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School funds could reduce state deficit

Matter-Eater Lad

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FRANKFORT — Kentucky lawmakers might consider dipping into local school districts' contingency funds to help balance the 2010-12 state budget, according to House Speaker Greg Stumbo.


Stumbo, a Prestonsburg Democrat, told The Courier-Journal in an interview that he has discussed the issue with Gov. Steve Beshear, who did not indicate his position.


"We do have a bunch of money that the schools have saved in their budgets, their 'Rainy Day' funds," Stumbo said. "And there's a pretty good sum of money there which will help us get through."


Various estimates say the funds contain hundreds of millions of dollars.


Beshear told the Herald-Leader on Saturday night that he will look at every option but has made no decision on what to do about the budget.


School officials say they are strongly opposed to the idea because they need those funds to balance their own budgets during tight economic times.


A preliminary state revenue forecast last week predicted a $161 million shortfall for the current fiscal year, which ends June 30. The outlook looks worse for 2010-12.


Brad Hughes, spokesman for the Kentucky School Boards Association, said any effort to tap the contingency funds would be unfair to districts that have prudently saved more. He said such a move could be illegal because contingency funds include money raised with local taxes.


"But the most obvious concern of school districts is what happens if they get hit in the middle of the year with something like a major heating and cooling problem or something like that that could cost $50,000 to $100,000," Hughes said.


Lisa Gross, spokeswoman for the Kentucky Department of Education, said state law requires districts to maintain contingency funds of at least 2 percent of their annual budgets and encourages a contingency of 5 percent.


She said all the local school districts combined carried a balance of $751 million into the fiscal year that began July 1, but only part of that represented what is within their contingency funds. She said she did not know the balance of such funds.


Tom Shelton, superintendent of the Daviess County school system, has studied the issue and estimated that the contingency funds of all districts total $300 million to $400 million.


Mary Lassiter, the state budget director who also is secretary of Beshear's executive cabinet, said Friday she does not believe school contingency funds have ever been tapped in a state budget crisis.


"Clearly it's going to be a very, very difficult budget," Lassiter said.


Senate President David Williams, R-Burkesville, did not respond to requests to discuss the state's budget outlook.


Bob Leeper, a Paducah Independent who chairs the Senate budget committee, said he does not believe the committee has ever considered the matter. He said he would need more information before commenting.


The predicted $161 million gap for the fiscal year came on top of one that totaled nearly $1 billion. The legislature dealt with during a special session in January, largely by using federal stimulus funds.


The outlook worsens in the 2010-12 budget, when the stimulus money goes away.


Both Stumbo and Beshear said they do not believe taxes should be increased during the current recession, and both said school funding will be the top priority in any decisions to balance budgets.


Stumbo said tapping district contingency funds would not be necessary this fiscal year. But given the dismal budget outlook, the move "is on the table" when the 2010-12 budget is considered.


He noted the process of trying to apply reserve funds of districts to ease the state budget gap would not be simple. "Some districts have designated uses for (part of their contingency funds). So we'll just have to literally go through that district-by-district," he said.




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