Local and state education officials have begun discussions about merging the Monticello Independent school district and its 850 students into the Wayne County school system.
The Monticello board voted Dec. 17 to seek state management for the district founded in 1905. That decision means the city school district will "begin the process of merging with Wayne County schools" for the 2013-14 school year, according to the Monticello district's website.
John Dalton, superintendent of the county school system, said Wednesday his understanding is that the plan is to close the Monticello district after this school year.
"I assume that's what we'll work toward," he said.
Dalton and the interim Monticello superintendent, John Hurt, met Wednesday for the first time with state Department of Education officials and discussed the city district's finances.
Hurt confirmed preliminary discussions are under way that could lead to a merger. It's too soon to say when the merger might take place, he said.
Jerry Lair, chairman of the Monticello school board, said the board's Dec. 17 vote was to seek state management of the system, not to merge with the county system, which has 2,700 students.
However, the state Department of Education wants the merger, and that is likely what will happen, Lair said.
"The Monticello board does not want to do that, but we have no choice," Lair said.
The district's finances had declined to the point it wouldn't have been able to make payroll in March without state management, Lair said.
If the Kentucky Board of Education approves putting Monticello under state management, the district would get an infusion of cash.
The state board will consider the issue at its February meeting.
The city school board's December vote to seek state management was unexpected, Dalton said.
"It was a surprise to us, I guess the urgency of it," he said.
There are many issues to work out in any potential merger of the school systems, Dalton said, such as what will happen to the Monticello district's employees, buildings and debt.
Both Dalton and the Monticello schools' website said Monticello students would have access to more academic and extracurricular opportunities in the larger county district.
There are two approaches to consolidating the districts, according to information from Kevin C. Brown, associate commissioner and general counsel for the state education department.
One is for the Monticello district's board to vote to merge.
In that case, the county school board would have to agree. Dalton said the Wayne County board won't consider the issue until the state school board decides whether to take over day-to-day management of the Monticello schools. If the county board voted no, voters in the two districts would then decide whether to combine the districts.
The second possibility would be for the Monticello district to tell state education Commissioner Terry Holliday it doesn't have the money to operate, which would lead to the state school board ordering a merger.
Officials from the Department of Education found a range of problems in the Monticello district last November after Holliday ordered a management audit.
For example, there was no evidence of adequate financial controls and the bank statement hadn't been reconciled in 28 months, the audit found.
There had been a decline of $1.4 million in the school district's unrestricted fund over the prior two years, according to the audit.
One reason for the financial decline was that the district bought and improved fields for soccer, baseball and softball, without getting required state approval, auditors found.
Another was that the district had lost students — which meant a drop in funding — and had lost grants, but did not make cuts required to stop the financial slide, the audit said. There was no evidence staffing decisions were based on the district's needs or student achievement, the audit said.
The district was "severely overstaffed" in some areas, but understaffed in others, according to the audit.
Decisions to merge school districts are rare in Kentucky.
In 2006, the Harrodsburg and Mercer County districts merged, and the Providence independent district voted to consolidate with the Webster County schools.
The Maysville school system voted in 1990 to merge with the Mason County school system.
Dalton, the Wayne County superintendent, said no one takes any pleasure in the difficulties facing the city school system, but that the county district stands ready to serve all students.
He and Hurt said their primary goal is to serve students.
"We're all looking at what's best for the children of the county," Hurt said.
Bill Estep: (606) 678-4655. Twitter: @billestep1