Accountants presented the Ketchikan school district’s annual audit, including a $5.4 million debt owed to the Ketchikan Gateway Borough, to the school board during its Wednesday night meeting.
Grant Todd, a certified public accountant with Anchorage-based firm Altman, Rogers & Company, said the debt accumulated over several years. He attributed some of the debt to rising health insurance costs. The borough and the school district operate under the same health insurance plan.
“There’s a number of factors that go into it, but a lot of it has to do with health insurance costs,” Todd said.
The borough manager flagged the debt in a memo to the school board last month. He attributed the debt to “failures in reconciliation of health insurance claims.” He also attributes the debt to the school district spending “beyond its available revenues for at least seven years.”
But the amount the school district owes to the borough is less than last fiscal year. According to last year’s audit, the school district owed over $7.5 million to the borough. The auditors said Wednesday that amount was brought down this fiscal year in part through payroll cuts. And, there were fewer insurance claims. In fiscal year 2023, the school district owed the borough about $2.2 million.
Annual audit reports note the expanding and contracting debt going back to at least the 2022 fiscal year. Todd said they’ve communicated in the past with the school district superintendent about it. But it still came as a surprise to school board members this fall.
Todd suggested the school board meet monthly with the borough to review budgets and spending. That task currently falls to the board’s assembly liaison committee, which traditionally only meets during budget season.
“Communication with the borough, I think, is very important,” Todd said. “The health insurance fund is on their books, the money is coming in and out of their books.”
After accepting the draft audit, the school board held an hour-long work session with school district staff and members of the public to further discuss the debt and ways to manage it.
School district business and operations manager Daniel Schuler suggested the school district switch to a fixed-cost health insurance plan for employees to prevent year-to-year insurance price fluctuations. School board members said that is something they’ll consider.
School board member Shari Montgomery suggested the board collect data on student enrollment to determine where the district could cut costs on maintenance projects and utilities. Montgomery says that until the district forms an updated budget with real numbers, all non-essential spending should be cut.
Although Montgomery said there are a lot of unknowns about the school district’s current financial situation, she said school district leadership has the power to fix past mistakes.
“Our students deserve better than this,” Montgomery said. “They deserve responsible leadership based on facts, not excuses. Leadership that reads the numbers and asks the hard questions and tells the truth, even when it’s uncomfortable.”
School board president Katherine Tatsuda, who attended last week’s borough assembly’s meeting where the school district’s financial woes were brought to light, said the assembly is concerned that nobody is tracking the school district’s spending authority. She noted several of the assembly’s budget-tracking recommendations, like implementing payment plans for interfund borrowing, board approval of all new hires and others. The assembly also recommended the board pursue federal funding and perform a second audit for a second opinion.
Tatsuda said the board isn’t sure what kind of independent audit is required – that depends on needs and costs. But Tatsuda said they’re going to weigh their options.
“Based upon the history, though, the longstanding history, it’s worth at least exploring,” Tatsuda said.
Tatsuda said the next steps in dealing with the school district’s $5 million debt are assembling a health care task force to explore health care options, putting a freeze on nonessential spending and having further discussions with the school district’s finance committee.
The school board also discussed committee assignments at Wednesday night’s meeting.
Hunter Morrison is a Report for America corps member for KRBD. Your donation to match our RFA grant helps keep him writing stories like this one. Please consider making a tax-deductible contribution.
