ANCHORAGE SCHOOL DISTRICT
ANCHORAGE, ALASKA

GENERAL FUND

The General Fund, consisting of each school and department's budget, accounts for the majority of the District's operations and activities. Therefore, this memorandum and most of the subsequent discussion and decisions on balancing the budget for next year will focus primarily on estimated revenues and expenditures of the General Fund.

Revenues

Alaska Public School Funding Program— The largest single revenue source to the District comes from the Alaska Public School Funding Program. The School Board and the Administration appreciate the past increases in revenue funding to the Alaska Public School Funding Program. Hopefully, the Legislature will continue to advocate for the students in our communities by funding an increase in revenues supporting public education. It is essential that school districts receive adequate funds to meet the required mandates and public expectations.

This Program is expected to provide approximately 54 percent of the District's General Fund revenues. This is based on continuing the same per pupil amount for the base student allocation ($4,169), that includes the roll up of the Learning Opportunity Grant and Section 93 of Senate Bill 2006, approved during the Legislative session, and the Quality School Grant ($16). Based on current enrollment projections, the amount of funding for FY 2004-2005 is estimated to be $202.6 million, which is $3.7 million less than the current FY 2003-2004 budget. This is a result of lower anticipated enrollment, (49,900 budgeted for FY 2003-2004 and 49,499 projected for FY 2004-2005) and the State assessed property valuation for the Municipality increasing $2 billion. This increase in assessed valuation results in a larger required local effort causing a loss of approximately $4.0 million in the Alaska Public School Funding formula calculation.

The Alaska Public School Funding program is based on average daily membership (ADM)—determined by the District's enrollment and special education intensive count—processed through school size factors and special needs formulae to establish the District's "basic need." The required local share and a percentage of the Federal Impact Aid funding that the District receives for federally-connected students is then subtracted from the "basic need" to determine revenue. The Alaska Public School Funding formula defines the required local share as being the lesser of 45 percent of the preceding years "basic need" or 4 mills times one-half of the annual increase in assessed valuation compared to the 1999 base year of the total State assessed full and true valuation of local real estate, inventory and other taxed personal property for the second preceding year, added to the prior year’s required local effort. An increase to the assessed valuation reduces the potential amount of Alaska Public School Funding revenue. The Alaska Department of Community and Economic Development notified the District that the assessed valuation for Anchorage has increased from $19.204 billion to $21.215 billion.

Local Property Taxes— Local property tax contribution is the District's second largest General Fund revenue source. Projected local property tax revenue for FY 2004-2005 is based on requesting the full amount of taxes available under the local property tax limitation. The local property tax limitation provides for an annual adjustment for inflation, five-year Anchorage population change and new construction.

The projected inflation rate used for planning purposes is 2.29 percent. This preliminary estimate is the rate being used by both the District and the Municipality of Anchorage in the property tax limitation calculations. The official Consumer Price Index (CPI) will not be available until February 2004. As determined by the State Department of Community and Regional Affairs, the five-year Anchorage municipal population change used for planning purposes is 1.1 percent, with the official percentage growth not available until January 2004. The projected combined rate of 3.39 percent for FY 2004-2005 is .39 percent more than the current rate of 3.00 percent for FY 2003-2004.

Included in the revenue projections are taxes associated with the opening of South Anchorage High School, and the completion of the addition/renovation to Ptarmigan Elementary and Wendler Middle Schools.

It is anticipated that this increase—and increased taxes allowed on new construction or property improvement—will increase the amount of taxes available in the General Fund by approximately $12.4 million. However, the Anchorage Assembly must first consider and approve the District's local property tax request.

The District has been notified that the Mayor is proposing transferring $1 million of Municipal taxing authority to the District under the property tax limitation in order to assist the District with our fiscal difficulties. As part of the approval of the 2004 Municipal operating budget, the Assembly approved a change in the calculation method related to the funding that the Municipality receives from the Municipal utilities. Subject to approval of utility rate increases by the Regulatory Commission of Alaska (RCA) in March 2004, the Municipality anticipates receiving more funding from the Municipal utilities using the new calculation method. The Mayor is proposing sharing a portion of the increased funding with the District by transferring funds to the District’s tax base under the property tax limitation formula. Since this process has not been completely finalized and the rate increases are still subject to approval by the RCA, the District has not included the additional $1 million of tax revenue in the FY 2004-2005 Preliminary General Fund Financial Plan. At a later date when the Municipal process is complete, the District will request the $1 million of additional taxes and the increased upper limit spending authority.

Federal Impact Aid— The revenue projection for Federal Impact Aid has been projected at 100 percent of projected entitlement and at the same amount budgeted in FY 2003-2004 based on FY 2002-2003 actual revenues. Uncertain at this time is the formation of the Stryker Brigade that may have an impact on future funding.

The amount of Federal Impact Aid revenue each year is uncertain because it is subject to pro–ration based on the annual funding appropriated by Congress. In addition, the percentage of the total number of federally–connected students to the total number of students the State has direct responsibility for—including military students, children educated at Mt. Edgecumbe and State correspondence (Alyeska)—and potential formula changes, could result in fluctuations in Federal Impact Aid funding to the District. This coupled with the fluctuation from year-to-year in the number of students living on military land, which can partially result from on base/post housing renovations, adds to the uncertainty of Federal Impact Aid revenue during the budget process. This Program is subject to annual Congressional appropriation and should be monitored. We also do not know, for example, if the District will receive prior year adjustment payments during FY 2004-2005.

Fund Balance— The District's undesignated fund balance for the General Fund is a potential one-time source of revenue. Deciding the appropriate level of fund balance required for a contingency reserve requires an exercise of judgment. Industry standards recommend undesignated fund balances or contingency reserves remain between 3 to 5 percent of the budget. The undesignated fund balance needs to be maintained to protect against shortfalls in revenue collection, to allow for adequate cash flow management, and to provide the financial ability to meet emergencies. As of June 30, 2003, the undesignated fund balance was approximately $26.665 million or 7 percent of the FY 2004-2005 Financial Plan of $376.8 million.

At this time, based on approval from the School Board in November, the Administration has included $4.5 million of fund balance as a revenue source to help reduce the fiscal gap. Using $4.5 million of fund balance will provide an undesignated fund balance of $22.165 million or 5.9 percent of the FY 2004-2005 projected budget of $376.8 million.

Pupil Transportation Reimbursement— The preliminary FY 2004-2005 revenue projection for Pupil Transportation is based on full funding for the District using the formula for State funding of pupil transportation approved by the Governor and the Legislature during the last Legislative session. There is no provision for an increase in State funding of transportation that is required to meet the individual educational plan (IEP) of a student with disabilities. This will be discussed with the Legislature and the Governor’s staff during the legislative session.

User Charges and Fees— Fees will continue to be assessed for musical instrument usage, ASD documents, High School and Middle Level Student Activity fees, High School parking fees, summer school, credit course training fees, and rental fees. Based on input from the School Board and Budget Review Teams, rate increases have been incorporated in these projections. The following schedule shows the adjustments:

Revenues generated from Community Schools Fees have been eliminated due to the recommended elimination of the Community School program in FY 2004-2005.

Medicaid— Based on FY 2002-2003 actual revenues and current year projections, it is estimated that the District will receive approximately $1,100,000 in Medicaid funding based on information from the Alaska Department of Education and Early Development (DEED).

E-Rate— Based on the decline of free and reduced student count, our eligible discount rate was reduced from fifty percent to forty-nine percent. However, for FY 2004-2005 the School and Libraries Division of the Universal Service Administrative Company have revised their eligibility discount criteria that should include more district facilities for FY 2004-2005. The net funding of these two factors is anticipated to result in slightly lower revenues for FY 2004-2005 than in the current year, but more than the actual revenue for FY 2002-2003. These funds are included in the budget as a revenue source, offset by corresponding communications expenditures.

PERTINENT FACTS

THE BUDGETING PROCESS

BUDGET DEVELOPMENT

STUDENT ENROLLMENT PROJECTIONS

GENERAL FUND

• Revenues
• Expenditures

OTHER FUNDS

FISCAL YEAR BUDGET COMPARISON

STUDENT ENROLLMENT PROJECTIONS

SUMMARY