FRANKFORT, Ky. — Kentucky lawmakers advanced a bill Tuesday to support an emergency loan fund touted as a way to potentially shore up a few school districts struggling to pay basic operations.

The loan program was touted as a short-term contingency to help districts hardest hit by shrinking tax collections, especially in the state’s coal-producing regions.

The measure would put $7 million into the loan program and expand access to it. The bill cleared the House Appropriations and Revenue Committee with bipartisan support.

Rep. John “Bam” Carney said the loan program already exists but wasn’t funded in the past. His bill comes as several school districts in eastern Kentucky — long dependent on coal-related revenues — have struggled to pay their bills due to plummeting tax collections as the coal industry declined. Fiscal problems have surfaced in a few western Kentucky districts as well.

“These are not districts who have been wasting money,” he said. “These are districts that are legitimately in difficult financial situations due to circumstances really outside of their control.”

Carney, chairman of the House Education Committee, said the loans could offer a “short-term answer to an immediate problem” for the most hard-pressed districts.

The bill appeared to have plenty of momentum as it headed toward the full House.

“I think it has to be a priority for the body as a whole … to make sure that these districts have the ability to complete the school year,” Acting House Speaker David Osborne told reporters.

State education officials would run the loan program. No-interest loans would be limited to $500,000 and would have to be repaid within five years. The bill would supply the loan program with $7 million in excess funds from the state’s main funding formula for public education.

The loan program initially was created as a way to help districts hit by natural disasters such as tornadoes in case insurance policies didn’t cover all the recovery expenses.

The bill would broaden access to include districts facing severe financial problems. It could also include districts feeling the loss of revenue when factories close.

The bill carries an emergency clause, which means it would go into effect immediately if signed by the governor. That would make the money available in case the most hard-pressed districts need the loans to get through the current fiscal year.

Carney, R-Campbellsville, said he’s worried the loan pool will be needed this year.

“We envision these loans having to go out … this year, or there’ll be circumstances that the schools will not be able to handle,” he told the committee.

Most of those districts generally have suffered from declines in enrollment, property tax collections and revenue from taxes on unmined coal.

More than a dozen districts, in the eastern and western Kentucky coalfields, have suffered big drops in tax collections on unmined coal, state education officials said.

Rep. Tim Couch, R-Hyden, said school district officials in his home county in eastern Kentucky have “cut all they can cut.”

“It is really comforting to hear that we’re trying to help some of these districts,” he said.

Rep. Jim Wayne, D-Louisville, said he’d prefer to distribute the money as grants that don’t have to be repaid, rather than as loans. He questioned how districts struggling to meet payroll in areas suffering from an “economic depression” would be able to repay the loans.

Another Democratic lawmaker, Rep. Kelly Flood of Lexington, said the potential need for loans points to a larger issue — the need for increased state support for public education as legislators work on the state’s next two-year budget.

“The most significant thing we can do is take tough votes and raise revenue for our public education system,” she said. “That is what we can do and ought to do this year.”


The legislation is House Bill 141.


Associated Press Writer Adam Beam in Frankfort contributed to this report.