Making the Most of Your First Term – 6

Introduction to School Finance


How are public schools funded?

Unlike many other states, the majority of funding for schools in Alaska comes from the state. Nearly one-third of the state’s total operating budget goes to support public education and is distributed through a funding formula adopted by the Legislature. Federal funds for impact aid and special title programs also account for a large share of school funding.

The 19 Rural Education Attendance Areas (REAAs) receive 100% of their basic school funding from the state, since communities in the Unorganized Borough essentially have neither a tax base nor a means for collecting taxes. School districts in incorporated areas are required to contribute to their schools, either through local taxes or in-kind contributions. They also have the ability to raise funds beyond “basic need,” within established limits.

Alaska’s public schools are funded with a combination of state aid, a required local contribution – where applicable — and federal impact assistance. AS 14.17 establishes state aid on the average daily membership (ADM). ADM is determined each October. ADM is then applied to the Base Student Allocation in the state’s foundation funding formula. The formula then adjusts each district’s ADM based on school size, a district cost factor and an additional 20 percent in funding for special, vocational and bilingual education. The formula also includes a special category of funding for transportation costs and Intensive Needs Students. The resulting “adjusted ADM” is used by the Department of Education & Early Development to distribute about $1 billion a year to K-12 schools.


What is the Board’s role in the financial management of the district?

The financial management of the district supports the entire school program. Boards should be actively involved in advocating for the resources and funding needed to provide a quality educational program to all students. To make that support as effective as possible, the Board should encourage advance planning through the best possible budget procedures and guide the expenditure of funds so as to derive the greatest possible educational returns.

School Boards expect sound fiscal management from the administration and use policy to provide a framework for that management.

Specific roles for the Board in the development and oversight of the district’s finances include:

  • Solicit public input on educational needs and utilizes that information in making budget decisions.
  • Approve and adopts the annual budget and approves budget transfers.
  • Is accountable for all district funds.
  • Adopt written policies governing the purchase of supplies and equipment.
  • Monitor all expenditures by receiving statements and approving payments.
  • Review the annual audit of district accounts and business procedures.
  • Adopt an insurance program, which complies with law and reflects prudent financial management.


What kind of information should the board receive regarding district finances?

The Superintendent should keep the Board informed about the district’s financial condition through regular reports. The reports should include a budget status report and a cash reconciliation report. These reports should be used by the Board to determine whether or not the district will be able to meet its financial obligations for the remainder of the fiscal year.


Are financial audits required?

State law requires the school board provide for an audit before October 1 of each year. To make the audit the school board will contract with a public accountant who has no personal interest, direct or indirect, in the fiscal affairs of the district. One certified copy of the audit shall be filed with the commissioner and one certified copy is posted in a public place at the district office.

The auditor should provide the Board with an opportunity to clarify its report and answer questions following the presentation of the audit.

The commissioner can withhold all payments of state funds after November 15 to a school district that fails to file a certified copy of the audit with the department.


Who selects the auditor for the school district?

The school board appoints the auditing firm from a list of recommendations provided by the superintendent.


What kind of investments can the district make?

The Board is permitted by law to invest temporarily any funds that are not immediately needed for the operation of the school district. Investments are usually limited to the following: Bonds, bills, or notes of the United States or the State of Alaska; and Certificates of deposit or savings deposit receipts issued by any state or national bank authorized to operate a bank in the state of Alaska.