FRANKFORT — As many as 14 school districts are faced with the inability to pay their bills by the end of the school year and some Kentucky lawmakers say they’re only a harbinger of things to come.
The Kentucky House Friday approved a bill which would use $7 million to fund for the first time the Emergency Revolving School Loan Fund, which originally was intended to help districts with capital needs. The money will come from excess statewide SEEK funds which weren’t expended due to smaller than projected enrollment.
House Bill 141, sponsored by House Education Committee Chair Rep. John “Bam” Carney, R-Campbellsville, would allow the department of education to extend interest free loans of up to $500,000 to school districts over a five-year period to cover operational costs.
The school districts’ financial woes are the result of declining coal severance taxes, declining populations and closures of major local employers, Carney said, and not from financial mismanagement.
“I truly believe these districts are trying to be frugal,” Carney told his colleagues before the bill passed 85-2.
Most of the districts are in eastern Kentucky, which has seen its coal economy tank along with the coal industry. Others are in the western Kentucky coal fields.
Fairview Independent, in Boyd County, suffers from lost revenues after the closure of the A.K. Steel Plant which laid off around 600 workers.
Rep. John Blanton, R-Salyersville, represents a district with multiple financially stressed school districts. He said Knott County Schools lost $1.2 million in coal severance tax revenue in mid-year while Pike County lost $3 million over the past two years.
Without help, Blanton said, Knott County will have to close its school doors in April: “Can you imagine allowing one of our public school systems to shut its doors?”
Carney conceded his measure is only a “band-aid, a short-term solution to a long-term problem.” The state’s basic funding formula for schools has been frozen for years even as money for many support services has been reduced. Meanwhile, enrollment has grown and fixed costs have increased.
Yet, as several Democratic lawmakers warned Friday during the debate, Gov. Matt Bevin’s proposed budget will cut funding for student transportation while freezing the SEEK formula at a time school districts will be asked to contribute more to the teachers’ retirement system.
Rep. Rick Rand, D-Bedford, said Carney’s bill is a warning “for what’s coming down the road. If we pass the budget as proposed by the governor, then we are going to see a lot of districts coming back for a loan.”
Rep. James Kay, D-Versailles, said the governor’s budget will also “push the financial obligation down to the local level” with cuts to transportation while “we are trying to dismantle school funding.”
But it wasn’t just Democrats who seem to recognize the need to come up with more money for schools.
“We need to continue the discussion (about school funding) for the future,” said Rep. James Tipton, R-Taylorsville.
Blanton agreed: “Let’s be bold, let’s tackle tax reform so we can move forward and to the things we need to do.”
Bevin has called for tax reform, perhaps in a special session, but House Speaker Pro Tem David Osborne, R-Prospect, said again this week there is no appetite to increase taxes in the House — at least in the regular session.
Others raised the specter of consolidating districts. Rep. Lynn Bechler, R-Marion, while offering a floor amendment which would have restricted the number of loans a district could receive, said consolidation could provide efficiency and save money. (The amendment failed.)
Rep. Brian Linder, R-Dry Ridge, a school finance officer from northern Kentucky, said some independent districts are too small and inefficient and should merge with county districts.
Others asked how the districts, already in financial stress, can repay the loans. Carney again conceded the bill offers a temporary, emergency solution but said the department of education is working with the districts to manage their budgets.
According to the Kentucky Department of Education, there are 14 such school districts at the moment, though a spokeswoman cautioned some may be removed before the end of the school year.
All but two are in coal-producing counties: Bell, Breathitt, Floyd, Harlan, Hopkins, Knott, Leslie, Letcher, Martin, Muhlenberg, Ohio, Perry, Pike and Union county school districts. The other two are Fairview Independent and Fulton County.
The measure now goes to the Senate for action.
Ronnie Ellis writes for CNHI News Service and is based in Frankfort. Reach him at email@example.com. Follow him on Twitter @cnhifrankfort.