Petersburg’s school district approved a budget this week that will draw down nearly $700,000 dollars from its reserves to make up for school funding vetoed by Gov. Mike Dunleavy. Dunleavy reduced education funding for school districts statewide with a line-item veto on June 12, just weeks before districts started their next fiscal years.
The Legislature originally approved a $700 increase in per-student funding, known as the base student allocation (BSA). It was the first substantial increase since 2017. Dunleavy didn’t approve enough money to fully fund the increase, issuing his line-item veto and decreasing funding. Now, districts will see a $500 increase this academic year instead. That’s less than the one-time $680 dollar boost districts got last year.
The Petersburg School District (PSD) originally budgeted for flat funding from the state before the base student allocation increase passed this year. Even with the $500 boost per-student, the district has to pull money from its reserves, or “fund balance,” to fill in the funding gaps.
School Board President Sarah Holmgrain said this kind of work-around won’t be sustainable.
“It’s like a savings account to draw from when you don’t have enough money to pay your bills,” Holmgrain explained during a live radio show on June 17. “And once it’s gone, it’s gone. It’s not like we’re creating revenue at the school district.”
PSD Finance Director Shannon Baird said drawing from the fund balance can only be a short-term fix; the district relies on its fund balance to cover emergencies and other unexpected costs.
“We don’t plan to do that again in Fiscal Year ‘27,” she said. “That wouldn’t be well advised to spend it all down.”
Districts across Alaska say state education funding has failed to keep up with rising costs. In recent years, other districts have also needed to spend from their fund balance in the face of budget shortfalls.
About 30% of the district’s budget comes from the borough, but nearly 70% of their funding comes from the state. Baird said the latest funding increase won’t be enough for the next budget cycle.
In order to avoid future cuts, she said increases would need to be double what the Legislature approved this year. That means that lawmakers would have to increase the BSA in statute by another $700.
Districts have been pushing lawmakers to boost the BSA for years due to statewide budget shortfalls. Petersburg School District Superintendent Robyn Taylor said that it took a lot of work to get the legislature to pass the $700 increase that Dunleavy reduced.
“All the districts recognized that was not going to make us even and sustainable, but it was a step in the right direction,” she said. “To see that line item vetoed was disappointing.”
Lawmakers can override Dunleavy’s veto, but leaders say it would be difficult to get enough legislators back to Juneau for a special session. They’re planning to attempt to override the veto when they return in January.
Even if the veto is overridden, it won’t be an easy fix for districts like Petersburg’s. Baird said a January override would come too late in the school year for certain kinds of important spending, like hiring staff.
The PSD School Board passed its FY2026 budget unanimously on Tuesday, June 17.
