Chilkat Valley News - Serving Haines and Klukwan, Alaska since 1966

Over the last five years, the Haines Borough has spent $1.5 million more than it would have if the state hadn’t cut back on school bond debt reimbursements.

For a decade, the state covered 70% of the borough’s annual school bond debt payments, each about $1.3 million, as part of a statewide program dating back to 1970 that promoted the construction and maintenance of public schools.

In the 2020 fiscal year, the state slashed the program’s funding in half, forcing the borough to expend an extra $500,000. Last year, Governor Mike Dunleavy vetoed spending on the program at all. The state contributed zero. This year, the program will be funded at 37% of its original level.

“This used to be the way municipalities and school districts in Alaska funded new schools and school improvements,” said Haines Borough’s chief fiscal officer Jila Stuart. “This program has essentially gone away and isn’t being replaced by anything.”

The borough issued a bond in 2005 to pay for construction of a new school, which cost $17.5 million. The borough issued a second, much smaller bond in 2015 to cover repairs at the high school. The state’s reimbursements stayed consistent at 70%, or about $900,000, until 2016, when then-governor Bill Walker vetoed a quarter of the program’s funding to help alleviate the state’s fiscal crisis.

The state again offered subsidies at 70% in fiscal years 2018 and 2019, only to cut funding entirely and then in half in the following two years.

Stuart said the borough normally uses property tax revenue to pay its share of the school bond debt. In fiscal year 2021, without state funding, the borough diverted additional property tax revenue, some sales tax revenue and some of its general fund towards debt payments.

The borough’s 2022 budget likely will need to be amended to match the state’s planned reimbursement, which is lower than what the governor initially proposed. That initial proposal funded the program at half its original level, but after prolonged debates and back-and-forth between the legislature and governor, the state is poised to reimburse only 26% of the borough’s debt payments this year, Stuart said. That means the borough would pay $956,800, next to the state’s $330,000.

A study published by the Institute of Social and Economic Research at University of Alaska, Anchorage, found that for the last two decades the state’s spending on school construction and maintenance has fallen well below national guidelines.

“Over the last 21 years, from fiscal year 2000 to 2020, Alaska’s spending on K-12 capital projects has averaged $249 million per year, adjusted for inflation, or about two thirds of what the National Council (on School Facilities) recommends,” wrote Bob Loeffler, public policy professor at UAA, who authored the study. “From FY 2000 to FY 2014, Alaska averaged $300 million, but only $124 million afterwards.”

While Haines will owe over $1 million each year until 2025, most of the borough’s debt is already paid off. That’s the good news, Stuart said.

The bad news, as the last few years have shown, is that the borough can no longer rely on the state to help fund construction or major improvements on its schools. In 2015 the state legislature put a five-year moratorium on reimbursing debt for new school construction projects. It extended the moratorium in 2019 for another five years.

“This is going to remain an issue for several years,” Stuart said.