HAZARD — School districts across the state are facing, in some cases, crippling payments to a group insurance trust that has recently declared its planned dissolution in June due to massive deficits.
Jody Maggard, financial officer for the Perry County School District, announced Thursday during a board meeting the projected payment the district will have to make to KSBIT, around $450,000.
“I wish I had better news for that, but I don’t,” Maggard said.
KSBIT, the Kentucky School Board Insurance Trust, announced in January that it had accumulated a significant increase in the deficits — expected to be from $50 million to $60 million — for the worker’s compensation self-insurance pool and the liability self-insurance pool. These deficits have led the trust to no longer accept new or renewal business since the beginning of the year.
In order to eliminate the deficit, KSBIT was assessed by the Kentucky Department of Insurance which set up a plan to have all previous and currently insured members make a payment based on the premiums paid, the number of years of participation by each member during the years generating a deficit, and the projected cost of claims in each pool by each member, as of June 30, 2012.
According to a press release from the trust, KSBIT was created in 1978 “to provide coverage through nonprofit self-insured pools authorized under Kentucky law. These pools allow school districts, colleges and universities to combine their resources while sharing the risks.”
“I still can’t get over how we have to do that. They [KSBIT] don’t even cover us; I mean, we’re paying somebody else,” board member Jerry Stacy said.
Maggard said the district has not been involved with KSBIT since 2007, when it signed with Curneal and Hignite Insurance. However, because it incurred costs during the period KSBIT is said to have started losing money, the district is legally accountable for the amount being asked of it.
“I’m not advocating for them [KSBIT], nobody in this room wants to give them $450,000, not one of the other 173 different school districts in the state of Kentucky wants to pay them any money,” Maggard said.
The Hazard Independent School District is also facing a large payment to KSBIT. At its school board meeting this week, Superintendent Sandra Johnson told the board the estimated payment for the district, released by the Kentucky Department of Insurance after its assessment of KSBIT, was $136,918.
The city school district has not been a member of KSBIT for the last five years, but could be expected to pay this amount in either one lump sum or in payments ranging for either 10 or 20 years, the options given to all districts facing this payment.
Johnson said some districts are facing payments of over $1 million.
According to the KSBIT calculation, the Knott County School District is expected to pay $1,096,677, Letcher County schools are expected to pay $599,653, and the Breathitt County School District may have to pay $744,735. These estimates are based upon the $60 million estimated deficit.
“There might be lawsuits go over, but I’m not saying that there’s not going to be. There might be changes in numbers, I’m not saying that there’s not going to be,” Maggard said. “But this is a reality, and it is going to happen.”