Committee presses State Board and superintendent on shortfall loan bill after Hancock County crisis

Lawmakers pressed State Board counsel and Superintendent Blatt during a committee briefing on House Bill 4,574, a proposal to create a temporary loan fund for county boards whose reserve balances fall below 5 percent of available funding.

Counsel told the committee the proposed 'temporary shortfall supplement fund for county boards of education' would allow financially distressed counties to apply for loans limited to covering personnel obligations and other essential operating expenses for the remainder of the fiscal year. The bill would require counties that receive money to repay the loan, present financial records to the State Board on request, implement the State Auditor's West Virginia checkbook reporting system within 45 days of receiving funds, and submit reports within 90 days when a county's reserve fund falls below 5 percent for longer than 60 consecutive days. Counsel also said the State Board could review other county funds and use identified funds to repay loans, and that remaining appropriated money would revert to the General Revenue Fund the following fiscal year with repaid amounts due by Dec. 31 of the calendar year after appropriation.

The bill defines 'maladministration' to include either (1) failing to maintain reserve balances at or above statutorily or rule‑required levels for two consecutive reporting periods without a corrective action plan, or (2) failing to submit required financial reports or submitting reports with material inaccuracies, including approvals of expenditures that exceed gross revenue for more than one fiscal year. Counsel said the proposal includes consequences: employees who exercised primary fiscal authority and were directly responsible for maladministration would be prohibited from public‑education financial roles for at least two calendar years and removed from current county financial duties within 30 days of receipt of funds.

Superintendent Blatt, who answered many of the committee's questions, described Hancock County as the immediate impetus for the bill. She said the State Board and other state offices fronted a state aid payment to ensure February payroll and estimated the county shortfall at about $3.1 million. She told senators that Hancock maintained roughly 143 positions above the formula — roles that had been sustained in part by federal COVID-era funds — and that not reducing those positions contributed to the fiscal cliff.

Lawmakers repeatedly pressed for specifics. Senators asked where statutory reserve levels are defined, how the State Board would determine which approvals count toward an 'expenditure approval' that triggers maladministration, which job classifications would be implicated, whether the bill creates new rulemaking authority for the State Board, and how counties would realistically repay loans. Counsel acknowledged some uncertainty about particular code citations and how frequently WIVUS/UAVUS reporting language appears in statute, and the superintendent said the State Board will provide more precise county‑level projections and data to the committee.

Several senators expressed political and policy reservations about using a loan fund: one senator asked, given reports of staffing shortages statewide, how Hancock could be over‑staffed by 143 positions; another lawmaker said he had difficulty justifying a special loan when Hancock recently upgraded athletic facilities. Superintendent Blatt acknowledged those concerns and said the State Board is also exploring rule and timeline changes (for example, aligning reduction‑in‑force timelines with final budget dates) to reduce future instances of fiscal distress.

The committee did not take a final vote on House Bill 4,574 at this meeting; members debated whether to lay the measure over for further discussion. The chair moved to proceed to other business and the bill remained pending.

Highlights from the hearing included the superintendent’s assessment that Hancock’s immediate payroll needs were addressed by a fronted state aid payment and counsel’s repeated caveat that some statutory cross‑references and reporting‑system terminology would need to be clarified in subsequent work sessions.

What’s next: senators asked the State Board to supply county‑by‑county three‑year projections, specifics on statutory references for reserve levels, and clarity about the auditor‑reporting and WIVUS/UAVUS mechanisms before the committee takes further action.