A bill that would temporarily shift financial control for the Gary Community School Corp. away from its school board in exchange for assistance with some outstanding loans received wide support Monday when it passed the state Senate.
Under the proposed legislation sponsored by Senate Appropriations Chairman Luke Kenley, R-Noblesville, and Sen. Eddie Melton, D-Merrillville, it would restructure who is responsible for the district’s finances for up to five years through July 1, 2022.
It passed the Senate 49 to 0. It now heads to the House for consideration. The bill is sponsored by Rep. Tim Brown, R-Crawfordsville, and co-sponsored by Rep. Charlie Brown, D-Gary, and Rep. Vernon Smith, D-Gary.
“We have had conversations about what it could do for us here in Gary,” said school board president Rosie Washington. “I think as a board we are very supportive of what it can do.”
“Overwhelmingly, I think, the present board, we have examined all of the pros and cons and at this point,” she said. “We are in favor of this bill maybe being a catalyst to getting us where we need to be.”
Under the measure, the district would be considered a “distressed political subdivision,” under the bill’s language, allowing the state to shift financial control to an appointed emergency financial manager.
In exchange, the Distressed Unit Appeals Board (DUAB) would have the power to “delay or suspend” the district’s payments on its five outstanding loans it owes to the Common School Loan Fund — now estimated at $30.87 million.
The measure would also allow the DUAB board would help establish financial improvement benchmarks and provide grants if “one or more” are met. It also would have the authority to ask the state to give the district interest-free loans from the Common School Fund on the district’s behalf.
The bill also would set up a three-member fiscal management board with one member selected each by Gary Mayor Karen Freeman-Wilson’s office, the school board and state superintendent of public instruction to advise the emergency financial manager on fiscal issues.
It would also appoint a chief financial officer that would work under the emergency manager and assist with daily operations.
For years, the cash-strapped district has been affected by a perfect storm of factors — declining enrollment, the rise of charter schools, less revenue under state-mandated property tax caps, changes in the school funding formula and low property tax collections in Gary — that have combined to place it in a position of dealing with a number of formidable financial challenges.
The Gary school district has cut staff, administrators and closed dozens of schools in recent years, trying to dig its way out of its massive debt.
According to the state, the district’s long-term debt including principal amount due and interest is expected to reach $101 million by July 2017.
State figures also show the district estimates it will run a $8.5 million budget deficit in fiscal year 2017 and $6.7 million budget deficit in fiscal year 2018.
Enrollment for the Gary schools has declined to 6,480 in 2015-16, from 15,119 in 2005-06, according to data from the Indiana Department of Education.
Currently, the district has five outstanding loans from the Common School Fund it has been repaying: $10.725 million and $11 million since January 2006, $2 million since January 2010, $1.8 million in July 2010, and a $15 million in January 2017, approved in October 2015.
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