The Ketchikan school district’s $5.4 million debt to the borough was discovered late last year after a district financial audit.
The debt was mainly attributed to an excess of health insurance claims and district overspending. The district and borough agreed in March to a three-year debt repayment plan of $1.9 million each year with 3% interest. That first payment to the borough was set for July.
But the updated memorandum of agreement now gives the school district an extra year, until 2029, to repay its debt to the borough. School Board President Katherine Tatsuda at the Wednesday night school board meeting said reconfiguring the agreement was a group effort.
“I just want to say a huge thank you to borough staff and the borough assembly for doing this for us and working with us, and recognizing the difficult work we have done and the very serious work we have done to bring us into a more stable financial position,” Tatsuda said.
According to the school district, modifying the debt repayment structure would allow it more leeway in planning for the next fiscal year. The borough says next year’s school district budget takes into account this new debt repayment structure.
This year’s school district payment to the borough is solely interest – about $160,000. After that, the district will pay nearly $2 million annually through the end of the repayment period.
It’s not the first time the school district has suggested the idea of allowing it more time to repay its borough debt. It originally asked for a five-year repayment to allow more planning time for school closures and staff cuts, but the borough assembly voted 5-2 for a faster return.
The updated memorandum of agreement also includes an amendment to allow state approved education funding to the borough only be made available to the school district with borough permission.
Assembly member Rodney Dial voted in favor of the new repayment agreement at Tuesday night’s special borough assembly meeting, although he’s concerned about the accuracy of next year’s school district budget. He said that healthcare costs are increasing, and student counts in the district are likely decreasing.
“So, to think that next year now, that they will be able to pay this, or that they’re going to ask us for a different modification, or that they won’t add more to the debt, or they won’t have a big deficit – those are all risks that we are taking with a smaller and smaller pot of money to fill these needs,” Dial said. “It really goes to the central premise of what so many of us are trying to do and get them to a balanced budget.”
The borough assembly also agreed on Tuesday to set aside an additional $5 million to the borough through the end of the fiscal year, June 30. To do that, the borough is moving $2.9 million from its housing development fund. According to a letter from interim superintendent Sheri Boehlert, the additional funds are needed to meet final payroll obligations, settle outstanding vendor contracts and ensure a balanced budget at the close of the fiscal year.
Three people provided public comment on the funding increase before the assembly approved it. Paul Hook said he does not agree with extending the repayment plan or giving the school district more money, and believes the district lacks financial oversight.
“Money doesn’t mean anything to these people anymore,” Hook said. “It’s lost its value because we just find another pile to shovel it into or out of. So, I really implore you to stop your glad hands passing out money to people who don’t appreciate it.”
The district will have to pay that money back, and is needed in part to keep its Local Education Fund above the minimum balance required under borough code. According to the code, the appropriation requires a “finding by the Assembly that extraordinary needs regarding the School District exist.”
Hook also expressed concern about areawide property taxes for schools, which are deposited into the district’s Local Education Fund.
But Caitlin Jacobson, a librarian at Kayhi, said she supported extending the school district’s repayment plan. She said the school district’s staff has needed help from the borough for “a long, long time.”
“It is not an adequate education system,” Jacobson said. “By agreeing to this payment, we’re keeping us barely alive.”
This is the third time the assembly has adjusted this year’s school district budget – once last year and again in March. The assembly earlier this month also greenlit dedicating a portion of the borough’s taxes imposed on lodging to the Local Education Fund.
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.
