Published Online: June 18, 2010

School Officials May Seek Oil Spill Compensation

Mickal Vogt uses a stick to place tar balls in a jar that washed up on the shore in Orange Beach, Ala., on June 12. Large amounts of the oil from the Deepwater Horizon have battered the Alabama coast, leaving deposits up to 6 inches thick on some areas of the beach.
—Dave Martin/AP

State education officials throughout the Gulf Coast, worried about economic fallout for already-strained K-12 coffers from the massive BP oil spill, are weighing whether to seek reimbursement from BP to make up for it.

Meanwhile, at least one top school official is raising the specter of health concerns for students in schools near the oil-tainted gulf—and even the prospect of relocations.

“This has the potential of having an impact equal to some of the many [hurricanes],” said Tom Burnham, the Mississippi state superintendent. “It’s just a different kind of storm.”

Already, a marked decline in tourism since the spill began two months ago has squeezed a major source of revenue for the region, officials say, and added to the strain on fragile state budgets. The disaster also is expected to affect both sales and income taxes, key funding sources for schools and states.

Crude oil from the Deepwater Horizon oil spill washes ashore in Orange Beach, Ala., earlier this month.
—Dave Martin/AP

Alabama state education officials have already announced plans to request reimbursement from BP, and some officials in Florida, Louisiana, and Mississippi say they may do the same.

The company agreed this week to set aside $20 billion in escrow to compensate victims of the environmental disaster. The fund, which was created in negotiations with the Obama administration, would be used to compensate businesses and individuals affected by the spill, which resulted from an April 20 explosion on a deepwater oil-drilling rig.

But it’s still unclear whether that funding will include money for affected states and school districts. The money could be used to reimburse state and local response costs, according to a fact sheet provided by the White House. School districts are not specifically addressed.

On the company’s website, BP outlines a claims process for local governments. The company lists both loss of revenue and the cost of additional government services among the claims it will consider. That information likewise does not specifically mention school districts.

“There’s a massive claims process, and anyone with valid claims will be considered,” Tristan Van Hegan, a spokesman for BP, said June 17. He said the average turnaround time is five days for an individual and seven for businesses. He could not say whether school districts would be considered businesses.

Still, Alabama state schools chief Joe Morton has made it clear that he expects BP to pick up the tab for lost state revenue resulting from a projected 50 percent drop in tourism. Mr. Morton said he plans to file a claim with BP—and will take legal action if necessary.

“As tourism diminishes along Alabama’s Gulf Coast, as the seafood industry is crippled due to the ‘no-fishing’ areas, and as oyster and shrimping areas are decimated by the oil spill, tax receipts to the [state’s] Education Trust Fund will suffer,” Mr. Morton said in a statement released last week.

Mississippi's Concerns

The oil hasn’t made it to Mississippi’s shores yet, but it already seems fewer tourists are visiting the Magnolia State’s beaches and casinos, said Mr. Burnham, the state schools chief. That means less state revenue, which in turn means less funding for education in a state where money for K-12 schools is already tight, he said. In his December budget request, Mississippi Gov. Haley Barbour, a Republican, had recommended a nearly 11 percent cut to state aid for education. And that was months before the oil disaster.

Mr. Burnham said some of the schools in the Gulf Coast area are located close to the water, meaning that it is possible to see the Gulf of Mexico from the school building. That has him worried, for instance, about children with asthma. He has met with local superintendents and asked them to prepare for the possibility that they may need to relocate certain students, or even entire schools. And he’s asked them to document the cost of any steps they take.

Mr. Burnham is not ruling out urging the state to take legal action if the necessary reimbursements don’t come through. He said he would work with the state school board and other state leaders to determine the best course of action.

Sales-Tax Decline

In Louisiana, meanwhile, state schools Superintendent Paul G. Pastorek said the Pelican State is still considering whether to ask BP for reimbursements. He said in an e-mail that the state education department is working with local school districts, the state attorney general, and the state board of education to gather information and decide on the best course of action.

“Given the potential impact of the oil spill on state revenues through the collection of sales taxes and state income taxes,” he added, “agencies that are supported through state funding could potentially be affected. Thus, the [state education] department’s ability to support public schools throughout Louisiana may be affected.”

Mr. Pastorek also said districts in the Gulf Coast area could face a steep decline in local sales-tax revenue, which accounts for more than a third of the total dollars spent on pre-K-12 education in Louisiana.

The Louisiana School Boards Association plans to urge Mr. Pastorek and other leaders to press BP for the funds, said Lloyd Dressel, the director of finance for the school boards’ group.

“I just don’t think the state right now has additional revenues to offset losses that we might have,” Mr. Dressel said.

In Florida, state Sen. Stephen R. Wise, a Republican, who chairs the Senate appropriations panel that oversees K-12 education, said there’s been a marked decline in tourism—a major source of income- and sales-tax revenue in the state—since the oil spill. He’s also concerned about the future impact on property taxes.

“If you have a restaurant on the beach and no one is showing up, these properties become essentially worthless,” Mr. Wise said.

He said he will urge policymakers in the state to ask BP for reimbursements. “I think we have no choice but to do that,” he said.

Still, he’s worried that the money may not be forthcoming.

“If I was them, I’d stall,” Mr. Wise said, referring to BP. And he’s worried that, given the large number of likely claims, there may not be enough money to go around.

“It would be a real problem if they went bankrupt,” he said. “Then there would be no money for anybody.”

Vol. 29, Issue 36

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