School funding rule creates unequal footing for municipalities

Wednesday, January 27, 2016 - 10:32

In deciding a lawsuit by the Ketchikan Gateway Borough over required local contributions to schools, an Alaska Supreme Court ruling dealt with one can of worms and left another wide open.

The suit, which alleged the state’s requirement for local governments to put up a portion of education funds violated the Alaska Constitution, was decided in the state’s favor, sparing Alaska’s government a judgment that would have exacerbated the budget crisis.

But it left a central inequity in place that has caused division between areas of the state with borough government and those without: Why does the state require those in municipalities to pay more?

The history of borough government formation in Alaska is itself fraught with legal battles and mandates — the Legislature and Gov. Bill Egan had to pass a law to require their establishment in the populated areas of Ketchikan, Juneau, Sitka, Kodiak Island, Kenai Peninsula, Anchorage, the Matanuska Susitna valleys and Fairbanks. Over time, those boroughs grew to offer services such as libraries, parks and recreation, local planning and zoning and regional administration of schools in the area.

The Ketchikan lawsuit took issue with the state’s requirement that areas where boroughs are in place front a portion of money for education. In Alaska’s “unorganized borough,” a sparsely populated, discontinuous area making up more than half the state’s area but only 13 percent of its population, the state funds all required education costs.

In areas with organized boroughs, however, the state requires that municipal government contribute 2.65 mills toward education funding. It’s a fundamental disparity that has yet to be addressed by the state, and the amount local governments contribute is huge — statewide, more than $200 million per year.

Fortunately for the state government, the Ketchikan suit was argued and decided on very narrow grounds: Attorneys for the municipality argued the required local contribution constituted a violation on the state’s constitutional ban on “dedicated funds” — that is, funds devoted to a specific purpose such as education.

The court decided the funding mechanism was a constitutional exception to the dedicated-funds prohibition, but didn’t address the issue of unequal treatment of organized and unorganized areas.

While having $200 million added to the state budget gap would be an unwelcome development, the issue is still in dire need of correction. In a bill submitted to the Legislature last year that would have repealed the local contribution requirement, Rep. Tammie Wilson, R-North Pole, pointed out an essential piece of language in the Mandatory Borough Act of 1963 that forced municipal government formation: “No area incorporated as an organized borough shall be deprived of state services, revenues, or assistance or be otherwise penalized because of incorporation.” As it stands, the state is violating that promise.

The required contribution may well prove an impediment to future establishment of boroughs in unorganized areas, and it’s not the only disincentive: In its effort to offload financial responsibility after the oil price slump, the state has also signaled it intends to shift a portion of the debt burden for employees in the state pension system to boroughs.

This transfer of millions upon millions of dollars in obligations would be difficult to bear for existing municipalities; it could result in the slamming-shut of the door to future voluntary borough formation.

The state has plenty of problems without addressing its unequal financial treatment of organized and unorganized areas. But this is a problem the state created itself, one it is currently exacerbating and one it must resolve to prevent resentment between state residents inside and outside boroughs.

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