ANCHORAGE—A Superior Court judge has invalidated the state of Alaska's requirement that local school districts help pay for education, which could leave a cash-strapped state on the hook for more than $220 million in additional funding statewide.
In a case brought by the Ketchikan Gateway Borough and supported in court by the Fairbanks North Star Borough, Judge William Carey ruled the contribution is a dedicated fund, which violates the state constitution's provision that no state tax or license will be earmarked for any special purpose. Carey ruled in the case Friday, but copies of the decision weren't available online from the Ketchikan court. The state Department of Law distributed copies of the decision Monday.
Under state statute, boroughs and municipalities must pay a certain percentage of taxable real and personal property to cover a portion of local school funding.
The state uses a funding formula to determine the basic need of each school district in the state. For school districts in unincorporated areas, the state pays the full cost. In boroughs and municipalities, however, the state requires the local government pay a portion of the cost through tax levies.
The statute requires boroughs to contribute 4 mills, not to exceed 45 percent of the basic need determined by the state's funding formula. For Ketchikan, that amounted to about $4 million in 2013. For the Fairbanks North Star Borough, the total amounted to about $26.8 million.
In February, the Fairbanks North Star Borough Assembly requested the borough attorney's office file an amicus brief in the suit on behalf of Ketchikan. The brief was filed in April.
On hearing of Carey's ruling, Fairbanks borough Mayor Luke Hopkins said he was pleased the judge both ruled the tax unconstitutional and agreed specifically with the arguments laid out in Fairbanks' brief.
Hopkins said what happens next depends on decisions by state lawmakers and a possible appeal by the state.
"What's next after this position is yet to be seen," Hopkins said. "I guess there could be appeals, but basically the judge ruled that the required contribution is unconstitutional. That's the position I wanted to have answered."
Hopkins said some residents believed removal of the required local contribution would put school funding in jeopardy. But he said any funding measures put in place by the state must submit first to the constitution.
"How it gets addressed, we all can have that conversation," Hopkins said.
Fairbanks North Star Borough School Board President Heidi Haas said Monday it would be too early for the board to make a statement on the ruling since they cannot yet know what the full impact might be.
The Alaska Attorney General's Office released a statement expressing disappointment regarding the ruling.
"The state maintains that because the local contribution is simply the borough's share of the cost of educating its students and because the local contribution is funded with borough revenue, the local contribution is not a source of state revenue and is not subject to the dedicated funds provision," the statement said.
Carey wrote in his opinion that the required local contribution, or RLC, consists of public revenues.
"It is hard to conceive of a way, and the state does not propose any, whereby a municipal district could raise the funds necessary to fulfill its RLC obligation without resorting to taxes," he wrote.
Lawyers for the state continue to evaluate the decision and any appeal options.
For the 2013-14 academic year, the state Department of Education had a $1.4 billion budget, of which $222 million came from local contributions.
Gov.-elect Bill Walker takes office next Monday and is already facing a $3 billion shortfall because of lower oil prices. He campaigned on a promise to cut the budget across-the-board by 16 percent.
An education department spokeswoman said funding is up to the Alaska Legislature, which convenes in January.
School funding was hotly contested during the last legislative session. While lawmakers flirted with changes to funding calculations and with raising the required local contribution, they ultimately decided to study how the state funds schools and further delve into the issue later. A bill to scrap the required local contribution, from Rep. Tammie Wilson, R-North Pole, failed to gain traction.
News-Miner staff writer Weston Morrow contributed to this report. Contact him at 459-7520. Follow him on Twitter: @FDNMschools.