State, district looks at getting Gary schools out of $23.7 debt

A new law gives the district a chance to work with the Distressed United Appeals Board and select a financial specialist to take control of the district's budget, sharing responsibilities with the Gary Community School Board and the city.

The district is $23.7 million in debt, with trouble paying vendors and teachers.

According to information The Times obtained from the school district, the debt includes more than $7.1 million in taxes and interest due the IRS; $4.15 million owed to NIPSCO; $730,000 owed to AT&T; and $440,000 owed to the Gary Sanitary District.

It appears the district has made at least one installment payment of $10,000 to the IRS.

The law allows DUAB to delay or suspend any payment of principal or interest to the Common School Fund. The board could recommend the State Board of Finance make an interest-free loan to the Gary schools from the Common School Fund.

The school district has been pressured by declining enrollment, decreased funding at the state level, charter schools and vouchers. 

Sen. Earline Rogers, D-Gary, and Sen. Luke Kenley, R-Noblesville, crafted the measure.

Rogers said the amendment to the state budget creates a coalition of individuals and groups at both the state and local levels. They include financial specialists, local leaders and DUAB, the same entity that assisted with Gary’s finances in the past, she said.

"They will be charged with crafting a plan of action where local officials, School Board members, a financial adviser and the DUAB work together to create the recovery plan for the district," she said.

The steps include a public hearing on the financial status, followed by a DUAB presentation to the School Board. That presentation will include suggested advisers, Rogers said.

"If the School Board chooses one of those financial advisers, that person will assist the board with financial and debt management over the course of the next year," Rogers said.

Rogers said there are other school districts traveling the this same road as the Gary district.

"The state wants to be careful about what they do and how they do it, but I'm hopeful that when we take a look at what happens in Gary, it will give us an opportunity to look at policy changes in education -- either change the policies that are in place or develop new policies that prevent school corporations from getting into a bind the way Gary is," she said.

Kenley said he knows there has been a lot of tension surrounding the reforms in education in the past few years, and he and Rogers thought it was important to include the Gary community as the state assisted with the school district.

"We think it's very important for the Gary schools to buy into the transformation and help lead it," he said. "There are many hard decisions that will have to be made. ... I hope to see some progress in six months. I hope that in two or three years, the Gary schools are back in good shape."

Kenley said the Indiana Department of Education also played an integral role. Kenley said the DUAB process does not affect the IDOE's designation of Gary as a "high-risk" district. That federal designation allowed the state to direct how federal dollars are spent within the Gary school district.

Gary schools Superintendent Cheryl Pruitt said the process will give the district an opportunity to identify the debt, upgrade the financial system and human resources, determine cash flow and have an economist look out and project revenue, tax collections, decline in enrollment and what all of that means to the district.

"This is an opportunity to partner with the state and city, and determine the best ways to financially fund the education for our children in Gary," she said.