Kenai Peninsula Borough School District leadership projected a sense that the district and its schools will make it out of the pandemic relatively unscathed financially, but that the economic health of the borough and state will need to look very different by the time federal support dollars run out in a few years.

KPBSD Superintendent John O’Brien, incoming Superintendent Clayton Holland, Finance Director Liz Hayes and others briefed principals and educators of the southern Kenai Peninsula on the school district’s projected fiscal year 2022 budget during a virtual forum Monday night. The short of it: federal grants from three separate waves of COVID-19 relief legislation will help float the district through FY23. That funding goes away in FY24, though, by which point leadership said the district should have some time to get to a more financially healthy place.

O’Brien noted that, like most other school districts around the state and country, KPBSD’s enrollment declined over the last year as parents navigated the options to find the best way to safely educate their children during the pandemic.

“Parent have had choices, and they’ve been difficult ones to make,” O’Brien said. “Trying to project student enrollment for next school year has been the most difficult our team has had to predict in the long history of doing enrollment projections.”

To that end, O’Brien said the district will use an early enrollment drive in April to try to get a better sense for what those numbers might be. More information on that enrollment drive will come out next week, he said.

O’Brien did note that more students have started returning to in-person learning at brick-and-mortar schools in the district, which he said is a good sign.

Enrollment is tied to school district funding. The Base Student Allocation (BSA), which is the amount of funding schools can count on from the state per student, has remained the same since 2017, at just over $5,900.

During her part of the presentation, Hayes detailed a preliminary FY22 budget for the school district that included about $131 million in total projected revenue, and about $134 million in total projected expenditures — a projected $2.67 million deficit for FY22. Hayes explained that the deficit will be covered by the district’s fund balance.

“But we have to … remember that going forward into FY23, that money won’t be available if we spend it next year,” Hayes said. “So every year that we expend our fund balance down, the chance that we have replacement revenue for it is not there. So we have to keep that in mind as we’re budgeting and going forward.”

Broken down, the district projects about $82.2 million in revenue from the state, absent the one-time funding school districts got from the state in 2020 and using what Hayes called a conservative estimate on enrollment to calculate funding from the BSA. The FY21 revised budget shows $76 million in revenue from the state through the BSA, while the district is projecting $71 million in FY22.

“We do a projection of the students we’re going to have in the subsequent year. That starts early,” Hayes said. “We start that process in October and we have to give that preliminary projected enrollment number to the state the first week of November. And as everyone knows, this year is especially challenging. We don’t know which students are going to come back to the buildings. … We did a conservative approach to the projected enrollment, but we think we’re in the ballpark.”

“To be honest I hope we’re wrong and the numbers are a lot higher than we projected them,” Hayes continued. “But that’s — we’ve got to start somewhere, right?”

Other projected FY22 revenue comes from the borough and an “other” category that includes Medicaid, interest earnings and other miscellaneous sources. The school district was originally going to ask the Kenai Peninsula Borough Assembly to fund the district at $50 million, but Holland said that ask is being revised to $48 million to take into account the borough’s own financially strained position.

“We are moving together on that,” Holland said.

Holland said he and Hayes had a “very productive” meeting with Borough Mayor Charlie Pierce recently, and that Pierce plans to set the floor for school funding at $45 million. The borough assembly cannot fund schools lower than the floor amount, but can choose to fund more than that.

“(Pierce) has really committed to working with us as revenue projections change with the borough to help us obtain that $48 million,” Holland said.

Holland is optimistic that working with the borough will get the district its goal funding, he said. He said he hopes the district can use the two years before federal funding runs out to get its enrollment back up.

“The borough and the district has a chance to be in a position two years from now where we are healthy financially,” Holland said. “And that is part of what we’re looking at in this big picture of things, that we need to end this two-year period where we can use funding to come out … in a healthy place.”

Of the district’s projected FY22 expenditures, about 79% of costs come from salaries (about $62.3 million) and benefits (about $44.3 million).

As of FY20, the total amount of the district’s fund balance was $19.8 million, with about $1.67 million in the unassigned category, meaning it can be used with no strings attached and without school board action. Additionally, Hayes explained the district had previously assigned $5.7 million for FY21 expenditures, but that there will likely be about $1 million of that leftover and not spent, which will then be used for FY22.

Funding from the federal government had helped the school district reopen during the pandemic, and will allow schools to keep certain positions and programs through FY23. Schools got funding through three separate waves of COVID-19 legislation: the CARES Act, the Coronavirus Response and Relief Supplemental Appropriations (CRRSA) Act, and the American Rescue Plan.

KPBSD received $2.29 million in CARES Act funding to be spent by June 30 of this year, and $9.08 million in CRRSA funding, to be spent by June 30, 2023. The district will also get funding through the American Rescue Plan, but the amount is not yet known.

“We’re hoping to learn that soon,” Hayes said. “And we’re not sure what the period of availability will be.”

The period of availability is how long the district has to spend the federal funding. If money is not spent by the end of the period of availability, it has to go back to the federal government.

The federal funding the district got through the second round of grants is going to allow the district to retain staff which Hayes said the district had anticipated having to cut. Holland said the district will retain all non-tenured staff. The district will also use the federal funding to keep all its elementary school counselors and “student success liaisons.” The district’s pupil-teacher ratio will also be able to stay at its current level.

While the district doesn’t yet know how much funding it will get from the American Rescue Plan, it does plan to use that funding to help maintain current staffing levels. Additionally, 20% of the funding from this third wave must be used to address “learning loss,” Hayes explained. This means the district must spend that percent of the funds on things like summer learning or enrichment, after school programs and learning interventions, all designed to help fill the gaps in education many students will likely experience as a result of the pandemic.

KPBSD School Board member Mike Illg, who attended the virtual meeting, said he will push for increased summer and after school programs even after the pandemic and after the federal funding runs out. These are things students have been missing, he said.

“I know we’re still dealing with the pandemic, but the healthy body is part of healthy learning,” Illg said. “So this is paramount to moving forward.”

The school district hosted a second virtual budget forum for the central peninsula community on Tuesday, and will host a third on Thursday for the eastern peninsula. For more information or to join the budget discussions, visit the district website at kpbsd.k12.ak.us.

Reach Megan Pacer at mpacer@homernews.com.