Money matters: MCPS must help foot $60 million bill after insurance trust dissolves

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By Stevie Lowery

The Marion County Board of Education spent more than an hour discussing the district’s finances during its regular monthly meeting Tuesday, Jan. 22. While the outlook isn’t “doom and gloom,” according to District Finance Officer Lisa Caldwell, it certainly isn’t pleasant. That’s primarily because of the recent news that the Kentucky School Board Insurance Trust (KSBIT) is dissolving in June. Marion County has been insured by KSBIT since 1978, and it, along with many other Kentucky school districts, will be facing a bill of $50 million to $60 million to pay off the trust’s deficit.

The Kentucky School Board Insurance Trust (KSBIT) has provided low-cost insurance to many of Kentucky's school districts for items such as workers' compensation and property. The trust will be dissolved in June or July, and a bond will be issued to allow school districts to pay off the deficit over 20 years. The exact amount owed by each school district is not yet known because payments will be based on an intricate formula that considers past claims and the number of years in the program.

It’s bad news and bad timing for most school districts in the state, which have all experienced continuous cuts in state and federal funding. But, according to Caldwell, the district can weather this storm.

“We have built our contingency to weather these types of unexpected items,” she said.

For the first time since 1978, the Marion County school district will have to find workers' comp and property insurance on the private market. Marion County Superintendent Dr. Chuck Hamilton said he is anticipating the cost will be 30 to 35 percent higher than what the district has been paying KSBIT.

On a related note, Hamilton said he has been asked to fill a six-month term on the KSBIT board, but didn’t feel comfortable doing it with the current situation.

“Quite frankly, here is how I feel about it. I feel an obligation to help all of the schools involved with this. But I don't know where this will end up. It could end up in some legal ramifications,” he said. “I'm not real comfortable doing that... It's probably not a wagon we want to hitch our horse to at this time.”


Budget work session

The Marion County Board of Education began reviewing the district’s 2013-14 draft budget last week, which is nearly $28 million. The board spent a great deal of its time discussing school activity funds, which are not controlled by the board.

Activity funds are monies each individual school has raised through fundraising, ticket sales, concession sales, student dues or fees, donations, etc. Caldwell said activity funds are governed by “RedBook,” which are the Kentucky Department of Education’s accounting procedures. Caldwell also said each school’s activity fund is closely monitored, and all school activity funds are audited by an outside auditor.

“I hate to bring up a sore subject. But I need to so that I understand,” Board Vice Chairman Ed Hacker said. “There was a sports team that wanted to take a trip and the board was told that the funds would be raised. It ended up they were short $2,300. What fund did that come out of?”

The trip Hacker is referring to is the trip the Lady Knights basketball team took to Arizona last year for the Nike Tournament of Champions. According to Caldwell, the remaining funds the team wasn’t able to raise for the trip came out of the school’s activity fund.

“They chose not to violate the RedBook violations but they chose to violate what they told us they were going to do…” Board Member Mike Cecil said. “I just think there is culture there on the way we handle our funds in some of our buildings.”

According to Caldwell, the principals are ultimately responsible for their activity funds. If the proper procedures aren’t followed at a particular school, that school will be written up in the audit report.

“In the end, it comes back to me,” Dr. Hamilton said. “I'll be the one held responsible for it.”

Board Chairman Michael Mullins said the reason the board was asking so many questions regarding school activity funds was for them to better understand.

“We are not in any way insinuating that you all are not taking care of the money or spending it correctly,” he said. “I just want you all to know that I am very serious about taking a hands on approach with the budget this year. We're going to learn the ins and outs of it... we should know exactly where every penny is going. We've been elected as stewards of the money, and that's what we're going to do.”

Cecil echoed Mullins’ sentiments.

“We want to redirect our focus on academics,” Cecil said. “If that means going through the budget item by item by item... then that's what we need to do.”

The board ended its discussion about the district’s finances at approximately 7:04 p.m., so that it could go into executive session to complete the superintendent’s mid-year formative evaluation. The board’s executive session lasted for more than an hour. The board resumed open session at 8:22 p.m., and immediately adjourned the meeting.