Alaska’s school system is shrinking, but the price tag is moving the other direction, fast.
We have fewer students today than we did a decade ago. The numbers are not debated. Enrollment has dropped year after year and is projected to keep dropping. That is nine straight years of decline as parents take their children out of underperforming schools. In any other setting, fewer customers would mean a smaller budget. That is not what is happening here.
The Legislature is moving House Bill 261, which adds at least $173 million in new spending next year alone. That is on top of an already large K-12 budget and additional one-time funding still under discussion. If you are trying to square that with declining enrollment, the answer sits inside a funding formula most people never see laid out plainly.
How The Formula Actually Works
Start with what people are told. The Base Student Allocation, currently $6,650, is described as a per-student amount. But that is not how it works in practice. Not even close.
Here is what actually happens. Take a district’s October student count. That number then runs through a cascade of multipliers before any money is calculated.
First, multiply by a school size factor that pays more per student to smaller schools. A village school with 25 kids might get a multiplier near 4.0. A 600-student urban elementary gets 1.0. The stated purpose is to support rural Alaska. The practical effect is that large urban districts get paid more to keep half-empty schools open than to consolidate them.
Second, multiply that result by a regional cost factor. In some districts this factor more than doubles the count. The factor itself has not been updated since 2008, so the relationships it reflects are nearly two decades out of date.
Third, multiply again by 1.20 for special needs. This is not based on the actual number of special needs students in your district. Every single student in every district gets that 20 percent boost, regardless of whether the district serves more or fewer high-needs kids. A district with 5 percent special needs students and a district with 25 percent get the same multiplier on their entire enrollment.
Fourth, for every student identified as intensive needs, add 13 funded students. Not one. Thirteen. This multiplier was 5 until 2009 and was nearly tripled. Districts identify these students themselves, and each identification adds roughly $86,000 in funding before other multipliers compound on top.
Finally, add correspondence (homeschool) students at 90 percent.
The number that comes out the other end is what gets multiplied by the BSA.
By the time this cascade finishes, roughly 125,000 actual Alaska students become close to 280,000 “funded students” on paper. Each real student generates about 2.2 funded students. Once you add the state’s other contributions, transportation, retirement, one-time grants, federal pass-throughs, the state is actually spending closer to $19,000 per real student, not the $6,650 BSA figure that gets quoted in every press release.
That is why a $1,000 BSA increase does not cost $125 million. It costs roughly $280 million. When district officials and the teachers union repeat that “the BSA has been flat-funded since 2017,” what they leave out is that the multipliers have grown substantially over that same period. State spending per actual student has been rising the entire time.
HB261 pushes the system even further.
First, it changes how students are counted. Instead of a single October snapshot, districts can choose a prior year count or a three-year average, whichever is higher. In a growing system, that might smooth volatility. In a shrinking system, it does something else. It locks in funding for students who are no longer there. Anchorage, which has lost thousands of students over the past decade, would receive about $31 million next year for students who do not exist anymore. That gap grows every year as enrollment keeps falling.
Second, the bill allows districts to increase intensive needs counts during the school year, which triggers that 13x multiplier. There is no equal mechanism that forces the number back down if circumstances change. It is a one-way ratchet.
That is HB261 as written. What got added on the House floor is arguably worse.
A separate proposal that had been stalled in the Senate was attached to the bill as Amendment 1. That changes how the whole system is paid for. Right now, local government support for schools is calculated by multiplying your borough’s total property value by 2.65 mills. As property values rise, the local share rises and the state share falls. That has saved the state hundreds of millions of dollars as Anchorage, Mat-Su, and Kenai property values have climbed. That is money that could have been used for major school maintenance, your PFD, or the higher education fund.
The amendment caps that growth at 2 percent a year regardless of how much property values rise. If your borough’s values go up 6 percent next year, only 2 percent gets captured locally. The state backfills the rest. Cost in year one is about $30 million. Cost in year two, year three, and every year after runs into tens of millions more, compounding indefinitely. In perpetuity.
Here is the part nobody wants to say out loud. The state does not have this money.
Alaska is staring at a long-running deficit. Oil revenues are volatile. Defined Benefits bill is poised to cost us billions. The Permanent Fund Dividend has already been cut repeatedly to plug budget gaps, and another cut is on the table this session. Lawmakers are openly discussing a statewide sales tax and an income tax for the first time in decades, because the math no longer works without new revenue.
Every dollar this bill commits to phantom students and capped local contributions has to come from somewhere. That somewhere is your PFD, your future tax bill, or both. This is not a one-time $173 million bill. It compounds every year, because enrollment keeps falling and property values keep rising, and the gaps the bill creates widen with each one. Five years from now, the annual cost will be substantially higher than the $173 million headline.
While all this spending grows, results are not. About 32 percent of Alaska students are proficient in reading and math statewide. In Anchorage, more than 60 percent are not proficient in either subject. On the most recent national assessment, Alaska ranked 49th in fourth-grade reading and math, and 49th in eighth-grade reading.
Fairbanks closed three schools last year. Anchorage just closed three more. Ketchikan voted to close two for next year. Juneau consolidated its two high schools. Anchorage faces a $90 million deficit even after closures. Schools are emptying out, and the policy response is to pay for students who are no longer there.
The Honest Conversation Alaska Isn’t Having
The question is not whether education matters. It does. The question is whether this approach is tied in any meaningful way to results. Right now, it is not.
Ask a simple set of questions. How much are we spending per actual student, not a calculated number on paper. Where does that number go over the next five years if enrollment keeps dropping and the state keeps backfilling local obligations. What, specifically, ties any of this spending to whether a student can read, write, and do math at grade level. And who pays for it when oil and the Permanent Fund will not.
Those are basic questions. They should be easy to answer. They are not being asked often enough.
The Senate will decide soon. The governor will decide after that. This is the window where House Bill 261 can still be shaped or stopped. Once it is in place, the cost curve is built in, and Alaskans will carry it through smaller dividends, new taxes, or both, for years to come.