LOUISVILLE — The Kentucky Board of Education on Wednesday rescued a small southern school district from the brink of closure, voting to allow emergency funds to be used to pay the bills in what members called an unprecedented move by the state.
Under the agreement, the state Department of Education will likely lend the Monticello Independent school district at least $1 million to keep its three schools open until the end of the school year. The interest-free loan will come out of the state's rainy day fund and will have to be repaid within five years, said associate commissioner Hiren Desai.
Desai said without the help, the district would not have been able to make payroll Feb. 28.
"Quite frankly, time is of the essence," Desai told members at a special meeting in Frankfort.
The department had never before advanced money for a state public school district to keep it from shutting down, Desai said. He added that without the financial help, the Monticello district would have defaulted on debt service payments, which could threaten every district in Kentucky.
"If one district defaulted," he said, "it could have an unpredictable impact on the credit rating for other school districts."
Financial projections showed the 762-student district would have a deficit of $1.1 million by the end of the fiscal year on June 30.
The board had voted in December to put the district under a designation of "state assistance," and officials were already working with Monticello board members to try to address financial problems.
But Commissioner of Education Terry Holliday recommended the state move from assistance to management when it quickly became clear the problems were worse than first thought. Desai said state officials thought the district was facing a deficit of about $200,000 for the rest of the fiscal year, but that number exploded the more they looked into the district's accounts.
Among the district's troubles are high transportation costs as well as construction projects that have since been halted.
One question not answered during the meeting was what the future holds for the district, one of 54 independent districts in Kentucky. There are a total of 174 public school districts in the state, most of them county districts.
Independent districts often get their students from within the boundaries of a city within a larger county, said KDE spokeswoman Nancy Rodriguez. There is no difference in the way the different types of districts operate, she said.
The Monticello district is located in Wayne County.
Desai warned that state officials have had "trouble finding a plan that is self-sustaining" for the district. He said while financial holes can be plugged in the short-term, if a long-term solution cannot be found, the district might have to be consolidated into the county system.
"By next school year we'll have to have those conversations and make a decision on that," he said, adding that independent districts across Kentucky are facing similar financial issues as enrollments decline.
Emotional representatives from the Monticello district said they welcomed the state's help.
"We pledge to listen," said Monticello board member Nancy Duncan, her voice shaking, "learn from the past and do all we can do to preserve this school district for current and future students."
Bill Denney, another board member, said the district and the community are rallying behind the schools for the sake of the students.
"They may not all be 'A' students, but they are 'A' kids," he said.