City, county school districts agree to pay thousands in KSBIT assessments
By JIM BROOKS
Nelson County Gazette / WBRT Radio
Tim Hockensmith, chief operating officer of Nelson County Schools, discusses the KSBIT assessment at an early board of education meeting.
Wednesday, Aug. 20, 2014, 9 p.m. — In an era of tight budgets and funding cutbacks, both public school districts in Nelson County have agreed to pay thousands of dollars in assessments to resolve the financial deficits of the now-defunct Kentucky School Board Insurance Trust (KSBIT)
KSBIT was a program created to provide low-cost insurance coverage to state school boards and educational entities. It was created in 1978 as a non-profit self-insurance fund that allowed school boards to combine their resources with other districts while sharing the risk.
By 2007, KSBIT was running a deficit; in 2010, the Kentucky League of Cities (KLC) took over administration of the KSBIT funds. When KLC was unable to turn the deficit condition around, the Kentucky Department of Insurance took control of KSBIT’s insurance programs and has worked since to eliminate the deficit by assessing KSBIT’s past participants with their share of the deficit.
The assessments given to the state’s school districts vary widely, but the impact is extensive — the Lexington Herald-Leader reported that since 1990, all of the state’s 174 school districts have been member of KSBIT at one time or another.
The assessments are based on a formula that considers past claims, premiums, and the number of years the districts participated in the KSBIT insurance program. The assessments include school districts and other education-related entities that were in the workers’ compensation fund from 1990 to 2013, and those in the property and liability fund from 2007 to 2013.
The amounts districts must pay covers a wide range; Fayette County’s $3.1 million assessment is the most of any district in the state. Lincoln County’s assessment was $355,000; Fleming County was assessed $351,803.
PAYMENT OPTIONS. School boards across the state have three payment options. The first is to pay the entire assessment in one lump sum; the second is to finance payment of the assessment with a bond sale. The third option is to spread the payments out — interest-free — over a specified number of years.
BARDSTOWN INDEPENDENT SCHOOLS. The Bardstown Independent Schools board of education approved its plan to Tuesday to pay its KSBIT assessment of $80,254.
Superintendent Brent Hosclaw noted that the original assessment was negotiated down from an original figure of $145,000. The district has already paid an initial payment of $25,089, which was due by the end of August. The board agreed to a six-year interest-free plan that will spread payment of the balance over five years in annual payments.
The Bardstown Independent School District was a member of KSBIT from 1990 through 2004 with the exception of 1995, Holsclaw explained.
NELSON COUNTY SCHOOLS. The Nelson County Board of Education also approved payment of its KSBIT assessment at its regular meeting on Tuesday.
Chief Operating Office Tim Hockensmith recommended the board utilize the interest-free payment plan to pay its $160,285 KSBIT assessment. An initial payment of about $40,000 is due by the end of this month, Hockensmith said, and the balance will be spread out in an additional six annual payments of about $20,000.
The district has not participated in KSBIT insurance programs for more than 10 years, which reduced the assessment, Hockensmith said.
Board Chairman Frank Hall expressed his displeasure with the management of the KSBIT insurance funds.
“We had insurance coverage some 15 years ago and now we’re still paying on it,” he said. “It’s sad that we’re not able to use that money for the children’s benefit rather than bailing out somebody.”
FUTURE ASSESSMENTS? The state’s school districts are also keeping an eye on a court case that may mean an additional KSBIT-related assessment.
In November 2013, the Kentucky League of Cities Insurance Services filed a lawsuit against the state Department of Insurance, saying it was owed $8 million in connection with its management of KSBIT and the state’s takeover of the insurance funds. If KLC prevails in the lawsuit, the state’s school districts may again find themselves faced with an assessment to cover KSBIT losses.
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