The U.S. Department of Education has determined that Alaska failed the federal “disparity test,” a benchmark ensuring equitable distribution of education funding across school districts. This failure puts at risk tens of millions of dollars in federal Impact Aid that the state has traditionally counted toward its own education funding obligations.
What is the Department’s Disparity Test?
The disparity test assesses whether a state’s per-pupil funding disparities among its school districts exceed 25%. Passing this test allows states to consider Federal Impact Aid—funds provided to compensate for tax-exempt federal and tribal lands—as part of their own contribution to education funding.
Alaska’s failure indicates that the funding gap between its highest- and lowest-funded districts surpasses this threshold.
What does it mean for Alaska’s education budget?
Failing the disparity test means Alaska cannot count approximately $89 million in federal Impact Aid toward its education funding requirements for the upcoming fiscal year. Consequently, the state must either increase its own funding to cover this shortfall or risk non-compliance with federal standards.
What is Alaska’s response?
In a letter dated May 16, 2025, the U.S. Department of Education informed Alaska Education Commissioner Deena Bishop of the state’s failure. The state has 60 days to request a hearing to contest the findings. Commissioner Bishop indicated that the state is evaluating its options moving forward.
Any proposed regulation changes and legislative actions taken?
To address funding disparities, Alaska’s Department of Education and Early Development (DEED) is considering regulations that would further limit local governments’ contributions to school districts. However, this proposal has met resistance. Representative Andi Story (D-Juneau) introduced House Bill 212, aiming to allow local funding for non-instructional services—such as transportation and extracurricular activities—to remain outside the state’s contribution cap.
Did this happen before?
This is not the first time Alaska has faced issues with the disparity test. In 2021, the state initially failed but successfully appealed by obtaining an exemption to exclude student transportation funding from the calculations. The current failure suggests that disparities persist despite previous adjustments.
Broader Impacts on Alaska’s Education System?
The state’s failure to meet federal funding equity standards compounds existing challenges in Alaska’s education system, including teacher shortages, aging infrastructure, and debates over the adequacy of the state’s per-student funding formula. Without resolution, the funding shortfall could lead to program cuts, staff reductions, and increased class sizes, particularly in underfunded districts.