The Gary Community School Corp. is considering a second try at an operating referendum.
A new report from state-appointed financial manager Jack Martin suggests the school district may not meet payroll in September, which could delay the start of school in August, and another 120 staff members may need to be laid off before the school year begins.
School board members say this dire situation points to the necessity of passing an operating referendum this fall.
The referendum would seek a property tax increase of 47.5 cents per each $100 of assessed valuation in the city. With a 75 percent collection rate, that could yield $7.5 million annually. In order to go on the November ballot, however, the question must be approved by the Indiana Department of Local Government Finance, the Lake County Auditor and Clerk of the Circuit Court by Aug. 1.
"We are in a tough situation," said board president Antuwan Clemons. "This is no bluff or threat. We understand that we need help, which is forcing us to go before the community. It needs to act and bail out Gary (schools)."
The district is struggling to climb out of a $75 million budget deficit caused by a combination of factors including declining enrollment, less revenue under state-mandated property tax caps, changes in the school funding formula and low property tax collections in the city of Gary.
Last fall, Martin said the district was "beyond bankruptcy" and the state auditors questioned the district's future as a "going concern." Martin has advised the district that layoffs need to happen because they are overstaffed.
On Tuesday, the board approved a contract for referendum legal services with Taft Stettinius & Hollister LLP, with a cap of $2,500.
In an interview before the meeting, board member Nellie Moore said the staff cuts proposed by Martin at a lengthy meeting of the budget and finance committee Monday would potentially free up $8 million, but she's not sure than many more cuts can be made.
"We've contended all along we cannot cut our way out of debt," Moore said. "We've reduced schools by large numbers, reduced staff and expenses including our health insurance a great amount. The debt we have is primarily due to the funding formula, which is inadequate to the needs of our students.
"We're in that bind not because of the mismanagement of school district, but because the state has not fulfilled their obligation of adequately funding the school district, and you can quote me on that," she said.
But Carlos Tolliver, a former Gary teacher, doubts a referendum would help the district get out of its financial hole.
"I've seen this board pass so many no-bid contracts in the areas of food service, Title I and maintenance," Tolliver said. "It's symptomatic of what we're seeing in this district. We need to have an honest discussion. This (referendum) is not a one-shot deal. That means after seven years, they can come back and ask for another."
The district previously tried to pass a general fund referendum in May 2015, but about 56 percent of voters rejected the request for $51.8 million over seven years. Clemons said the margin was close enough last time that he hopes that parents and community members effectively campaign for the measure this time. Districts are barred from using public money to support referendum campaigns.
"We've carried the ball as much as we can, but there's no way we can cut our way out of this without help from the governor, the mayor, the council and others," Clemons said. "We're saying, 'Can you help us?'"
Bus contract remains unsettled
The district's bus service for the upcoming school year is still up in the air as a proposed contract with Illinois Central was taken off the agenda at the start of the meeting Tuesday.
Superintendent Cheryl Pruitt said she has tried to speak with Illinois Central representatives since Friday about some additional changes sought by Gary board members, but her calls have gone unreturned.
Pruitt said the board will likely approve the amended contract — which includes a $4.2 million base rate for bus service during the 2016-2017 school year — later this week, with a handful of changes yet to be worked out.