Local Contribution FAQ

The total amount a school district is determined to need under Alaska’s public school funding formula. This calculation is made before deducting the required local contribution or accounting for federal funds such as Impact Aid.

A public school district located within an organized borough. These districts receive part of their funding from borough governments and are defined in Alaska Statute (AS) 14.12.010.

A district located in an unorganized borough or within a home rule or first-class city. These districts operate independently of a borough structure and are defined in AS 14.12.010.

A federal requirement under the Impact Aid program. To pass the test, a state must demonstrate that per-student revenues in its highest- and lowest-funded districts do not differ by more than twenty-five percent. Specifically, the state must rank all districts by per-student revenue and compare the districts that fall at the ninety-fifth and fifth percentiles of total student enrollment—excluding the highest- and lowest-funded districts that together serve five percent of the student population at each end. If the disparity between these two points exceeds twenty-five percent, the state fails the test. Failing the test can affect the state's ability to count Impact Aid toward its local share in the school funding formula.

A federal formula grant program that provides education funding to districts that have lost the ability to generate property tax revenue due to the presence of tax-exempt federal lands—such as military installations, national parks, or Native trust lands or have experienced increased expenditures due to the enrollment of federally connected children. The funds help ensure these districts are not disadvantaged in the school funding formula.

The amount of money cities and boroughs are required to provide to their school districts from local tax revenue. This contribution is included in the state’s funding formula and is subject to statutory minimums and maximums under AS 14.17.410.

A type of school district in Alaska that lies outside organized boroughs and outside home rule or first-class cities. REAAs do not have taxing authority and rely on state and federal funding.

The Juneau Empire published an article reporting the City and Borough of Juneau approved $2.3 million in additional school district funding outside the state’s local contribution “cap.” The funds supported non-instructional services such as student transportation, the RALLY after-school program, and community school activities.

DEED contacted the Juneau School District regarding how local contributions were being reported under the state’s school funding formula. This marked the beginning of a broader review of local contribution practices across all districts in accordance with Alaska Statute (AS) 14.17.410.

DEED issued a memo to all municipal school districts reviewing FY2022 financial statements and reminding districts that local appropriations and in-kind contributions applied to special revenue funds must be counted toward the maximum allowable local contribution, as defined in AS 14.17.410. The memo also emphasized that labeling funds as “outside the cap” does not exempt them from statutory limits and outlined potential adjustments to state aid if districts exceed the cap without appropriate reimbursement.

DEED issued a follow-up memo to all school districts, building on the July 27 communication. The memo clarified that local contribution requirements under AS 14.17.410 are distinct from the federal disparity test and acknowledged potential inconsistencies between statute and existing regulation. DEED also announced plans to propose regulatory amendments to ensure alignment with current state and federal guidance.

A draft regulation was shared with the Alaska Association of School Business Officials (ALASBO) Education Funding Work Group. The purpose of this review was to gather initial feedback prior to submission for legal review and before advancing the proposal to the State Board of Education for consideration and public comment.

DEED issued a memo to all superintendents providing an update on the proposed regulatory amendment to 4 AAC 09.990 to clarify that the term “local contribution” as used in AS 14.17.410 is not limited to funds appropriated by a city or borough or those reported in a district’s school operating fund. The memo outlined an adjusted timeline based on feedback from the ALASBO Education Funding Work Group and confirmed DEED’s intent to present the draft regulation for public comment at the March 2025 State Board of Education meeting. It also explained that, if adopted, the regulation would take effect in time for districts to incorporate changes into their FY2027 budgets.

The draft regulation was submitted to the Alaska Department of Law for legal review. The review was not finalized in time for spring action, and the regulation did not move forward until the Board’s June 4, 2025, meeting.

During a roundtable discussion at the Alaska Superintendents Association (ASA) Legislative Fly-In in Juneau, Commissioner Deena Bishop met with district leaders to walk through the timeline and clarify the intent of the proposed regulation. She affirmed that the effort focuses on aligning regulatory language with existing state statute.

During a hearing on House Bill 212, the House Education Committee discussed topics related to school funding and local contributions. The conversation included how local funding is reported and the potential implications of DEED’s proposed regulatory clarification.

DEED presented to the Senate Education Committee on the proposed regulation clarifying how local contributions are counted in Alaska’s school funding formula. Commissioner Bishop and DEED staff reviewed the timeline, the regulatory rationale, and responded to questions from legislators.

DEED received notification from the U.S. Department of Education (USED) that Alaska did not meet the federal disparity test. This outcome affects the state’s ability to count a portion of federal Impact Aid toward its local share in the school funding formula. The result underscored the importance of maintaining alignment between state statutes, regulations, and federal funding requirements.

DEED staff and Commissioner Bishop presented the proposed amendments to 4 AAC 09 to the State Board of Education. The Board chose not to adopt the regulation on an emergency basis and instead unanimously voted to open a 30-day public comment period to gather input from stakeholders.

During the ALASBO Summer Leadership Conference, DEED provided an update on the timeline, process, and public comment period for the proposed local contribution regulation. School business officials were encouraged to review the materials and submit feedback to support broad participation in the process.

DEED submitted a formal request for a hearing with the USED challenging its May 16, 2025, finding that Alaska does not meet the Impact Aid disparity test for FY 2026. DEED notified all school districts of the filing.

Alaska funds public schools using a mix of local, state, and eligible federal Impact Aid dollars. The required local contribution as defined in AS 14.17.410(b)(2) is the minimum amount that cities and boroughs are required to provide through local tax revenue to help fund their schools. This is the required local contribution. Cities and boroughs may also provide an additional local contribution, but the legislature set a maximum limit on this contribution in AS 14.17.410(c).

No, not all Alaska communities are set up as cities or boroughs that allow a tax to be levied. As defined in AS 14.17.410(b)(2), only city and borough school districts are required to pay a local contribution. Additionally, of those that can levy a tax, not all communities can raise the same amount of local tax funding for their schools. Some cities and boroughs have strong tax bases, while others, especially rural or small areas, do not. To ensure fairness, AS 14.17.410(c) establishes a limit on local contributions made in excess of the required local contribution in AS 14.17.410(b)(2). Additional local contributions are limited to 23 percent of a district’s basic need, or the equivalent of a two-mill tax levy on taxable property in the district, whichever is greater.

Based on AS 14.17.920, DEED, in collaboration with the State Board of Education, is charged with the responsibility to adopt regulations necessary to implement AS 14.17. The legislature chose to regulate local contributions in statute and when DEED became aware that school districts are inconsistently interpreting and defining local contributions, it became necessary for DEED to consider a regulation change.

The Impact Aid Program is a federal formula grant program that gives funding to school districts that have lost the ability to generate property tax revenue due to the presence of tax-exempt federal land, such as military bases, national parks, or Native trust lands or have experienced increased expenditures due to the enrollment of federally connected children. Since this land can’t be taxed, the federal government provides money to help fill the gap.

Alaska cities and boroughs do not have to follow federal law on Impact Aid, but they are required to follow state law. When the legislature adopted the education funding statutes, it chose to include eligible federal impact aid in the funding formula and chose to limit local contributions in order to support a state equalized funding formula. Alaska’s statutory school funding formula (AS 14.17.410) allocates education dollars fairly across all districts, including those that rely more heavily on federal support.

The federal disparity test is a yearly federal “check and balance” to determine whether a state is distributing education funding equitably among its school districts. The Impact Aid Program must certify that the state has in effect an equalized program of state aid in order for the state to be permitted to consider impact aid payments when determining state aid to districts.

To pass the test, the state must show that the amount of per-student revenues in its highest-funded districts is no more than 25 percent greater than in its lowest-funded districts. Specifically, a state must rank the districts by per-student revenues from highest to lowest and compare the per-student revenues of the districts that fall at the 95th and 5th percentiles of the state’s total number of students. If the disparity between the per-student revenues at those two districts is larger than 25 percent, the state fails the test.

When a state fails a disparity test, it can no longer count federal Impact Aid payments toward its state funding obligations. This could result in a significant funding loss for the state, as Alaska has a large amount of federally held lands that cannot be utilized as a tax base to fund its local public services, including schools. For example, the amount of funding at issue this year is approximately $80,807,459.

The goal of the proposed regulation is to clarify and implement the existing statute by aligning regulatory language with state law. This will help ensure all school districts have a consistent understanding of how local contributions are defined and reported within Alaska’s school funding formula, supporting transparency, equity, and effective administration statewide.

The State Board of Education’s (SBOE) mission and the state’s education priorities established in 2016 are to provide an excellent education for every student every day, regardless of where they live. The proposed regulation is consistent with the SBOE’s priorities by supporting success for all Alaska school districts and all students through an equalized system of state funding.

DEED began this work in 2023 after identifying that some districts were receiving funding “above the cap” on local contributions in the school funding formula. The 2023 Juneau Empire article on the “above the cap” funding received by the Juneau School District, in combination with the recent updated federal Impact Aid disparity test guidance, brought additional attention to the issue. The proposed regulation update does not change the statute or how funds are considered; rather, it is a clarification identified by the Department of Law to align the regulatory definition with applicable law.

The proposed changes aim to eliminate inconsistencies between state law (AS 14.17.410(c)) and the current regulation (4 AAC 09.990) regarding how local contributions are defined and reported in the school funding formula. The proposed changes will align Alaska’s rules with federal law (Sections 7009(b) & 7713 of the Elementary and Secondary Education Act) and implementing regulations (34 CFR § 222, Subpart K), which outline how states must report education funding when seeking to be certified as having an equalized program of state aid. The proposed changes also align better with state law. The statutory definition for local contribution is “appropriations and the value of in-kind services made by a district.” AS 14.17.990(6). The current regulatory definition limits local contributions to only appropriations and certain in-kind services reported in a school district’s operating fund. 4 AAC 09.990(b). The proposed regulation change would align better with the statute by removing the reference to a school district’s operating fund, since that is not a statutory requirement.

Instructional costs include items directly supporting student learning, such as teachers and classroom materials. Non-instructional costs include services like meals and transportation. The Impact Aid Program does not differentiate between instructional and non-instructional but instead considers whether a state has in effect a program of state aid that equalizes expenditures for free public education among local educational agencies in the state. The Impact Aid statute’s definition of current expenditures is in 20 USC 7713, paragraph 4:

(4) Current expenditures: The term “current expenditures” means expenditures for free public education, including expenditures for administration, instruction, attendance and health services, pupil transportation services, operation and maintenance of plant, fixed charges, and net expenditures to cover deficits for food services and student body activities, but does not include expenditures for community services, capital outlay, and debt service, or any expenditures made from funds awarded under part A of subchapter I. The determination of whether an expenditure for the replacement of equipment is considered a current expenditure or a capital outlay shall be determined in accordance with generally accepted accounting principles as determined by the State.

The proposed regulation does not reduce the total amount of state funding provided to education. However, it does clarify and implement the limit in state law on additional local contributions from a city or borough, outlined in AS 14.17.410(c). We recognize that this change may feel like a reduction in flexibility or support for districts that rely heavily on local funding beyond the state formula. This proposal is intended to help ensure a fair and consistent approach to funding across all districts — including those that do not have the ability to raise local funds. DEED is committed to working with districts to offer as much flexibility as state and federal law allow.

DEED has not conducted a formal statewide fiscal impact analysis, rather we have gained our information from school district audits. Presently, the department is aware that approximately five districts may be most directly affected by this change as reported in the yearly audits that they may be receiving more local contribution than would be allowed under this regulation.

Local control generally refers to a community’s ability to make decisions about how much to support its local schools, including the authority of cities and boroughs to raise and allocate funding, and the flexibility of districts to determine how to use those resources. The proposed regulation doesn’t remove local control; it clarifies how certain types of government revenue are counted to ensure transparency, consistency, and compliance with both state law and federal funding rules.

The proposed regulation is designed to promote transparency and consistency for all school districts in understanding local contributions under state law. Because REAA districts do not have taxing authority they are not required to make a local contribution, so they would not be impacted directly by the proposed regulation. Similarly, rural school districts whose municipalities may have limited tax bases, or other municipalities that choose not to fund to the additional local contribution maximum, would not be directly impacted.

The proposed regulation does not directly change staffing or contractual agreements. It focuses on clarifying funding definitions, which will be reflected on a district’s required annual reporting, to help districts plan with greater certainty.

Districts will continue to determine how to allocate funds for these programs. The proposed regulation would not remove support for these services but focuses on consistent accounting practices associated with local contributions.

No, the intent is not to penalize any district, rather the regulation change ensures that all students have access to the same high-quality education, regardless of where they live. This approach is designed to distribute funding equitably across all districts so that those without strong local tax bases are not disadvantaged.

Yes. The proposed regulation does not affect a district or school’s ability to raise money through community fundraising efforts such as bake sales, booster clubs, or donations from individuals and local organizations. These types of contributions are not counted as part of the local contribution because they do not come from a city or borough government.

The department recognizes the importance of stability for district budget planning. While the final timeline and process involves multiple steps and stakeholders, SBOE and DEED will make every effort to consider district budget cycles and provide advance notice and support if changes occur to the regulation.

Decisions about services and staffing remain under local district control. The state continues to fund these programs with targeted funding including $14.1 million for Early Learning and $6.2 million for Pre-Kindergarten Grants and an increase of 10 percent to Transportation funding in FY2026.

Under the proposed regulation change, services and programs that fall under “community services” and not “free public education”, like community programs, are outside of the local contribution definition.