001Recording in progress. >> Good afternoon, everyone. We'll call the Monday, April 27th, 2026 ASD School Board work session to order. Uh the time is 4:01 p.m. here in the board room. Present are members Jacobs, Bellamy, Higgins, Hallman, Lessons, and Wilson. We'll note when member Donley joins us. We've called ourselves to order and engaged in a roll call. Our first and only item for discussion today is a discussion and informational briefing on SB 278. We I anticipate having staff and or specific legislators from Senator Bjorkman and then Senator Tobin's office present today and I understand that Senator Bjorkman who who is scheduled to be up first is with us online. Is there a representation from Senator Bjorkman's office present with us on Zoom? Thank you, Chair Jacobs. Yes, this is Senator Bjorkman. Welcome, Senator. Thank you
002so much for joining us today. We have your attachments that you sent to us. If you would like us to pull up a specific one and then share that and proceed through your slides as you see fit. Just let us know which attachment we should have open when and other than that you are free to proceed, sir. Very good. Thank you. Yeah, if we could just put up the slide deck. You all can look through the rest of that information at your leisure when considering the bill or considering other information that I'll provide to you and I might reference a certain thing or another as we go through. But thank you very much for your time. I'm sorry I did not update the date on this presentation as it is indeed the 27th of April.
003We can go to the next slide. What I'd like to talk with you guys today is a little bit of restoring the public's trust in the legislative process as well as the funding process by which the state of Alaska provides educational resources and revenue to school districts like yours and mine and across the state. Of course, I represent the northern portion of the Kenai Peninsula Borough School District. Our the Kenai Peninsula and and taught at the school district there for a while. Um the legislature made headlines last year when we increased the BSA and passed other policy reforms in House Bill 57 and it was understood by the vast majority of the public that would that would lead to additional state aid and additional money coming into school districts like Anchorage and mine and other
004school districts around the state. Uh people felt good about that. People felt that things were hopeful. Um however, um even as I mentioned to some of my colleagues that the state would indeed be spending about 2 and 1/2% less money on K-12 education in fiscal year 26 than they did in 25, um those calls really uh went unnoticed. And then we saw headlines that we see below here that you all as a school board made some very uh painful and and continue to discuss um difficult program reductions and reductions to learning opportunities. My school board on the Kenai has chosen to close at least four schools this year and make very significant reductions because even though we did successfully increase the BSA, both of our districts saw less state aid from the state. You guys,
005according to your your CFO that I've spoke with, Katie Piercy, got about $7.2 million less in state aid. My district's um more than half of that less as a result of the rising required local contribution. Let's go to the next slide, please. So, before I talk more about what the required local contribution is, I'd like to tell you a little bit about kind of where I come from in this discussion. I've been a school teacher um since I got out of college. I taught in Nikiski in my own classroom for 14 years before I got elected to the legislature, and education is not just theoretical for me. It's not an academic pursuit that I I read about. It's something that I do, and it's who I am as a person. Um I know the impacts
006of the budget cuts that you all are making and what they will have on learning environments across your district. I know the impact of what happens when we have to reduce um reading options and the ability for kids to get extra help at the elementary school level. I know what it means to lose librarians. I I grew up in high school band and went on to play band at Michigan State in their marching band, and losing programs like that is extremely painful. That matters, and that's going to affect um educational outcomes. So, this is a very important to me. And uh why I I'm continuing to engage and prioritize education funding that actually reaches the district and reaches classrooms. Required local contribution very simply is a method by which the state can reduce the amount
007of state aid that it provides to districts. The The state of Alaska under our current formula is the payer of last resort. And for every dollar that the required local contribution increases, that means that state aid decreases by that same dollar. And so, what drives local contribution that requirement, and this is a completely different formula to the maximum allowable optional on top of state aid, but what drives that required local contribution is entirely based on assessed property values, and we'll talk about that a little bit in a minute. Can we go to the next slide, please? So, here's a kind of an infographic that discusses um more in detail about what's happening here with required local contribution. Required local contribution has been driven by a very, very significant increase in property tax assessments, and we
008see those property tax assessments specifically surge over a period of years since we have been tracking, um, this data since the late '60s. Uh, when that happens under the current formula, again, for every dollar that that required local contribution increases, state aid decreases, which is especially having a negative impact on Anchorage because your municipality is up against, um, your property your your tax cap, your municipal tax cap, and and you cannot, um, give additionally the muni can't give additionally for those optional maximum dollars because of those fiscal constraints. Um, so that means when state that state aid decreases because of your required local contribution going up, you're getting less money, and that's a big problem. Um, that means less resources for students in classrooms, that means less opportunities for them to learn in smaller groups.
009Your class sizes go up, um, which of course you guys likely know that those class sizes are a huge factor in producing quality educational outcomes. We'll be going to the next slide, please. So, here is a, really, a more detailed breakdown about what required local contribution is and how it's calculated. Again, we see really the causal factor here in this chart on the right-hand side of the slide, and that is a a history of full value determination. Uh, full value determination is calculated by, really, what the the fair and true value of assessed property is are in your municipality. And then, what's added in is any optional exemptions that your municipality has added, which in Anchorage is is few, so that's good for you all, but personal property then is added on top of that,
010and then what I could only describe as um some some voodoo economics of assessing um that nobody really understands what the state assessor does, but they add in a little extra um before they arrive at the uh full value determination, what they base the required local contribution on. A required local contribution then is 2.65 mills of that full value determination or its equivalent. So, that money does not necessarily have to be collected from property taxes. Other municipalities do it differently. For instance, the Denali Borough collects the money to provide for their local contribution from a bed tax. Um other districts do it differently. There is an optional method to calculate required local contribution, which is the 45% of the district's basic need from the preceding fiscal year. The four districts that do that are listed
011here, um and the impact from Senate Bill 278 on them would be different and and minimal, although still positively impacting them by reducing the rate of growth of that required local contribution. The full value determination and required local contribution move together. They are inextricably linked because of the expectation that it will be the equivalent of 2.65 mills. It is very important to know that the policy that I am proposing in Senate Bill 278 is not one that restricts any assessed values or full value determination. Those things still um will be what they naturally would be by uh market forces. However, what I am asking to do and implement is limit the growth of that required local contribution to 2% per year. Let's go to the next slide, please. Here you see on a statewide basis,
012and the curves for Anchorage are included in the documents that I emailed to you all, how the required local contribution curve has overtaken the uh basic need curve and what problems that causes. At any point in this chart where that orange curve depicting required local contribution goes up at a faster rate than basic need, that means that the amount of dollars your district receives from the state in state aid goes down. Because of the the one-to-one ratio of when the required local contribution increases by one, your state aid goes down by one. So, what you can see here is because the BSA has remained pretty much flat for so long, and required local contribution has continued to escalate over time, you see a pretty significant cost shift from the state taking on their constitutional responsibility
013to pay for K-12 education, um that's being shifted over to the local municipality. At the right right side of this chart, you see basic need and state aid increasing with the BSA. However, that was not enough to overtake the required local contribution growth, and um that's uh why we saw less dollars going to your district and mine. Next slide, please. So, what are the effects of Senate Bill 278, and why is it it needed? How will it help? Well, Senate Bill 278 still keeps some in the game some some skin in the game for local municipalities. Um they still will be responsible for a required local contribution growth of 2%, but the state would be responsible to make up for any difference above that. So, what does this What does What does this mean? Um
014essentially, what you see here, the numbers here, which are also depicted in an attachment that I sent as well, this is money that the state is has taken away for last school year and will continue to take away if we do nothing under the status quo. We had a BSA level that was passed last year in HB 57, and funding went out to all the districts. But then municipal school districts were essentially punished for having a tax base, and when that that full value determination increased, the state took these BSA funds away from municipal school districts. What the bill does is simply tell the state, "Hey, State of Alaska, don't take so much money away from our school districts simply because we have escalating property values. We still want to be your partner, but we
015don't want to experience such a drastic cost shift because of our increasing required local contribution. It's really hurt your district. As you see here, the impact is about $20 million that the state has taken and will take away um this school year and then for next school year as well. Also, a word of a word of warning and caution, um the very large assessed value increases that folks saw in Anchorage on their green cards in March, those increased assessed values will be how your required local contribution is calculated next year. This means that this problem is getting significantly worse and will continue to eat into your state aid as we go year over year. Uh it's a problem, and I think we need to deal with it by having a more predictable and um sustainable
016method of increasing our required local contribution as we go from year to year. Next slide, please. So, what does this bill not do? The bill does not affect in any way at all your maximum local contribution. In Anchorage, you guys, like I said, are a little bit different because of your municipal tax cap from already and really not allowing your district to receive a maximum optional benefit from your assembly. Um again, the bill does not limit assessed values. Um they still are what they are. It simply reduces the growth of that required local contribution and reduces that cost shift from the state to the local government that is dictated by the rising required local contribution. Also, this bill does not remove any dollars whatsoever from school districts or limit what local governments can give to
017schools. It uh it treats everybody equally uh that has a required local contribution, limiting that growth, and if you don't have a required local contribution, it doesn't hurt you at all. You still get to benefit from the whole BSA and all of those multipliers that are in it. Next slide, please. Here's again just an infographic about what's happening here with required local contribution. Um required local contribution, the average growth of that in the red curve is about 5% per year. Um it's gone up more steeply recently, um but it's it's typically about 5% as we go, and what that does is it is significantly inc- eating into uh state aid that's moving into your school district. It's it has a huge effect, and I don't think people really have realized this before now, and I've
018been talking to more and more people about it, and it's hard for folks to understand when they see such big headlines that wow, we overrode the governor to pass this BSA increase, and isn't it amazing? And I said, yes, that is. However, because of the way our formula works, our districts got less money, and now we're having to make significant cuts, and that's uh not producing good results, and really not matching up with what public expectations have been from state and local government as far as school funding. That concludes uh kind of my brief presentation. I'm happy to take any questions that you might have or have a discussion with you about this concept further. Thank you, Senator, for the presentation, and again for your service to our state. Um are there board members who
019have a question for the Senator on SB 278? Member Hickey. Thank you. Uh first of all, thank you for your presentation. I I really appreciate that. I appreciate anybody in the legislature focused on education funding at this particular time. I know that's always a tough issue. My concern is always that we're looking at the funding um of leftover funds that we can provide education without really focused on what's the adequate. Um you know, we've done a study, and we've shown class sizes uh being adequate. That's based upon the vast majority of lower 48 um uh schools and as well as the um um uh court decisions there as well. But But I don't see any discussions. Is there a possibility at some point here the legislature might actually look at that? I know that when
020we look at the BSA from 99, we're at a disadvantage. Our cost of living has changed more dramatic than others, and so we're getting less than what the BSA normally would have called for if we corrected that. But we don't want to make this into a win-lose situation. What we want to do is is the discussion of what's adequate funding rather than who's paying what with leftover funds. That's my big concern. Is there any discussion in that regard? Thank you for that question. Remember Higgins, yes, I think there is likely to be another adequacy study done. But at the local level um your teachers and and the parents in the buildings, um they can tell you more definitively than anyone how they feel the resources and educational opportunities provided to their students are meeting their
021student needs. I think it's it's very important that we look at that. Of course, Alaska is a very diverse state and our ability to provide education across the vast geography of our state is is important. And that that means that things aren't going to look the same from community to community. I am interested to know more, Mr. Higgins, about what you meant about leftover funds. um The the required local contribution again is a way that the state has and will continue to take away state aid from your district and my district and not not continue to provide that and expect your your municipality to pick up the tab. So, I don't see that as adequate or sustainable. But I'm happy to understand more. Thank you, Senator. And thank you, Mr. Higgins. Um Senator, just a
022quick clarification question to make sure those who are following at home and then myself included are tracking what this piece of legislation would do. If we assume and I'm going to choose to assume that the municipality of Anchorage will fund our district to the um maximum next year uh some of the financial challenges they're having because they've indicated it's a priority for them in the past and then uh the past track record indicates they will do so. Um so in that in that universe where we receive the local maximum from Anchorage in uh their budget year, which is calendar year 2027, um and in a year where this piece of legislation becomes law, is the understanding that um the funds that ASD will actually receive will remain status quo or stagnant? Um does this bill
023primarily impact municipalities and the state in terms of where that that slider is for who pays, um or does it actually provide new revenue to ASD? Thank you for that question. If you could go to slide 12, it's just a reference slide. We're working on that. Just a moment, sir. Just advance to get advanced the deck two slides. Yep. So here are two charts um that show the the mix of funding. If you look at the left-hand bar here, um the orange on the bottom, that is required local contribution. And then the blue band in between is is state aid. And so what reducing the growth of the required local contribution does is it makes sure that the municipality of Anchorage is going to receive and your district, your school district itself, I should say.
024Let me back up. Reducing required local contribution means that your school district will receive its same share of state aid as it would um under the the BSA that we passed last year. So, what the required local contribution does is it causes this orange part of this bar to grow, meaning that the Municipality of Anchorage is on the hook for more money that has to be contributed. And so, if you guys are at the max, if if your Municipality of Anchorage is at the max for what they are able to provide, it simply means that the state is going to provide a larger share of that multi-colored bar. The blue bar will increase, and that orange bar will decrease. If you're at the max, it does not mean that your district will get additional funding
025from your local. It simply means that the Municipal Assembly is not going to have to take as much of their revenue to fund the school district. The state would fund that money. Understood. Yeah, thank you, Senator. I'm I'm tracking that, and and I appreciate you validating that understanding. I I also want to check my understanding on the slide that's titled how does SB 278 help? And can I confirm is this bill revenue neutral for the state or cost neutral to the state because for every dollar that Anchorage would save, for example, other communities would pay would be would be impacted financially or where is the knowing the state's fiscal picture is even more challenging than our own? Where will this extra revenue come from? And I guess let me start there. Yeah, thank you, sir.
026Perfect. Thank you for the question, Chair Jacobs. This is not extra revenue. This is revenue that this the state is simply not going to provide your your municipality and your district. So, what let's say that we had a bill um to provide for $100 million, okay? We're going to we're going to fund $100 million. We said, "Okay, ASD, we're going to give $100 million." Well, that $100 million is reduced the state is not going to give you as much money because of required local contribution. This is money from the state treasury that is simply not going out to the Anchorage School District because the state is expecting the municipality of Anchorage to pay the money. This cost shift is an entirely a fiscal impact of savings to the state because the state is not providing
027these funds that you see here and a little bit more, which you can see in the the graphic of the change in the required local contribution, but the state is not giving you these funds because they're expecting the municipality of Anchorage to pay more. So, they're expecting all of the districts here listed to pay more, but meanwhile there are many districts that are not expected to pay more. They don't have a required local contribution. They still get the full benefit of the full BSA with all of the multipliers. The the current system, the current formula that we have in place allows the state to save money by cost shifting from the state government to local government. It's not that we're asking the state to pay more. It's just that we're asking the state to pay
028what they said they would and not shift that cost on the municipalities. Thank you, Senator. I'm just going to follow up briefly, and I with the concept of something that seems very reasonable. Um I think I'm just talking through or thinking through what that would mean in practice, and you know, you mentioned the money sitting in coffers and um and just not going out. And what I think I understand about the state's fiscal picture right now is um the current operating budget without a significant draw to the CBR, or um I think maybe a cut was made recently in Senate Finance to the permanent fund dividend. Um Put very simply, the state doesn't seem to have excess money in its coffers that can be easily tapped into um to send those funds out. And um
029I think the question that the presentation asks is without a sustainable long-term fiscal plan, would this additional funding be coming to the district in lieu of funding from a from local governments, like in our case the Municipality of Anchorage, at the expense of some other state funding due to our current state fiscal picture? Thank you, Chair Jacobs. I mean, that's essentially the way that budgeting always works. A dollar spent on one thing is a dollar that can't be spent anywhere else. I guess for for your board, you all need to decide if you want to support uh legislation that is going to give you all more resources that you can use to educate kids and um create learning opportunities or not. Um You know, the state has been in search of a long-term fiscal plan
030for a very long time. Um coming up on 30 years. Uh we haven't delivered one yet, but what I can tell you is there are significant funds available in the operating budget currently to fund education. Um but if those funds go out through the the formula and an increase to the BSA, they will continue to be eroded by an increasing required local contribution. Um and that means that districts like ours will lose funding to that. Um and and and our kids will lose out on opportunity. So right now the way the budget sits is there is an additional $100 million um um in one-time funding that is going to be an additional supplemental budget for fiscal year '26 that will pay be paid out in '27. And that money will go out outside of the
031formula in one-time funding if it survives the budget process and if it survives the governor's veto, which I would say at this point in time is highly unlikely. Um my goal with this piece of policy and some others is to include it in a policy bill that we could rally enough votes for to once again override the governor's veto if necessary. I think people are very interested in that. People are are interested in supporting education policy and dollars connected to that policy that will actually reach reach districts and classrooms. And so um if we pass a policy bill, the options and opportunity to do that are very high. Um but if we don't if we don't pass that policy bill and simply rely on one-time funding, I think it's very very likely that that one-time
032funding would be vetoed in its entirety. Um and there will be uh zero possibility almost that we could get the votes to override that veto. What I've done in in crafting this legislation and some other ideas with some of my colleagues is to try to put together a policy bill that we can actually get all the way across the finish line and provide more dollars to districts. Yeah, thank you, Senator. Okay, member Bellamy, you have a question? I do, thank you. Senator Borkman, thank you for the presentation and for your unwavering support for public education. I get that SB 278 will give us more resources. And it does appear to me to respect local control. But I do I'm a little concerned that we're going to be we might become very dependent on state funding.
033So I guess my question is how would SB in your opinion SB 278 ensure predictable and adequate public you know, funding? I mean Yeah, I'm just a little worried. I don't want us to become totally dependent on state funds funding. But at the same time, we do need funding that's adequate and predictable. And in your in your view, how do you see those two things happening with SB 78? Very good. Thank you for that question, member Bellamy. I think the danger of districts becoming entirely um dependent on state funding is very low. This bill still requires there to be skin in the game from local government because that required local contribution will continue to go up at 2%. That means that your local government will still have to have a plan in place to to
034share the responsibility. And um to to share um, ability for for you all to, to um, participate at the local level. That that's not going away. Um, that 2% increase per year is still a significant responsibility for your local government to to take on. And so, this is a this is a cost-sharing agreement, but if you look at the curve of that required local contribution, you're seeing significant cost shifts from the state to the local government right now. And that's that's concerning. Um, that that's the state's constitutional responsibility to provide for K-12 education. Um, it's very important that we fulfill our constitutional mandates. And the share of local government participation in providing educational opportunities and resources is important as well because that ensures that local folks are involved in crafting educational programming and options. So,
035the bill before you still keeps local skin in the game. And with rising costs of everything from labor, utilities, insurance, building maintenance, um, those costs and those pressures to continue to raise the base student allocation are absolutely still there. Um, and what this does is simply slow the growth of that cost shift from the state to local government. Thank you. Thank you, member Bill Melby. We'll go to, uh, member Wilson and then member Holloman. So, I also wanted to thank you for your support of education, Senator Bjorkman. Uh, I do have one question. A- are there any unin- unintended consequences of taking 90% of federal impact aid while capping local contributions from fast-growing municipalities? That's an interesting question. Um, the share of impact aid that you all receive as a portion of your budget is
036very small. I think last time I looked, it's like less than $7 million. Um, on average, uh, federal impact aid as a percentage of total K-12 education spend in the state is less than 7% of total spend that the state does, not to mention any grant funding or federal funding that comes beside that. The Senate Bill 278 does not directly impact federal impact aid at all, um, because it just, if you look at slide 12 again with the stack of funding, it simply ensures that that orange bar grows less slowly as and the and the blue bar doesn't shrink so fast. So, the current system the current system that we have encourages local governments to give more and more as the state gives less and less. That current function within our funding formula right now
037is, uh, endangering us each year of having a problem with the disparity test. That's a problem that exists right now and that we have dealt with in the past, um, because we have not increased education funding. Um, that's a problem that exists in the system currently. Uh, this bill does not impact federal impact aid directly, um, but if if districts are forced to give more and more, um, to their max local, then you could have a problem with that that disparity test. Thank you, member Wilson. Thank you, Senator. Um, member Holloman. Uh, yes, Senator Burlison. I just want to say I appreciate you bringing this and bringing attention to it. Um, with with the shift cost shifting from the state to the organized locals, it really seems to me like it's one more discouragement to
038any unorganized area organizing. And I think there are a lot of obstacles to our unorganized areas getting organized and establishing a tax base. Um but when we look at so many different ways that the state's cost shifted to the municipality and the school district, it it makes it not make sense for some areas that really could organize and begin to uh take on some of their own responsibilities like police protection and and like some of the basic things around maintaining um some place we have some rural areas that do have some businesses, do have private property. But I can understand why they don't want to organize. They don't want something like this to happen to them. So I I do appreciate that putting a cap on it. Uh I think it's a good step for
039the state. Appreciate you bringing the bill. Thank you. Thank you, member Holloman. Um don't see any other questions from the board. So, Senator, thank you so much for taking time today to be with us. We know your day is very busy and again, thank you for your support of public education and your service to Alaska. Do you have any closing comments before we uh move on to the second half of our work session? Absolutely. Well, thank you, Chair Jacobs and members of the school board for the discussion today. You know, I think when it comes to education funding, folks used to think, you know, you could train and say your prayers, take your vitamins, raise the BSA, and that's all we had to do to cover education funding and to make sure we had enough
040educational resources available for kids. Um unfortunately, because of really the rapidly advancing required local contribution, that's not the case and raising the BSA in a way that the state has money to to pay for is going to drastically improve education in some areas that have less of an escalation for their required local contribution. And then that increasing local contribution is actually going to result in less state funding for districts like ours. As a reminder, Senate Bill 278 is not a hard cap on required local contribution. It's simply a rate limiter that limits the growth of that required local contribution so that the state takes less money from our districts over time. And that's important. That's important if you want real policy that will deliver dollars to your district. And I think it's important to know
041that. It's important to understand the value of the dollars that you see on the screen here that will be taken from your your municipality and your district and coming up. You guys have a a pretty unique situation with your cap on on your local revenue that really limits your your your assembly's ability to support and make up the difference. If you're already at your tax cap, your assembly is not going to be able to continue to make up the difference and hit the max allowable contribution for your students. They'll hit their tax cap which is essentially the governor over your revenue currently. But communities like like yours and mine are going to um to remain struggling to fund schools and to fund programs for kids if we don't get this under control. It's it's a
042big deal and it's it's not going away anytime soon, but it's not forever. We see spikes like this happen frequently if you look at slide five. And then things level out, but when the spikes do happen, when those spikes do happen and we're in them right now, um, we're we're not really sure how long it will go for, but what we do know is that we have significantly less opportunities for kids because of it. So, um, it's a complicated system, but it it's one that's important to understand because it means a lot for our kids and educational opportunities that are available to them. Thank you, Senator, for your time and for your closing comments. We appreciate again your service to Alaska and I hope you enjoy the rest of your your day, sir, and best
043of luck as you wrap up session. Thank you. Okay. Uh, my understanding is we have a Jason Ritter with us in attendance. Welcome, sir. Uh, Mr. Ritter is, uh, believe representative from Senator Tobin's office. If you could introduce yourself for our record, um, and then, um, your the context for your, um, interest and expertise on this piece of legislation and maybe the underlying subject matter expert, uh, expertise you have and then, um, anything you'd like to share would be helpful. Yeah. Uh, thank you, Chair Jacobs. Uh, Jason Ritter, uh, for the record. I'm staff to Senator Luki Gel Tobin. Um, I worked heavily with her on the education foundation formula, um, and I'm here just to speak a little bit to the numbers and answer any questions anyone may have. Um, I just want to
044start out by saying, um, lowering the required local contribution or capping it at 2% does not, just for the record, bring any more money to schools. Um, and I think it may do the opposite, but I will get to that. Um, it simply shifts that cost back to the state. Um, and if you look at the last, I think like 18 years, 11 of those 18 years, we've we've seen districts, or um, communities go over over that their property growth have exceeded that 2% cap. Meaning 11 of the last 18 years, we would have seen cost shifting back to the state. Um if we did this this was enacted now, it's retroactive to 2025, it would immediately create an unfunded liability um and the board previously asked where that money would come from um it
045would come from everyone else in the state like in essence, the biggest benefactors of this cap would be the four richest districts. And those districts makes make up 77% of the required local contribution. I think it's Matsu, Kenai, Anchorage, and one other. Um so this would be in essence us giving a break to the four richest districts and having the rest of Alaska pay for that. Uh this would be an annual transfer as I said 11 of the last 18 years, we've seen property values exceed that 2% growth, which means you would just have a continually growing share being taken by the state assuming that the BSA is not increased. And that is another good point is the only reason that we see required local contribution becoming a greater share of state funding is due
046to a lack of BSA increases. If BSA increases were to track inflation, you would see the BSA and required local contribution as percentages of the share be a much more stable unchanging amount. Um also lower actual revenue usually reflects policy choices. So, if property tax or property values are growing, you would assume that we are getting more revenue for that, and that is covering that increase in the required local contribution. Some Some localities choose to give tax breaks. Sorry, tax breaks and tax exemptions to different property. So, that is a choice they're making, and I'm not sure it makes sense to say we're going to give our um local groups these tax cuts, and then we're going to have the state come in and pick up the tab for that. Um it inverts the logic
047that the foundation formula was designed to achieve, where wealthier communities are paying more of the share of state education funding. Um and it creates It creates arguably, it may create narratives that say, "Look, the state is now funding $70 million more per year towards education, so we don't need to further increase education." But, in reality, the amount of money schools are actually getting would remain unchanged. It would just be more covered by the state. I think that's pretty much it, but I'd be happy to answer any questions anyone has. Uh thank you, Mr. Ritter, for your time. Just a a clarification question. I'm not asking you to speak for your boss, but has Senator Tobin taken a a stance on SB 278 to your knowledge? To my knowledge, she has not taken a public stance.
048Understood. Okay. Uh member Holloman. Um yeah, you were saying this would benefit the the wealthiest districts at the expense of all everybody else. How How would they pay that? I I'm just wondering about the actual mechanism where money would flow from them to the districts that are affected by this. Uh the idea is that the state would be picking up anything over that 2% cap. So, that money would come from the state, and how that would be allocated, I am not I'm where it would be allocated from, I cannot I cannot say. I'm I'm assuming they would still get their BSA allocation like they are now. Yes. I would I would assume as much. Um the other point I wanted to make I Anchorage does exempt a lot of properties, but they're on our valuation
049rolls. We give a property tax exemption, but we don't we don't value their property at zero. My understanding, and I'm happy to be corrected if I'm wrong, that drives our our total property valuation in Anchorage, which is subject to the 2.6 mil formula. And And I'll I'll look to our CFO to see if I'm saying something incorrect, but we would still pay the 2.6 in the required local contribution, say to a church property that may be valued at a million dollars, but they pay no property taxes on it. Would Is that sound correct, Mr. Ratliff, through the chair? I'm not totally sure what exemptions they they take out for the full and true value. Like in Anchorage, we have I think like senior and military exemptions that are above what's mandatory. So anything above that
050mandatory amount is kind of the delta between the fair the full and true value and what we do our mill rate assessment our actual mill rate assessment on. Right. Having looked at this to some degree from what I can tell, they don't discount the valuation of the property. But whatever the taxes are say on a million-dollar property owned by a church, we give them an exemption equal to the tax. We don't diminish the taxable value of the property. It's it's on the books at its full value from what I can tell. Um so I I'd like us to be able to back up what you were saying. I I think if we still wanted to give that exemption to everybody for the full value, we'd still have to pay the same um minimum required contribution
051even if we weren't collecting any money at all, which obviously would be a disaster. But again, having looked at some of the property values and everything, the valuation is not diminished at all for nonprofits, but they are granted an exemption to the tax amount, not the valuation amount. Uh through the chair, uh so I think we're talking about two different things. One is the total assessed values, which would include um all the values except for the mandatory exemptions. Um but many boroughs and districts give um optional exemptions out, um which would decrease their revenue. Um but theoretically, rising property values um, in many cases would mean rising revenue um, in those places, and that would offset that rising local contribution. If that makes sense. Any follow up, member Holman, before we move on to member
052Holman? Okay. Uh, thank you. Member Holman. Yes, thank you. Um, Mr. Ritter, I'm I'm I'm still struggling with SB 278. Not in a bad way, I'm just trying to get a deeper understanding. Um, but I sense that this is not the in its current format, this is not a uh, policy that the senator would support at right now, or uh, you don't have to answer that. But, do you have do is there an alternative uh, thought uh, um, to if not SB uh, 278, then what? If you have an opinion. Um, I guess in my opinion I'm sorry, through the chair. I think in my opinion, the greater solution is creating um, some tie between inflation and the BSA increases, so that you do not see this um, widening cost shift to uh, required local
053contribution. Um, because when the BSA goes up, your required local contribution um, in most cases, there are outliers um, the four five districts that uh, fund based on the 45% prior year cap um, but besides those districts um, most districts would not see a required local contribution increase if you increase the BSA. That would be just state funding. Because the uh, RLC is tied specifically to property values. Um, so if we fund education more, the required local contribution doesn't go up and the state would be paying more. Okay. So, specific to Anchorage. I mean What What are the unknowns, I guess? What are the um What are the cautions? Um Again, I think >> In your opinion Sorry, through the chair. In my opinion, I think that one of the concerns here is that um
054if you have multiple years where property values are outpacing um out outpacing education funding and that RLC cap, then you have an ever-widening burden on the state. Like, it if if inflation or property values increase 3% and they're capped at 2%, then 1% now is being transferred to the state. And if that happens year after year after year, you're having more and more of that cost burden just moved onto the state to where um local contributions may be negligible and it could affect local control. Um I think the other issue is again that this may or may not create narratives that look, the state increased funding for education by 70 million this uh FY27 and that means the state is funding education more, so we don't need to fund education more and we don't need
055a BSA increase. When in reality, schools are not actually getting more money in schools are not actually getting more funding overall. Okay. Thank you, Mr. Chair. Thank you, Mr. Ritter. Thank you. Um I appreciate your your time and your expertise, Mr. Ritter. Um You know, the I assume that Anchorage is in the the group of I think you called the four richest school districts in the state and here and locally it does not feel like um we're in a time of of um excess resources. And so I appreciate both the perspective from where that came from um specifically when looking to um districts across the state, some of them that have crumbling or condemned school buildings and um teachers that are are being cut that uh district absolutely can't afford. Um And I I I
056think through that and I think through what I think you touched on a moment ago that had the state adjusted the base student allocation of the foundation formula for inflation, what I think I understand is this issue largely would be moot. Is that correct? Um yeah. To the chair or to the chair, I think it wouldn't change the amount being paid um through required local contribution, but the state's share would be larger. So it would change the percentage that is being covered through local contribution versus the percentage that is being covered by the state. Um when we don't increase the BSA and we don't increase education funding, more of that cost ends up getting shifted to local contribution, but as soon as you raise the BSA or raise education funding, then that tends to even
057it out and where their portion would be smaller in um relative to the total funding. Right, understood. And given that's I think where I was um what my understanding was is that this um conversation, and it is a um a fair one and I think um one that should be had, I just wanted to name that it's an a potentially an unintended byproduct of the fact that education funding hasn't been increased um to account for inflation adequately. And I I do track that um you know one of the risks is that if values increase more than the 2% cap, that's something the state's going to have to account for financially and um the state's fiscal picture is challenging right now. Um the one-time education funding which I am greatly appreciative for the Senate um well
058they reduced the um without qualification 150 million or so that the house had in its budget, it replaced it with 100 million or so that's contingent on um I believe oil prices being at $95 a barrel um which is far from certainty. I can't budget on that. Um Unalakleet can't budget on that. Mat-Su can't budget on that. Um it feels like we're arguing around a not arguing we're having a discussion around the the the fringe without an the best use of energy would be talking about how we pay for core services our citizens deserve and our constitution mandates as a state. Um Is there a piece of legislation Is there any alternative to um this proposal that exists or is this a a sole vehicle um to your knowledge or is there a a comparable
059piece of legislation that exists right now that um discusses a similar um but different path forward or um is this really a one-of-a-kind bill right now? Uh to the chair, I'm assuming you're speaking on SB 278 and I as far as I know there are no other pieces of legislation that are attempting to change the foundation formula or the or the required local contribution part of that formula currently going through the bodies. Okay. And then has Governor Dunleavy indicated he would support this bill? To your knowledge. To my knowledge, I'm not aware to my knowledge. Okay, understood. All right, member Holland. Um yeah, I I want to make sure something's clear because I'm a little confused. To my understanding, there is no connection between the required minimum contribution and the BSA. Would That is I
060had to ask you that and check back again with um Mr. Ratliff. And both of you are nodding yes, but certainly if we were adequately funded, all of this would be less concerning. But this is really about how fast the state can cost shift to a growing economy in any of the organized areas and that um So yeah, when we talk about percentages and all that, it confuses me a little bit. But yeah, to to my knowledge, there's no connection between the two. Are there other questions for Mr. Ridder? Not seeing any. I thank you so much for your time today, sir. And I thank the senator for her service and her support of public education on our behalf. Thank you. That completes our work session today. The timing of this was intended to dovetail
061with our regular session agenda. We'll have an opportunity for us to consider how and if we want to as a board publicly support SB 278. So we wanted to have this time today. And uh we want to thank Senators Tobin and Bjorkman for providing resources and their time and the staff's energy. Um and we will conclude our work session at 5:00 p.m. on the dot. Thank you, everyone. Rec-