Kentucky House budget committee approves loan fund for school districts in financial crisis
School districts could borrow up at $500,000, interest-free.
FRANKFORT, Ky. (WDRB) -- School districts across the state, especially in rural areas, are struggling to make ends meet. But 16 districts concentrated in eastern Kentucky are in crisis, their budgets in danger of running into the red.
Rep. Bam Carney (R-Campbellsville), chairman of the House Education Committee, testified that the districts are at risk of not being able to meet payroll by the end of the year
Carney’s bill, HB 141, which was approved by the House Budget Committee, would set up a $7 million loan pool. School districts in crisis could apply for zero interest loans of up to $500,000, which must be repaid within five years.
“We envision these loans having to go out for many of these districts this year, or there will be circumstances that schools will not be able to handle,” Carney said.
The 16 districts are in immediate danger primarily because of declining coal tax revenue, plummeting property values and taxpayers moving out.
“That is what is impacting this," Deputy Education Commissioner Robin Kinney said. "It's a loss of local revenue. It's not mismanagement."
The districts of concern are Bell County, Breathitt County., Fairview Independent, Floyd County, Fulton County, Harlan County, Hopkins County, Knott County, Leslie County, Letcher County, Martin County, Muhlenberg County, Ohio County, Perry County, Pike County and Union County.
Some lawmakers worry proposed budget cuts to education could cause similar school budget shortfalls to ripple across the state.
“We have to have some backbone this session," aid Rep. Jim Wayne (D-Louisville). "And that backbone requires that we vote for revenue increases, because this state is in a major, major crisis situation."
The budget committee approved the bill unanimously, but even supporters said it's only a short-term fix to a problem that could get worse.
“A lot of our school districts are operating on margins that are very thin," Carney said. "If one plant decided to leave the community, that could certainly put them in a desperate situation."
The next stop is the full House, where there may be an effort to turn the loan fund into a grant fund that districts would not have to repay.
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