November 29, 2012 | Vol. 39, No. 38

Borough Formation and Petersburg City Schools

EDITOR’S NOTE: The following information was provided to The Pilot at the request of the publishers to provide factual information about the formation of the Petersburg Borough and its effect on funding for the Petersburg City Schools.

Approval or disapproval of a Petersburg Borough should not be based solely on the effect, positive or negative, of borough formation on the local schools. The borough decision is much, much larger in scope than this. That said, many people have asked for an explanation of school funding and the net effect of borough formation on the school district.

The purpose of this column is to briefly outline this complex topic. Understanding the state educational funding formula, and the recent changes made to it by the Alaska Legislature that could benefit a Petersburg Borough, are a vital part of this discussion.

In Petersburg, like in many municipalities (which includes both cities and boroughs), both the local residents and the State of Alaska contribute to the minimum funding necessary to educate local children, known as the “basic need” (based primarily on the number of students in school). The local residents must contribute an amount referred to as the “required local contribution”.

The minimum contribution is calculated based upon the assessed value of all property located within a municipality’s boundaries. The remainder of a school district’s “basic need”, after deduction of the required local contribution, is contributed by the State. A municipality may also make additional voluntary contributions, over and above both the required local contribution and the State funding. For the 2011/12 school year, the City of Petersburg made a required local contribution of approximately $1.2 million, and the State paid approximately $5.6 million. The City also made an additional voluntary contribution of approximately $600,000.

Bear with me for the next part … it’s a bit complex.

The Alaska Legislature recently changed the educational funding formula by reducing this minimum amount of money which local governments are required to pay, from a 4 mill tax levy equivalent to a 2.65 mill tax levy equivalent. This has important consequences. First, the State of Alaska will now contribute a larger share of funding to local education than it did before. Second, money paid by a municipality to its schools over and above the 2.65 mill required contribution will now be part of its “voluntary contribution” -- additional money which the municipality is allowed, but not required, to provide to its schools.

What does this mean to Petersburg City Schools? The combined effect of the change in the education funding formula and formation of a Petersburg Borough should mean more money to Petersburg schools, for three reasons.

1. The reduction in the required local contribution makes it easier for the Borough to make a substantial voluntary contribution. This is because now everything above a 2.65 mill equivalent (versus a 4.00 mill rate) will be a voluntary contribution.

2. Voluntary contributions by the Borough to its schools would not be offset by any reduction in state funding. Thus, all local funding of Borough schools above a 2.65 mill equivalent would be a voluntary contribution which will not be offset by a reduction in state funding and would result in a net total gain in local school funding.

3. A 2 mill voluntary contribution to Borough schools will be more than $106,000 greater than the equivalent 2 mill voluntary contribution by the City, because the Borough will have more property within its boundaries than the City did and thus a larger tax base. For the same mill rate as would have been assessed by the City, the Borough would receive more revenue which can be applied to school funding.

Altogether this means that (1) the Borough would pay less than the City paid under the previous funding formula to fully fund the required local contribution plus an additional 2 mill voluntary contribution, and (2) Borough schools would expect to receive $106,000 more because of the Borough’s broader tax base, for the same mill rate as would be charged by the City. In short, it would cost the Borough less, and Borough schools would receive more funding than before.

A broader tax base established by borough formation could be very important at this point in time. A significant amount of the money which local Southeast Alaska communities have paid into their schools to date has come from federal funding, under legislation referred to as the “Secure Rural Schools (SRS) Act”. The SRS Act has now expired, however, Congress has so far reauthorized the funding for one additional year.

It is by no means a certainty that this funding will continue, especially in the current economic climate, and if it is not continued local residents will need to contribute more to education than now, to make up the difference. A future broader tax base could assist in meeting those educational funding needs.

Lastly, several questions have been posed about how the school district will provide education services to those children living in the borough, but outside the current city limits. PCSD will NOT have to build or staff a school in another community under any foreseeable borough formation scenario. Currently, about 25 students who live outside the current city limits attend Petersburg schools.

If in the future other borough residents, living off the road system, would like to attend borough schools through a Borough school correspondence program, this could be done if there are at least 50 participants required for such a program to be cost effective. In the meantime, those children already have the ability to participate in one of the State’s numerous existing correspondence programs.

Bottom line: All indicators are that formation of a borough will have a net positive effect upon Petersburg City Schools.

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