House panel approves $23 million bail-out loan to Kentucky State University

Bail them out of a shortfall

FRANKFORT, Ky. (KT) – Legislation to provide $23 million to Kentucky State University to bail them out of a shortfall for the current fiscal year was approved by the House Appropriations and Revenue Committee on Tuesday.

House Bill 250, sponsored by Rep. James Tipton, R-Taylorsville, has five co-sponsors, including Rep. Derrick Graham, D-Frankfort, a KSU alum, and in whose district the school is located.

Tipton noted the $23 million is set up as a loan, “However, based on further evaluation and based on future performance of the results, the loan could be forgivable, only by the action of a future General Assembly.”

He said the bill provides a tremendous amount of oversight and accountability.  “It directs the Council on Postsecondary Education to initiate a plan and has reporting requirements for the president and a board member of KSU to appear four times a year for the next three years before various committee to give us an update on what’s going on.”

In addition, the bill also requires CPE by November 2025 to provide a three-year performance analysis, based on a management improvement plan to the interim Education and A&R committees, along with CPE’s recommended transition plan to a new governance and operational structure of the Frankfort school, if the analysis finds a continuing significant lack of efficiency and effectiveness in the governance and administration of KSU. 

CPE President Aaron Thompson, a former interim KSU President, also appeared before the committee, saying they looked at not only what happened, but what CPE can do to make sure it doesn’t happen again.

“The reports that we are going to be doing, is such an in-depth analysis, even financial evaluations that come up with indexes, that can predict if they are going down a path they shouldn’t be going down,” he testified.

Thompson stated their plan will involve more than finances.  “We are also putting in place what we consider to be a forward-thinking way they should be structured; the infrastructure of the people, as well as the products, to ensure there is a long-term stability and thriving of the campus.”

KSU will have to take $7 million out of their budget for the fiscal year that starts July 1, he said, to make sure that it is a balanced budget again.  “We are working with them to do that now, along with the Board.”

Tipton added, “We’ve been told the financial situation at the school means that roughly around the end of March, they will not be financially solvent without the $23 million.  That’s why this legislation includes an emergency clause, so it can become effective immediately upon passage.”

He emphasized this needs to be done for the current students, as well as future students.  “Without this, there is going to be tremendous uncertainty, there is going to be tremendous disruption, tremendous chaos.  If somewhere down the road we see progress is not being made, this legislation will let us look at other options down the road.”

The bill passed on a 21-1 vote, and now heads to the House floor.