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10-11 Executive Memo

KSBIT Unemployment Program provides efficient alternative for Kentucky’s public schools

By Bill Scott
KSBA Executive Director

Over the last three years both the Commonwealth of Kentucky and its public schools have experienced unprecedented financial challenges related to the state and national economies.

However, when it comes to the relative cost of unemployment benefits, the schools have fared much better than the state as a whole.

In January 2009, the Commonwealth of Kentucky borrowed approximately $948 million from the federal government to shore up the state’s unemployment insurance program and was recently required to make a $28 million interest payment on this loan. A missed payment would have resulted in a loss of approximately $600 million in federal tax credits to the state’s employers, which would have increased their contribution from $56 to $434 per employee – on top of the state’s unemployment tax rate, which was increased in 2010 to address the long-term viability of the unemployment program.

The great news for Kentucky schools is that as reimbursing employers, they are exempt from these increased costs.

Still, revenue losses, ever-increasing expenses and unfunded mandates have significantly impacted unemployment claims and costs back to school districts. In fact, total claims by Kentucky school districts in the last three years have increased from $5.2 million to $8.8 million. However, members of the Kentucky School Boards Insurance Trust’s unemployment service are required to pay for only actual benefit payments issued on their behalf, which means they will avoid increased tax liabilities related to the unfavorable economy and higher employer contribution assessments needed to replenish the state’s unemployment program.

It also means that districts receive annual rebates through KSBIT if they have paid in more than is needed to pay claims.

KSBIT members have access to training to control unemployment costs, consultation on individual claim matters and a third-party review to assure overpayments are not made to claimants. It is extremely important for school districts as reimbursing employers to pursue contestable issues such as voluntary resignations or for-cause discharges related to willful misconduct.

KSBIT staff work with school districts so that specific separation details and documentation are available to successfully prevail in contestable claims.

Another training session is scheduled this fall in Lexington to assist districts in minimizing unemployment costs.

While public schools are not immune from the consequences of the recent economic downturn and have seen their unemployment claims escalate, KSBIT staff continue to work closely with the state unemployment office to stay abreast of both federal and state issues that impact members and their unemployment costs. As the chart on this page shows, during the past two-and-a-half years, our third-party review process has identified 363 errors representing $278,413 in overpayments which went directly back to member districts.

Regardless of future economic trends, KSBIT staff will continue to work closely with its members to minimize unemployment claims and costs. For more information on the KSBIT unemployment service please contact Steve Smith or Myron Thompson at 1-800-372-2962.