Glasgow Daily Times, Glasgow, KY

January 15, 2013

Kentucky school districts get added deficit burden

By RONNIE ELLIS
Glasgow Daily Times

FRANKFORT — Already facing stagnant state funding amid growing enrollment and costs, Kentucky’s school districts learned Monday they are now looking at another $50 to $60 million to pay off a long-term deficit in the Kentucky School Boards Insurance Trust.

KSBIT operated a risk pool, low-cost insurance program to cover workmen’s compensation, property and liability insurance and other services to member districts. In 2010, the Kentucky League of Cities took over administration of the fund and put in $8 million to cover the deficits accrued to that time.

But that apparently wasn’t enough.

Kentucky League of Cities Executive Director Jonathan Steiner said the liabilities and deficits go back to 1990. KLC tried to cut costs, reduced fees to agents and charged higher premiums. But actuaries for KLC determined what was thought to be a $6 million deficit in 2010 was actually $16 million. That has now grown to $28 million, Steiner said.

On Monday KSBIT sent an unsigned memo to school districts announcing its board’s decision to assess member districts — both current and past — between $50 million and $60 million to fund the deficit and costs of reinsuring its liabilities with a private firm, subject to approval by the Kentucky Department of Insurance.

KSBIT will no longer accept new or renewal business, but current participants will be covered through June 2013. After that, school districts will have to purchase coverage on the private market.

Assessments will vary between districts. A formula to be approved by the Kentucky Department of Insurance will consider what a district has paid in premiums, what claims a district has made on the funds and the number of years the district participated.

There are 174 districts in Kentucky, but not all of them participate in the two risk pools and others have participated for a time, but then withdrew. Claims vary between districts as well. For instance, one might owe a lifetime of workman’s compensation to a disabled 30-year-old employee while another owes the same claim, but for a 60-year-old employee.

At $50 million, the average assessment calculated on 174 districts would be $287,356. Individual assessments haven’t yet been calculated.

Bill Scott, executive director of the Kentucky School Boards Association, said assessments will range from “probably well under $10,000 at the bottom end, but at the top end there are certainly going to be districts that will exceed $1 million.”

For the full story, see the print or e-edition of Tuesday's Glasgow Daily Times.