Gov. Mike Dunleavy on Thursday issued vetoes and signed the fiscal year 2025 operating and capital budgets, leaving most education funding intact but cutting funds directed to the Kenai Peninsula Borough School District that the federal government says the state owes.

According to a Friday release from the governor’s office, the signed budget leaves in place $174.6 million for a one-time increase of $680 in the base student allocation, the amount of funding each district receives per student. That represents a roughly 11% increase in per-student funding. It also includes a one-time $7.3 million pupil transportation increase and funding for school maintenance projects.

That same increase of $680 per student was previously vetoed by Dunleavy early in the legislative session as part of Senate Bill 140, a comprehensive education bill that would have also created a statewide charter school coordinator position, funded the reading intervention programs mandated by the Alaska Reads Act, allowed districts to apply for federal funding to help boost internet speed and quality in rural school, funded correspondence students at the same level as students in brick-and-mortar schools, and increased funding for student transportation.

An effort to override that veto fell short by one vote.

A list of vetoes says that Dunleavy cut nearly $12 million that was set to go to school districts, including KPBSD, in outstanding pandemic relief funds. That funding was first flagged by the federal government in December, when the U.S. Department of Education said the state was out of compliance with requirements that it agreed to when it accepted funding under the American Rescue Plan Act.

In March, the federal government warned the state that it could be considered a “high-risk” grantee, jeopardizing $425 million in federal funding for Alaska schools.

That funding was meant to supplement funding, not replace it, and the department said that the state under-allocated funds to the KPBSD and other districts. KPBSD is owed $9.7 million, according to the U.S. Department, part of a total $29 million owed to four school districts.

The State Department of Education and Early Development has repeatedly said they deny any allegations of wrongdoing, but $5.5 million for KPBSD in outstanding pandemic relief funds were included in the budget passed by the State Legislature in May.

Dunleavy writes, in vetoing the funding, that the need is “indeterminate at this time as underlying funding request remains unresolved.”

“By maintaining focus and fiscal discipline, this budget increases funding where it is needed most while at the same time reducing total Unrestricted General Fund spending,” says Dunleavy in the release. “It provides additional funding to school districts needed to address the cost of inflation and provides additional targeted funding for programs that will improve student outcomes.”

The Kenai Peninsula Borough School District, facing a deficit of $13.7 million, advanced and approved a budget in April assuming no new funding from the state. That budget increases the pupil to teacher ratio by one in most classrooms, cuts 10 days worked by support staff, cuts elementary school counselors, defers upgrades to curriculum and some equipment, cuts extracurricular travel, cuts stipends for assistant coaches and educational programs like Battle of the Books, and closes school pools and theaters.

That budget is still the budget approved by the district for the next fiscal year, though the KPBSD Board of Education in June directed staff to begin restoring cut positions under the assurance that funding included in the budget would be allowed to reach schools.

That move was motivated by the increase in one-time per-student funding, which would bring around $11 million to the district, other funding for transportation and Alaska Reads Act implementation, and also by the $5.5 million directed to the district that Dunleavy vetoed.

During that meeting, the board noted that the funding they were counting on receiving from the state was largely composed of one-time funding, just like last year. This means they will again be facing a deficit and again calling for more funding next year.

Discussion and revision of the budget is scheduled for the board’s Monday meeting.

Also vetoed by Dunleavy was around $11 million allocated to broadband assistance grants that would improve internet access in schools and $2.6 million in increased Head Start grants.

Full budget reports and an itemized list of vetoes can be found at omb.alaska.gov.

Reach reporter Jake Dye at jacob.dye@peninsulaclarion.com.