The failure of the Kentucky School Boards Insurance Trust is expected to soon have serious financial consequences for the public school districts in Harlan County.
According to state and local school officials, districts not only have to look at financing approximately $60 million worth of debt to cover the trust’s losses, many must also seek new options for insurance coverage in worker’s compensation and liability that will most likely include much higher premium costs.
During Tuesday’s special session of the Harlan County Board of Education, Chairman Gary Farmer and Superintendent T. Michael Howard shared recent communication from the trust outlining the estimates of the total debt and financing options with the rest of the board.
The Harlan County School District is facing an estimated debt of over half a million dollars. The district would either have to pay the total immediately or accept a financing plan that would cost between $36,000 and $60,000 a year, depending upon which option (10 or 20 years) is selected.
Farmer said he was questioning the estimated amount because the county district only participated in this insurance plan from 1990-1997. He was very concerned the trust was “now going back” and assessing districts for the trust’s failure to manage its accounts correctly.
“I don’t know why they can’t go through bankruptcy like every other business can,” he said.
The Kentucky Valley Educational Cooperative in Hazard is assisting area districts with this issue, Farmer noted, and have engaged an attorney to represent the interests of school districts. Board Attorney Johnnie Turner was also advised to look closely into the issue.
For the past 16 years, the county district has remained self-insured for worker’s compensation and liability, Farmer said, and addressing the financing requirements for this new debt on a policy that old may affect their ability to manage their current policy.
Officials at the Harlan Independent Schools had much the same reaction. Chairman Joe Meadors acknowledged, “There is no way we can pay what they say we owe in one year.” Unlike the county, the city has remained in the KSBIT program since joining sometime in the 1990s, he said. The city’s estimated debt is just under $173,000.
Districts have had these estimates for less than two weeks, he noted. While they are aware of the potential debt, Meadors said, all they can do right now is discuss it while they wait for final numbers as the whole process plays itself out across the state.
“What we’ve had is the worst-case scenario so far,” said David Johnson, superintendent of the city school district.
Exact figures should be available later in the spring, Johnson noted, and then districts can make decisions on how they will address the debt issue.
Of more immediate concern, he added, is for the city district to obtain a policy to cover the coming school year, probably with greatly increased premium costs.
“In the midst of what we’ve all been going through lately, this is certainly not welcome news,” Johnson said.