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June 2012
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UNFUNDED School raises may show up in taxes

Politicians are nothing if not crafty. An example is a tax increase coming to a community near you that was really engineered by the governor and legislators, but will be blamed by most taxpayers on local school boards.

We are referring to a part of the recently adopted biennial state budget that mandates a three percent pay increase for the state's teachers over the next two years. Don't get us wrong - we don't begrudge the raises, which are not unreasonable. But it was a pretty slick deal for legislators, because they handed out the raises and left it to local school districts to figure out how to pay for them.

And this time around, in many cities and counties, paying for it may require an increase in school property tax rates. That's because a number of districts are being hit with the unfunded mandate for raises at the same time they face stout insurance assessments resulting from their participation in the failed Kentucky School Boards Insurance Trust.

Many local school districts had workers compensation and liability insurance through the KSBIT. The fund failed and shut down in June of last year, leaving participating districts on the hook for $60 million in liabilities. McCracken County was hit with a $122,032 assessment for the workers compensation portion of the trust alone, and Paducah Independent Schools was socked with a $210,834 bill for the same.

The damage was even worse in some other counties in the region. Carlisle County, a relatively small system, was assessed $234,275 for worker's compensation expense and $56,671 for property and liability claims. Graves County was hit with a $366,568 bill for workers comp and $225,549 for liability claims.

It's not chump change for any of the region's school districts and the combination of the insurance hits and the mandate for pay increases from the Legislature makes tax hikes in some of the districts inevitable.

As Paducah Public Schools Superintendent Donald Shively puts it: "The KSBIT assessment and the annual state-mandated 1 and 2 percent pay raises, as well as our contributions to state retirement, all go into the decisions our board makes in regard to local tax levies. If there's an adjustment in the local tax levy, I just hope our community understands what's going on economically for our schools at this time."

We suspect many if not most of the region's school districts are in similar straits. Some are talking about the potential of personnel cuts to deal with the double whammy of assessments and the pay raise mandate, but in the end, many districts are already pretty lean, and turning to the taxpayers may ultimately be required.

And so it is that legislators hand out raises that could well require a tax increase, but the tax is local, which means a different group of politicians - school boards - take the heat.

It will be something to keep an eye on as school boards re-set their tax rates in the months ahead. We just hope people will place blame where blame is due if the burden placed on the school districts results in unpleasant surprises when the property tax bills come in.

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