Kentucky school districts have started getting bills over the past couple of weeks to help offset insurance claims against the failed Kentucky School Boards Insurance Trust (KSBIT).
The trust announced last year that it would disband due to financial woes and school districts would have to pay off outstanding claims of about $60 million. The trust offered insurance for workers’ compensation, property and liability claims.
Having received their bill, which was court-mandated, members of the Harlan Independent Board of Education met recently and began making plans for payment.
Harlan Independent Schools Superintendent C.D. Morton told board members the district’s total assessment is $258,728. He said the workers compensation part of that is $215,101 and the property and liability assessment is $43, 627.
“We have several options to pay that,” said Morton. “One of which is not to pay it. Another option is to pay 25 percent of that up front and then you get an interest free option to pay the remaining balance over the next six years. On the property and liability, you have to pay 40 percent up front and then you have only two years to pay the balance of that. You can see what that looks like for us. That would be $71, 226 up front and then $39,000 for the next two years and then $26,888 for the next four years. Those are real dollars — general fund dollars…”
Morton said there is another option of financing through KSBIT. He said the district usually finances their school buses through KSBIT.
“Generally, they have a really good program that helps school district, but in this case you just did a 10-year finance for $258,000,” said Morton.
If they finance through KSBIT, Morton said, “You don’t pay anything the first year and all total, interest included, would bring you up to $319,000. That is a little more than $60,000 in interest on a 10-year note. If you jump to a 15-year option, it would be about $118,000 in interest over a 15-year period.”
Morton said he is still looking at the budget and will come back to the board with a recommendation in the next few days. He said if the district is going to finance this, KSBIT must be notified by the end of August.
“This is a fiasco,” said board chairman Joe Meadors. “I’d like to know where the Department of Insurance was when all of this mess was occurring. They swoop in at the last minute and say ‘whoops,’ a big unfunded liability. Somebody should have had their finger on that months, perhaps years, before it got to this point. It would have saved a lot of heartache — a lot of financial loss, especially for small districts.”
Morton added this “hurts his stomach” to think about spending $100,000 in interest to finance this.
“I think this is unfortunate that there was $50 million in debt out there that somebody was not watching over,” said Morton. “Our students, of all school districts that have to pay this, are the ones who suffer. This would never work in your personal life — normal circumstances. It’s just unfortunate that school districts are being ask to pony up this kind of money.”
Morton said the “door has not been shut on further assessment,” but his hope is “there won’t be.”
Nola Sizemore may be reached at 606-573-4510 or on Twitter @Nola_hde