State Intercept Program

KRS 160.160(5) creates a state intercept for lease-supported debt service payments:

Rental payments due by a board under a lease approved by the Department of Education … shall be due and payable not less than ten (10) days prior to the interest due date for the bonds, notes, or other debt obligations issued to finance the building or public facility. If a board fails to make a rental payment when due under a lease, upon notification to the Department of Education by the paying agent, bond registrar, or trustee for the bonds not less than three (3) days prior to the interest due date, the Department of Education shall withhold or intercept any funds then due the board to the extent of the amount of the required payment on the bonds and remit the amount to the paying agent, bond registrar, or trustee as appropriate. Thereafter, the Department of Education shall resolve the matter with the board and adjust remittances to the board to the extent of the amount paid by the Department of Education on the board’s behalf.

The credit rating agencies treat the provisions of this statute as a credit enhancement program and have issued ratings for it. The ratings on the state intercept for local school districts have historically moved in conjunction with the ratings for state’s general fund appropriation-supported debt.​

State Intercept Program