Ketchikan school board holds emergency session after superintendent reports roughly $4.6 million FY26 shortfall

The Ketchikan Gateway Borough School District Board of Education met in an emergency session on May 7 to confront an estimated FY26 budget shortfall of roughly $4.6 million and to plan immediate steps to prevent a cash crunch in June.

Superintendent Sherry Royer told the board the district’s recent accounting work shows “this 4.5 is not included in [the MOA] and so needs to be addressed separately,” and that the gap is materially larger than the $1 million cushion the board had expected. Royer said the district has already taken significant measures this spring — including closing two schools, reducing 55 positions and cutting roughly 8 percent from the budget — but that those actions are not sufficient to close the new shortfall.

From the borough’s perspective, Manager Ruben Duran and Assistant Borough Manager Cynna Smith described long-standing drains on the borough general fund and emphasized limited local capacity to absorb another large supplement. Smith said the borough previously covered a district health-care deficit of about $4.8 million between 2019 and 2023 and has spent roughly $3.5 million on a Point Higgins oil-spill cleanup that is still awaiting insurance reimbursement. “We have to look at our own cash position,” Smith said, noting general-fund constraints and the potential need to borrow from dedicated funds.

Board members and borough staff discussed options to address both the immediate cash need — the district faces several payroll and vendor payments in June — and the long-term impact on FY27. Options the board directed staff to pursue include:

- Requesting an early DEED payment to shift some FY27 funds into June and avoid an immediate DEED “cap” penalty; Borough Manager Duran said an early payment could reduce the penalty risk. - Asking the borough assembly for a supplemental appropriation to cover the immediate $4.6 million cash need (board members were told the Local Education Fund contains about $2.0 million but that a full supplement would require assembly action and may need a supermajority depending on the approach). - Seeking renegotiation of the district–borough MOA repayment schedule so that repayment terms could be spread over a longer period. - Preparing additional district budget reductions for board review, including the possibility of eliminating 18–20 positions as an estimate Royer provided (the superintendent said that figure could yield roughly $2.5 million in personnel savings) and cutting nonpersonnel items such as activity travel (potentially about $333,000).

Officials warned of a compounding penalty if local contributions exceed the state-imposed cap: borough staff said DEED can reduce foundation funding for the following fiscal year by the amount that exceeds the cap, which they characterized as a multi-million-dollar risk that would deepen the district’s FY27 shortfall. Cynna Smith described the penalty calculation and urged the board to factor it into any supplement request.

Board members repeatedly expressed concern about the consequences of deep cuts to programming and services. Several members said they could not support further reductions to the alternative-school program (referred to in the meeting as Ravilla/Rovilla), arguing that removing additional positions or services there would likely cause high-need students to leave the district and could worsen attendance and graduation outcomes. Special education director Sally Stockhausen told the board the approved budget includes two preschool teachers and staffing aligned to IEP requirements and cautioned that any changes must preserve mandated services.

The board also heard from the activities director (identified in the meeting transcript as Kelly Smith), who described how donations and event revenue operate and flagged Title IX and equity considerations if activity funding were redirected. The activities director said some events generate local economic benefits and that cutting activities would require strict, uniform policies to avoid Title IX and equity problems.

During public comment, community members urged transparency, asked the board to examine the root causes of repeated deficits, and recommended forming a community task force to help identify solutions and assess consequences of proposed cuts.

The board gave staff direction to move quickly: request an early DEED payment, submit a borough supplement request for the full amount needed to cover June payrolls, seek MOA schedule changes, and prepare a set of proposed budget revisions and cuts for the board’s review. The board scheduled follow-up meetings, including a regular meeting on May 13 and a special meeting on May 15 (5:30 p.m.) to review revised materials.

The board did not take formal budget action at the emergency session; motions recorded were procedural (approval of the agenda and entry into the work session). The district and borough officials said there is about three weeks of payroll and payables that must be covered in June, and they warned that failing to shore up cash could trigger staff-payment and labor issues as well as state funding penalties.

Next steps: staff will prepare the supplemental request and revised budget options for the upcoming meetings; the board is to decide whether to direct additional cuts, pursue alternate funding sources, or support a borough supplement and DEED request to avoid triggering immediate reductions to FY27 foundation funding.