by Mike James

Virtually every school district in Kentucky will have to pay a share in erasing the deficit in the Kentucky School Boards Insurance Trust, which is closing up shop at the end of June, according to documents on a website set up to guide administrators through the process.

School officials don’t yet know how much they will pay, but according to the documents each district will be assessed an amount based on its years of participation, amount paid in claims in the past, and a projection of the amount likely to be paid before all current claims are resolved. Since all districts have participated at some time, all of them will have to make payments.

The trust, usually referred to by its initials, KSBIT, was created in 1978 to provide coverage under self-insured pools that allowed districts to combine resources and share risk.

KSBIT’s workers’ compensation and property and liability pools are in deficit because its losses exceed what it will need claims in the two pools.

Any district that participated during the years considered deficit years will have to pay a share.

The trust puts much of the blame on lifetime medical obligations of workers’ compensation and with some districts leaving the program during years when they could get cheaper coverage elsewhere.

The trust won’t know the total assessment amount until it finds out the cost of transferring its liabilities to another insurer, but estimates it will be between $50 million and $60 million.

It is telling districts they will receive “good-faith estimates” within the next few weeks.

Districts will get to choose whether to pay in a lump sum or over 20 years.

The 20-year option will make the difference between distress and catastrophe, according to at least one school administrator.

“It would be devastating to the districts of Kentucky if we can’t go that route,” said Ernie Sharp, finance director for Fairview schools.

Based on discussions he has had with his insurance agent, he estimates Fairview’s bill will be about $180,000.

The trust will stop taking new or renewal business after January, and current members will receive uninterrupted coverage through June. By then, districts will have to find new carriers.

That shouldn’t be too difficult — administrators in Northeast Kentucky report that insurance agents have been calling them since the state announced the move on Monday.

More problematic will be making sure replacement coverage is adequate, said Greenup County business manager Scott Burchett.

One reason for insuring through the trust was that it was operated under the aegis of the Kentucky School Boards Association, and thus knew more about the specific needs of public schools, he said. 

“Now we will have to be a bit more vigilant to make sure all the coverages are what we need,” he said.

Only time will tell whether replacement policies will cost more, he said.