for calculating interest on interfund loans; staff indicated they will recalculate applicable rates each July 1 as provided by borough policy. Assistant borough staff also recommended postponing a separate ordinance setting FY2027 local school funding until after the MOA and related documentation are finalized so staff can present revised figures.

The assembly''s action does not itself change school programs; the school district must now finalize its budget and staffing decisions in light of the repayment obligation and ongoing structural deficit concerns. Several assembly members said they expect frequent reporting from district finance staff and will watch implementation closely.

The assembly moved remaining agenda items and some public hearings to a special meeting on March 9 and set other hearings for March 16.

The MOA is recorded as adopted; staff and both parties will follow the timelines and reporting requirements built into the agreement.