FRANKFORT, Ky. — The Kentucky House voted Friday to pump millions of dollars into an emergency loan fund that could be tapped by school districts struggling to meet expenses due to sagging revenues.
The proposal is a response to the financial woes in several school districts in the coal-producing regions of eastern and western Kentucky. The districts are struggling to pay their bills due to plummeting tax collections, largely tied to the declining coal sector.
“They are making every cut that they can until they can’t cut any longer,” said Republican Rep. John Blanton, whose eastern Kentucky district is among those hard hit by coal’s struggles.
House members voted 85-2 after a lengthy debate to send the measure to the Senate. The vote came amid a flurry of action by the House on Friday, accelerating what has generally been a slower pace as this year’s session approaches the halfway point next week.
The measure would put $7 million into the emergency loan program. The money would be drawn from excess funds in the state’s main funding formula for public education.
State education officials would administer the loan program. The no-interest loans would be limited to $500,000 and would have to be repaid within five years.
The loan program already exists but has not been funded, said Rep. John “Bam” Carney, the bill’s lead sponsor. The program was created to help school districts hit by natural disasters in case insurance policies didn’t cover all the recovery expenses. But now lawmakers want to make it available for districts in need of an influx of cash to meet payroll and other expenses.
Most districts at risk of potentially needing the loans have suffered from lower enrollment and sharp drops in property-tax collections and revenue from taxes on unmined coal.
Blanton noted that one school system suffered a $1.2 million loss due to declining revenues from unmined coal. But the hardships are being felt in many other districts, he said.
Some lawmakers said the potential need for emergency loans shows that the state is underfunding public education. School funding will be a key issue later in the session when lawmakers craft a state budget for the next two years.
“This should be a wake-up call for us today as we move through the rest of this session, as we consider this budget,” said Democratic Rep. Rick Rand of Bedford.
Rep. Wilson Stone, a Democrat from Scottsville, warned that “if we don’t change some things in the commonwealth,” more school districts will need even larger amounts of emergency assistance.
Under the bill, state education officials would report to lawmakers each year on the loan fund’s status. The measure carries an emergency clause, which means it would go into effect immediately if signed by the governor. That would make the money available in case the most hard-pressed districts need the loans to get through the current fiscal year.
Carney, a Republican from Campbellsville, said the hope is that any districts needing loans would have enough time to restructure their operations, enabling them to repay the money within five years.
But acknowledging the hardships some districts are facing, he added: “I cannot stand before you today and say that every one of these districts would be able to pay back every penny.”
The legislation is House Bill 141.