Editor’s note: EdNews filed public record requests with 13 school districts, interviewed multiple superintendents and watched recordings of several school board meetings for this story.

Trustees and administrators who have been forced to make a decision on how to pay off the Idaho School Benefit Trust’s $13 million shortfall say they feel bullied, threatened and blindsided and have sought legal counsel to craft carefully worded messages to Blue Cross of Idaho that reserve all rights to legal remedies.

One district’s letter to Blue Cross, the trust’s third party administrator that is collecting payments, called the trust’s lack of full disclosure and the quick Sept. 10 deadline to decide on a payment option “unreasonable and dangerous.”

A group of North Idaho superintendents sent a letter to Gov. Brad Little last week that claims the trust intentionally withheld details on its financial trouble until after districts had already renewed for the 2026-27 benefit year.

“It is deeply frustrating that local educational funding must be diverted to cover the systemic silence of ISBT,” the superintendents wrote.

Some districts faced difficulty in finding law firms without conflicts of interest before the Sept. 10 deadline. At least two districts secured legal counsel that same day and were able to quickly conduct special meetings to get in before the deadline. Two other districts did not meet the Sept. 10 deadline and asked for an extension into the following week.

EdNews reported last week that the trust was $11.3 million under the legal requirement for surplus as of Aug. 31, 2025, according to an independent audit. Additional financial records EdNews received from the Idaho Department of Insurance show the trust since then has hemorrhaged money and doubled its deficiency.

As of May 31, the trust was $23.9 million under the legal requirement for surplus and had recorded a $12.6 million net loss in the first three quarters of the 2025-26 fiscal year, according to its latest available quarterly report.

The trust recorded a deficit of $10.5 million at the end of May, while Idaho Statute required $13.4 million in reserves. The state uses a formula to determine the required surplus amount needed to pay claims.

The department is investigating what happened. Director Dean Cameron told lawmakers last week at a legislative working group meeting that the investigation will hopefully be complete within the next couple of months, before the start of the 2027 legislative session in January.

Why this matters

The Idaho School Benefit Trust is a self-funded health care plan that more than 100 school districts and charter schools participated in during the 2025-26 benefit year, which ended on Aug. 31.

Employers contribute to the trust, which then pays out claims for employees, dependents and retirees through Blue Cross of Idaho.

The trust ran out of money this year and is unable to pay claims. The Idaho Department of Insurance has negotiated a deal with Blue Cross to loan the trust $11.9 million with 6% interest to pay claims through Aug. 31. But before Blue Cross can loan the money, it needs districts to commit to pay their share of the $13 million shortfall.

The trust on Sept. 1 transitioned to a fully insured health plan, which means Blue Cross — not the member employers — now carries the risk of paying all medical claims.

If districts did not submit a payment option by Sept. 10, or if they fail to pay a lump sum or make the first monthly installment by Sept. 30, they are considered delinquent and Blue Cross will not pay out medical claims. The monthly payment option required districts to sign a 12-month binding contract.

Several districts balked at that binding contract and refused to sign — EdNews discovered through public records requests, school board meetings and interviews.

Here’s what has transpired over the past couple of weeks.

Districts have trouble finding legal counsel

Wallace School District agreed to pay one monthly payment and did not sign the 12-month binding contract, according to Superintendent Todd Howard. The district did not comply with the Sept. 10 deadline, and asked for an extension to the following Monday when the school board conducted a regular meeting.

Howard said the law firm that many districts use for legal counsel — Anderson, Julian & Hull, based in Boise — had a conflict of interest with the trust. The district contracted with a local law firm for advice.

“When there’s a contractual agreement, we’ll ask for legal review,” Howard told EdNews.

Coeur d’Alene School District also did not comply with the Sept. 10 deadline and refused to sign a contract. Superintendent Shon Hocker wrote to the Department of Insurance on Sept. 10 asking for an extension in order to discuss the issue at a Sept. 14 board meeting.

“As stewards of taxpayer funds, we require additional information in order to pay an amount of this magnitude,” Hocker wrote to the department.

The district’s usual attorney,  Lyons O’Dowd, had a conflict of interest. Trustees on Sept. 14 agreed to contract with law firm Malek + Malek. Hocker wrote to the department again on Sept. 15, agreeing to make monthly payments under protest without signing a contract or waiving any rights.

“Given the threat of litigation against districts should they not make payment and the demand for an immediate response, the Coeur d’Alene School District has opted to make supplemental monthly contributions in installments over the 12-month period,” Hocker wrote.

West Jefferson trustees met on Sept. 9 to discuss the payment options, but Superintendent Shane Williams advised trustees to table a decision until a special meeting the following day, after receiving legal counsel. He said the district’s regular counsel had a conflict of interest and he had been trying to find another law firm. That morning he was able to schedule a meeting with an attorney the following day, Sept. 10, to discuss the payment options.

“This is a 12-month binding contract that we want our legal counsel to look at,” Williams told trustees.

On Sept. 10, West Jefferson agreed to sign the contract for monthly payments, but included an attachment laying out the district’s concerns. The district acknowledged that it was agreeing to the contract without full disclosure of the financial arrangements, including details about the surplus note between the trust and Blue Cross.

Blue Cross agreed to loan the trust $11.9 million with 6% interest to pay off claims for the 2025-26 benefit year.

“West Jefferson School District #253 requested information about the terms and conditions of that surplus note, but the Idaho Department of Insurance informed it that those terms are exempt from public disclosure and cannot be provided to West Jefferson School District #253,” Williams wrote.

The district also believes the Sept. 10 timeline has been “unreasonable and dangerous.”

“Districts have been required to evaluate and act upon a significant and potentially consequential financial obligation within an extremely limited period of time, while material information regarding the underlying financial arrangements remains unavailable,” Williams wrote.

Three other districts — Kimberly, Filer and Caldwell — sent letters to Blue Cross with identical legalese that waive no rights to any legal action. The letters include two very long sentences, including this one:

“Please be advised that in making the lump-sum payment, the District waives no rights, claims, or defenses that it has or may later have, without limitation, and further hereby expressly reserves all rights to pursue any equitable or legal remedies it has or may have related to, among other things, the lump-sum payment or the circumstances giving rise to the request for the lump-sum payment, whether against the Trust, its trustees, its administrator, its actuaries, the Idaho Department of Insurance, and/or any other person or entity.”

Caldwell spokesperson Leslie Solis said the district used law firm Givens Pursley LLP to draft the letter.

Kimberly Superintendent Luke Schroeder said the district had to go through three other law firms before finding one without a conflict of interest and the right area of expertise. The district met with an attorney on Sept. 10, and trustees agreed to pay a lump sum at a special meeting later that day.

“We basically had 24 hours to make any kind of decision based upon any kind of legal counsel,” Schroeder told EdNews.

Schroeder said he is frustrated with the lack of transparency and that he felt the district was being “bullied” into making a decision.

“I will use the word threatened,” Schroeder said. “We were being threatened with, ‘If you don’t pay this, we’re not going to pay your employees’ medical claims.'”

Caldwell trustees used similar language at a board meeting on Sept. 14.

Board Chair Travis Manning said trustees have to be very transparent about the budget process, and he is frustrated that the district has to pay $594,647 because of the trust’s mistake.

“We teach our kids we don’t bully other people and we don’t treat people poorly,” Manning said. “It feels like we’re being bullied by an insurance company and potentially the Idaho Department of Insurance, and I don’t like it. I don’t think it’s fair. I don’t think it’s fair to the public.”

Caldwell Trustee Trish Robertson said she thinks the trust should be taken to task. She said the situation seems “fairly fraudulent.”

“We all got blindsided, and I hope that there’s an investigation and culpability is pursued because if they didn’t know this was coming, they are incompetent,” Robertson said.

North Idaho leaders appeal to Gov. Little, citing ‘systemic silence’

A group of North Idaho superintendents on Sept. 18 wrote a letter to Gov. Brad Little to express their concerns with the trust’s lack of communication.

“It is deeply frustrating that local educational funding must be diverted to cover the systemic silence of ISBT,” the superintendents wrote.

The trust never told districts or the Idaho School District Council that it was financially unstable or that it was at risk of failing, the letter states.

“The superintendents serving on the Idaho School District Council were never notified of any evidence of financial issues over the past few years,” the letter states. “The trust then continued with minimal increases creating fiscal instability without any warning.”

The group of superintendents also expressed concern with the timing of the July 14 notification, when the trust’s benefits manager, Debbie Hainke, first informed districts that the trust had run out of money and they were responsible for covering the shortfall. The trust required districts to renew for the 2026-27 benefit year two weeks earlier, by July 1.

“The superintendents believe ISBT intentionally withheld information regarding their financial trouble until after districts renewed their insurance agreements for the 2026-2027 school year,” the superintendents wrote. “Many districts may have selected to go in a different direction.”

The Idaho School District Council is the sponsoring organization of the Idaho School Benefit Trust, but has no decision making authority over the trust. Superintendents Williams, Schroeder and Howard all sit on the council’s board of directors. 

Howard is the council’s North Idaho representative. He told EdNews the letter to the governor came about after a regional meeting last week, to ensure Little was aware of what is going on with the trust.

“I think it was just making sure that our concerns and the issues that we’re dealing with were as clearly stated as possible,” Howard said.

In a statement to EdNews on Tuesday, the governor made it clear that school employee insurance decisions are left to local school districts and charters.

“The Governor’s Office is confident the Department of Insurance is taking appropriate actions to address the severity of the situation, and we will continue to monitor the situation and support efforts to provide stability and clarity for Idaho school districts and employees,” Emily Callihan, Little’s director of communications, wrote to EdNews.

No decision yet on state takeover

As of Wednesday, the Fourth District Court had not yet made a final decision on the Idaho Department of Insurance’s petition to take over and rehabilitate the trust.

Director Cameron filed a petition for a rehabilitation order on Aug. 27 that would allow the state to take control of the trust.

“Rehabilitation gives the Department legal authority over the Trust’s affairs, which allows the borrowing arrangement to proceed and enables claims to be paid,” Cameron wrote in the petition.