Ketchikan school district warns it may not be able to cover June payroll; borough officials weigh contingency steps

School district officials told the Ketchikan Gateway Borough Assembly liaison committee on April 7 that the district has limited cash on hand and likely will not have funds to cover the district's June payroll without borough assistance.

"As of yesterday we had $1,596,000 balance within all of our accounts," said Lisa, a district official who provided the liaison with a verbal cash-flow update. She said the district expects adjusted foundation payments to change in April through June, and that under current projections the district should be able to meet payroll through May but "I don't believe that we'll have cash to be able to cover that" June payroll.

Assembly members pressed for concrete figures and contingency plans. "If you're not going to be able to make the June payroll ... how much is that going to be?" asked Assembly member Dowell. Lisa said she did not have a precise dollar figure at the meeting and that the district has historically relied on support from the borough under a memorandum of agreement (MOA) to address year-end shortfalls.

Assembly members said the borough needs quick answers because the borough's projected unreserved fund balance is about $2,000,000 and an emergency loan or appropriation to cover district payroll could strain that reserve. Borough finance staff said treatment depends on whether the borough appropriates funds or lends them (which would be recorded differently in borough accounts) and that they would seek legal advice on releasing sequestered funds.

The liaison also reviewed the district's recent interactions with the Department of Education. District staff said the Department accepted an MOA in March that allowed the March foundation payment to be released, but that DEPARTMENT OF EDUCATION officials have conditioned further payments on receipt of a balanced FY27 budget. The FY25 audit and a department letter that flagged a negative fund balance remain part of the oversight context.

Assembly members and district staff also discussed FY27 budget assumptions. The funding ordinance the board approved on the agenda included a required local contribution of $6,533,243 and a discretionary local contribution of $5,020,720, plus listed in-kind insurance and banking fees. District staff said the proposed FY27 budget includes a $1,000,000 adjustment built in to address anticipated shortfalls, but acknowledged that the plan assumes staffing reductions and does not include contingency for negotiated contract increases.

Health-insurance costs were another concern. District staff said they had used a FY27 per-eligible-employee estimate of $35,550 per year based on a 19% increase from earlier figures, and said that those estimates will be updated in a call with the district's broker, USI, after the liaison meeting.

Several assembly members raised prior-audit findings and allegations that restricted or fiduciary funds had been used inappropriately in prior years. An assembly member cited audit findings from FY23 and FY24; district staff replied that student-activity and fundraised dollars are held in fiduciary accounts at school sites, are audited, and "do not touch the cap" or general-operating revenue.

Board and assembly members also discussed operational choices the district is considering: the school board is scheduled to vote the next day on closing two schools that district staff said could reduce long-term overhead but would result in cuts affecting roughly 45 positions. Members asked whether closure actions would affect DEPARTMENT OF EDUCATION decisions; district staff said DEPARTMENT OF EDUCATION acceptance was tied to submission of a balanced FY27 budget rather than a single closure vote.

Borough finance staff noted there is roughly $5,410,000 that has been sequestered under prior MOAs to cover competing liabilities (including health-insurance obligations), and said they would consult the borough attorney before releasing the full balance because obligations and prior agreements create competing claims on that pot of money.

Assembly members asked for clearer, more frequent cash-flow reporting and supported scheduling monthly liaison meetings so borough and district staff can collaborate more closely as the budget and FY27 approval process proceeds.

The liaison took no final vote on funding at the session and adjourned after a motion to close the meeting passed without objection.