IRS: Gary schools owe $6.7 million

The IRS has filed two liens in the Lake County Recorder’s office against the school district. One lien, filed Sept. 3, seeks payment of $5,270,467 for payroll taxes in 2013. The other lien, filed June 24, says the district owes $1,514,529 for part of 2012 and 2013.

IRS spokesman Luis Garcia said the agency doesn’t comment on specific taxpayers. “The public document has to speak for itself,” he said.

The documents state the IRS is giving notice that taxes, including interest and penalties, have been assessed against the Gary Community School Corp. and Michael Washington, its interim chief financial officer.

“We have made a demand for payment of this liability, but it remains unpaid,” the lien notice states.

Gary attorney Robert Lewis said the district plans to establish payment plans for its debts. “We have a number of creditors, like most people. We are working diligently to get these taken care of,” he said.

Superintendent Cheryl Pruitt said the district is addressing its bills through a fiscal plan.

Pruitt is in the midst of a contract renewal with the school board, which now plans to offer her a two-year pact.

“She is about the business of running the school corporation,” school spokeswoman Charmella Greer said. “Students are first and we will continue to handle the financial situation.”

Debts mount

Creditors have been stalking the cash-strapped school district in recent months.

Last month, the Gary Sanitary District filed 21 liens on schools saying the district owes about $800,000 in sewage bills.

Pruitt and Mayor Karen Freeman-Wilson announced Friday a deal has been reached to pay those bills. “We have reached a resolution and there was never any chance of them losing services,” Freeman-Wilson said. “We reached a solution. I was regretful it became a public issue because we’re partners.”

Two months ago, the Illinois Central Bus Co. demanded $3 million in past due bills from the district. It recently reached a settlement that will pay off the debt by Dec. 31.

Prior to the settlement, the bus company sent out press releases threatening to halt bus service on Nov. 10. That action drew Pruitt’s ire. “I would like Illinois Central to stop attacking this community,” she said Oct. 16 during a public hearing on her contract renewal.

Meanwhile, the district has declared an emergency and plans to issue $1.2 million in bonds to settle some of its debt. A hearing is scheduled for Nov. 25.

Cash flow fallout

In August, Pruitt told the school board the district has lost $100 million in revenue since 2009.

Data from the Indiana Department of Local Government Finance shows the Gary school district lost $13 million in property tax caps last year — more than any district in Indiana. Overall, Gary saw 83 percent of its $15.7 million levy snagged by the circuit breaker.

In addition, a new GOP-written state funding formula reduced state funding. Meanwhile, property taxpayers are only contributing at a 42 percent collection rate.

With a decline in enrollment, state revenue dipped even more.

The $27.3 million budget deficit has made it difficult for the district just to keep up with repairs on aging schools. But it has made reductions.

In 2012, there were about 1,800 school employees. Today, there are about 1,000. Earlier this year, Pruitt said the payroll is about $1.9 million each pay period.

In June, the district laid off 39 teachers and 55 paraprofessionals. That same month, the school board voted to close five schools. One of the five is still open, while repairs are being made at another school.

In February, State Superintendent of Public Instruction Glenda Ritz took the unusual step of designating the district as “high risk” because of its nagging financial problems and poor student performance. Ritz placed a full-time Department of Education staff member in the district to oversee improvement measures.