The Kodiak Island Borough is on the hook for an additional $254,919 after the final amount for the school bond debt reimbursement program passed by the Legislature was short several million dollars.
School bond debt reimbursement is a state program that reimburses municipalities for the cost of school construction and major maintenance projects that were paid with bonds. The borough has just over $4 million worth of debt that is eligible for reimbursement from the state this year according to Borough Manager Aimee Williams.
Williams told the Borough Assembly on June 26 that the state Department of Education and Early Development informed her that the borough owed $254,000 more than it budgeted for.
“Through a lot of emails we figured out that House Bill 53 started out with an amount that was $4,040,942 less than what DEED calculated they needed to fully fund the program," she explained.
According to DEED’s figures, which Williams shared with KMXT, the state’s school bond debt reimbursement program needs $50.5 million to be fully funded. But the Alaska Legislature only approved $46.5 million through House Bill 53 to fund the program during this year’s budget process.
That $4 million gap is in addition to the Legislature only funding 75% of the reimbursement rather than the full 100% this fiscal year. Williams said that means the Borough is receiving 75% of the Legislature’s amount which passed at $34,882,149 for the school bond debt reimbursement program, not the final number that DEED used.
“They just didn’t start with the same number," she said. "So when the Legislature said how much was in the budget, which was just under $35 million, that only ended up being 69% of what DEED thought they needed to fully fund and so we got a number that was 69% of what we expected.”
It is unclear how this snafu happened in the first place. A spokesperson for DEED said via email, the estimated amount Gov. Dunleavy's FY'2026 budget proposed appropriating to fully fund the school bond debt reimbursement program was later revised to $50.5 million, "due to changes in the anticipated bond schedule... The Legislature ultimately appropriated a fixed amount totaling $38.9 million. A prorated amount will be issued by the department to each entity based on the actual payments eligible to be reimbursed."
A 10-year moratorium was in effect preventing new projects from being included in the school bond debt reimbursement program. But that just expired at end of day Monday, June 30. Williams said DEED is likely working with the assumption that it will take on additional debt this fiscal year after the expiration of that moratorium.
In an email on June 27, state Senator Gary Stevens of Kodiak said, “This has become a complex issue. We are working with all involved to understand and resolve it, including the department, borough and the borough’s lobbyist."
Ideally, Williams hopes a fiscal adjustment would be made at the state level so that the local municipality won’t have to pay the additional $254,919. If not, she said the borough will survive this financially, but that’s not the point.
“I think the point here is not whether we can survive it or not; it’s that we expect to get the correct numbers from the state," Williams said. "And then when we build our budget and we set the mill rate, once that is set we can’t change it. And so if we are in a situation where we are starting out in a negative, we can’t collect more money, like that is set for the year.”
She emphasized that paying out this extra money will not only affect this fiscal year’s budget [FY'2026] but will have an impact on next year’s as well.
Editor's Note: This story was updated to include emailed comment from the state Department of Education and Early Development.
