Unable to pay critical bills and facing a potential long-term payroll shortage, Gary schools is expected to seek a $14 million loan from the the Distressed Unit Appeals Board on Friday.
The cash-strapped district is hoping to get some temporary relief from its dire financial status to cover payments to its more than 700 employees through the end of the year and critical vendors including the Internal Revenue Service, NIPSCO, the Illinois Central Bus Co., and insurance providers.
In a letter addressed to DUAB chairman Micah Vincent dated on Feb. 24, state-appointed district fiscal manager Jack Martin wrote he believed that it faced few choices after its recent setbacks of a failed $8 million November referendum, declining enrollment and a $1.5 million drop in property tax revenue in 2016 from the prior year.
If approved, nearly $12 million would be used to cover payroll and vendors from March to June.
The largest amount of the requested loan, $4,709,283, would go for March expenses with $2.957 million used to make payroll. The remaining funds would also go to pay vendors that month: $481,570 to the Service Employees International Union, $425,000 for CIGNA, $360,000 to NIPSCO, $267,650 to Indiana Workforce Development, $208,063 to other vendors, and $10,000 to the Internal Revenue Service.
In April, $3.295 million of the loan would be used for payroll, payments to CIGNA and the Illinois Central Bus Company. In May, $1.595 million would be used for payroll. In June, $2.195 million would be used for payroll and payments to CIGNA.
Superintendent Cheryl Pruitt could not be immediately reached for comment.
Unable to meet payroll earlier this month, the district secured a short-term loan with the assistance of Rep. Eddie Melton, D-Merrillville. Fishers-based First Internet Bank agreed to the $1.5 million loan, which will be repaid with interest when the district receives its tuition support payment from the state on March 15.
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 an $8.5 million budget deficit in fiscal year 2017 and $6.7 million budget deficit in fiscal year 2018.
The DUAB meeting will be held at 8 a.m. at the Indiana Government Center North in Indianapolis.
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