District owes the Borough $5.4 million from years of overspending

What happened

An independent audit accepted by the board on December 3, 2025 found the district owes Ketchikan Gateway Borough $5,441,399, built up mainly from health-insurance costs that ran over budget every year from FY2019 through FY2023. The state rejected the district's FY2026 budget over the resulting shortfall, and in February 2026 the board agreed to a Borough repayment plan: interest-only in year one, then roughly $1.9 million a year for three more years, paid off by mid-2029.

Why it matters to families

Almost $2 million a year in debt payments comes directly out of money that would otherwise pay for teachers, programs, and buildings, on top of the budget cuts, layoffs, and school closures the district was already making because of falling enrollment.

The evidence

The December 3, 2025 audit-results memo to the board states a '$5.4 million liability owed to the Borough' driven by 'a year of unusually high health insurance costs' and prior-year deficits. The February 28, 2026 Memorandum of Agreement between the district and Borough sets out the recoupment framework, and a July 17, 2026 superintendent's report to the board shows the finalized repayment schedule: $163,242 in FY2027 (interest only), then $1,926,289 in FY2028 and FY2029, and $1,926,609 in FY2030.

The source