Alaska gets stern warning from US Education Department over state’s distribution of money to local schools

JUNEAU — The U.S. Department of Education this week designated Alaska as “a high-risk grantee” because it said the state failed to provide adequate funding for low-income schools during the COVID-19 pandemic.

The 2021 American Rescue Plan Act gave over $125 billion to schools across the nation to help cover pandemic-related costs. A March 27 letter from the U.S. Department of Education says that as a condition of receiving $359 million in federal COVID funding, Alaska is required to give $30 million to the highest-need schools in four districts.

The Alaska Department of Education said it “disputes that claim in the strongest possible” terms. According to a March 22 letter, the state says it has already complied with federal requirements and that it doesn’t believe it needs to give out additional funding to districts.

“This is an incredibly surprising conclusion considering we funded our schools as we always have,” said Education Commissioner Deena Bishop in a prepared statement on Thursday.

The U.S. Education Department warned in December that the high-risk designation was possible unless the funding issue was resolved. The state plans to ask for reconsideration of the high-risk designation within a 10-day window.

In its March 27 letter, the U.S. Education Department listed amounts federal officials said were still owed to four Alaska school districts. That included $16.6 million for Anchorage School District; $9.7 million for Kenai Peninsula Borough School District; $3.1 million for Fairbanks North Star Borough School District; and just over $200,000 for Juneau School District.

Kenai Superintendent Clayton Holland said school administrators are trying to resolve a $15 million deficit. An extra $9.7 million in funding could help prevent staff cuts and an increase in class sizes, he said.

“That would be wonderful news for Kenai and I’m sure those other districts as well,” he said Thursday.

Maintenance of equity

The unresolved funding issue relates to a “maintenance of equity” provision in the American Rescue Plan Act, which was new for federal funding measures. That provision required states not to reduce funding during the pandemic for low-income students at the highest-need schools. The Alaska Education Department says it made no such reductions, and that the state’s funding formula was equitable.

Drastically changing enrollment patterns during the pandemic created challenges for states. Around 41 states had issues with the first tranche of federal COVID relief for schools, according to the National Conference of State Legislatures. All but one state has resolved those concerns.

“Alaska is the only state that has not met or presented a sufficient plan for meeting these requirements,” said Adam Schott, deputy assistant secretary at the federal Office of Elementary and Secondary Education, in the March 27 letter.

If Alaska remains out of compliance with federal law, COVID funding may be recovered by the federal government. Federal school grant funding for Alaska may also be withheld, Schott said.

Alaska is set to receive $425 million in federal school grants for the fiscal year that starts July 1.

Anchorage Democratic Sen. Löki Tobin, co-chair of the Senate Education Committee, said the “high-risk” designation was a serious matter. The federal government could look more closely into the Education Department’s finances, which could place a greater administrative burden on already-strained state officials, she said.

“It puts us into a very precarious position,” she said. “I can hope that the federal government would give us some leniency, but they clearly have been for two years. And now they have to use the stick approach because we are not meeting our obligation and commitment that we agreed to when we took these relief funds.”

‘Great concern’

The Dunleavy administration was given 30 days to request $30 million be appropriated for the four school districts, or it could present a plan for how it would resolve its noncompliance with federal law. Additionally, the state was given 10 days to explain why the high-risk designation should be lifted.

Legislators have sought answers this year from the state Department of Education on whether the extra school funding would need to be added to this year’s budget. Members of the bipartisan Senate majority said they were assured by state officials that the maintenance of equity issues would be resolved.

Kodiak Republican Senate President Gary Stevens on Thursday said through a prepared statement that the “high-risk” designation was a “great concern.”

“Without a plan and quick action, our local schools could be out additional federal resources, and the responsibility will fall onto the state coffers to fill the gap,” he said.

Palmer Republican Rep. DeLena Johnson, who manages the House’s operating budget, told the finance committee on Thursday that the state Education Department advised legislators to withhold the extra funding from the budget — for now. An appeal over the $30-million figure was ongoing between the Alaska Department of Law and the federal government, she said.

For months, there has been correspondence between the state and federal education departments over the maintenance of equity requirements. A March 18 letter showed some of the U.S. Education Department’s concerns were resolved. Two school districts were taken off the list for extra funding or had their allotments reduced.

Karen Morrison, director of finance and support services at the Alaska Education Department, said through a prepared statement Thursday that the changing amounts “allegedly owed” to districts showed the issue had not been decided by federal officials.

‘Unfortunate’

Juneau School District is experiencing an unprecedented budget crisis due to flat state funding and significant accounting errors. In December, the district was told by federal officials it was owed an additional $2.5 million; by March 4, state officials told Juneau it was owed nothing; by March 18, the U.S. Education Department said Juneau schools were now owed $200,000, according to Superintendent Frank Hauser.

“It seems as if there have been some significant data revisions during this process, and I think, like all districts involved, we’d like to understand those swings and understand the process,” he said.

Will Muldoon, a Juneau School Board member, said it was “unfortunate” the funding issue had not been resolved as districts finalize their budgets.

“The Juneau School District only used revenue numbers they could depend on. This resulted in the closure of multiple school buildings and an overall reduction in force of 12% of our staff,” he said.

A spokesperson for Anchorage School District said Tuesday that district officials understood the state was still in the process of appealing the federal requirements. The $16.6 million allocated to Anchorage may not be final nor is there a timeline for resolution, the spokesperson said.

Holland, the Kenai superintendent, said he last spoke Monday to Education Commissioner Bishop about the funding issue. He said Bishop’s message was that districts should not rely on receiving that extra funding this year, and that negotiations with the federal government were continuing.

The Senate Education Committee has scheduled a hearing next Wednesday on the maintenance of equity requirements and the high-risk designation. The Alaska Department of Law advised the Education Department to decline the invitation because a response was being prepared and the funding issue had not been resolved, Tobin said.

”I find this deeply troubling because I think it’s clear there has been a mishandling of the situation. There has been miscommunications. There has been a lack of communication,” she said, and added about the high-risk designation, “We do not need to find ourselves in this circumstance again.”