The Alaska education funding disparity issue could cost the state $81 million after it failed an equity test earlier this month. Federal officials notified Alaska’s education department on May 16 that the state did not meet the disparity test requirements.
This test ensures a fair funding gap between the highest and lowest-funded school districts nationwide. Alaska receives Impact Aid from the federal government each year to support districts with non-taxable land, such as tribal areas and military bases.
However, the state can only reduce its funding by deducting this aid if it passes the disparity test. Bryan Zadalis, spokesperson for the Alaska Department of Education, confirmed that the agency is considering an appeal with help from the Department of Law.
Zadalis added that the state believes it followed all federal Impact Aid rules, including those related to the disparity test. If the appeal fails, the state might owe local districts an additional $81 million in supplemental education funding.
Democratic Senator Löki Tobin questioned whether the state can afford that payment given Alaska’s budget shortfall. The legislature recently overrode Governor Mike Dunleavy’s veto of a bill that boosts school funding by $180 million annually.
Still, that funding does not impact the current dispute since it applies to a different fiscal year. Federal officials found that fund transfers between general and transportation accounts in some districts made Alaska noncompliant with equity rules.
Lisa Parady, who leads the Alaska Council of School Administrators, wants collaborative talks with the state to avoid further failures. She and other education leaders believe changes to local funding rules should be paused during this review.
Despite calls to delay, Zadalis said, the department plans to move forward with new funding regulations in June. He said the goal is to ensure Alaska can meet future funding disparity standards and avoid more financial penalties.