Alaska budget to pay $300M for old school construction costs

Gov. Mike Dunleavy controversially vetoed 50% of the state’s payments each year between 2019 and 2021 as legislators grappled with a $1.6 billion deficit.
Published: Jun. 29, 2022 at 8:02 PM AKDT
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ANCHORAGE, Alaska (KTUU) - Fifteen Alaska local governments are set to share around $300 million to pay for old school construction costs as part of the budget passed by the Alaska Legislature last month that was signed into law by Gov. Mike Dunleavy on Tuesday.

Before 2015, communities with a tax base would bond for the costs of building new schools, often over many years, and the state of Alaska would then pay for around 60-70% of that incurred debt. The state’s reimbursement was subject to appropriation as noted on the bonding proposals put out to voters.

The state’s fiscal crisis saw the state’s payments come under the chopping block. The Legislature implemented a moratorium on incurring new school construction costs until 2020, which was then extended until 2025.

In 2016, then Gov. Bill Walker vetoed 25% of the state’s annual contribution for school bond debt. Gov. Mike Dunleavy controversially vetoed 50% of the state’s payments each year between 2019 and 2021 as legislators grappled with a $1.6 billion deficit.

Nils Andreassen, executive director of the Alaska Municipal League, said those vetoes had a “drastic” effect on some small communities’ bottom lines that expected the state to pay its share.

“It meant that they had to pick this up on their own,” Andreassen said. “They drew down from savings, from their maintenance accounts. It meant that they weren’t able to fund their other priorities. It meant tax increases for some communities.”

An ongoing windfall from high oil prices has changed the state’s fiscal picture, turning a billion-dollar deficit into a multibillion-dollar surplus. The Legislature appropriated roughly $300 million during the last legislative session to reimburse municipalities for school bond debt for this year, and each of the three years of Dunleavy’s vetoes.

“I don’t think we can underestimate how big a difference this is going to make for many of those communities,” Andreassen said.

In addition, the Legislature appropriated $116 million for school districts in the Regional Education Attendance Area to pay their school debt for this year, and for the past three years of vetoes.

The governor said on Tuesday that he hoped the wealth being transferred to municipal governments would in turn be passed onto taxpayers to help them during a period of high inflation and energy costs.

For some communities like Dillingham, reimbursing school bond debt is expected to be a “huge assist,” said local independent Rep. Bryce Edgmon. He added that he was “pleasantly surprised” that Dunleavy had not used his veto pen again to shrink the payments.

The Anchorage School District is waiting for guidance from the Alaska Department of Education and Early Development about how this money can be spent. Lisa Miller, a spokesperson for the district, said by email that $91 million of the state’s share in school bond debt has been passed onto Anchorage taxpayers since 2017.

The City and Borough of Juneau is set to receive $16 million in payments, which will bring its budget from a deficit to a surplus. Andreassen noted for some communities, these payments would merely bring them back to a “baseline” after three hard years of state budget cuts and vetoes.

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