The Craig school district is facing a $1 million deficit and the city is considering solutions

The Craig City School District on Prince of Wales Island is facing a budget deficit of more than $1 million for the next school year. As a result, the city of Craig, the island's largest city, is considering increasing its sales tax rate. Residents and the city council are currently trying to find out how much.

School districts across Alaska are struggling with budget deficits due to rising operating costs and flat-rate state funding. According to Brian Templin, Craig's city manager, the local city council needs to figure out how far it's willing to dip into its reserves.

Gov. Mike Dunleavy vetoed a bipartisan education bill in March that would have significantly increased funding for public schools. Templin said this is partly to blame for the deficit, plus their schools are becoming more and more expensive to operate.

“The City Council recently spoke about the issue, and from other resources we had available, it looked like we were close to a million dollars short of closing the gap for the school district,” Templin said.

In total, the school district itself is short about $1.2 million, Templin said. Afterward, Templin said the city's $1.2 million in revenue would be just enough to keep the school district afloat and limit the need for the city to dip into its cash reserves.

Therefore, the council needs a quick and efficient way to increase its revenue sufficiently to close this gap. Templin said for Craig, raising the sales tax rate seemed like the most logical solution.

“So the first question is whether people would prefer to see a year-round flat tax increase or whether residents would prefer to see a seasonal split in the sales tax,” Templin said.

In other words: One idea was to raise the sales tax across the board. Craig currently has a flat 5% sales tax. According to the city's calculations, they could increase that share to about 7.5% to meet their goals. Or Craig could use a seasonal split rate – to reduce the burden on year-round residents. Templin estimated it could be around 6% in the winter and 8.5% in the summer months. City staff sent out a survey to seek public input on implementing the increase.

“There is a general perception that if the public does not want to see a large increase or no increase at all, they are simultaneously making the decision that they want to fund that amount to the school district next year,” Templin explained.

Depending on the results of the city survey, the final form of the increase proposal will be presented to the City Council for a vote in October, Templin said.