DALLAS -- Legislation that would pave the way for state oversight and appointment of an emergency manager for Indiana's embattled Gary Community School Corp. in Indiana is headed to the state House after passing the Senate.
The bipartisan bill crafted by Sens. Luke Kenley, R-Noblesville, and Eddie Melton, D-Merrillville passed on a 49-0 vote Monday.
The goal, according to Kenley and Melton, is to resolve the school corporation's late vendor payments, delayed payrolls, annual operating deficit and $101 million debt burden.
"Schools across Indiana are faced with difficult financial times," said Melton. "As the co-author of this bill, I fought hard to ensure that the bill provides additional funding opportunities through grants, debt forgiveness and the improvement of financial transparency of Gary Community Schools. While I have always advocated for increased public participation and disagree with appointing an emergency manager, ultimately I believe this bill, if passed into law, will provide the Gary Community Schools an opportunity to focus on improving the overall delivery of quality education, as the district gets on the right financial track.".
The school system is grappling with more than $100 million in debt, including a $25 million hole in its operating budget. As of June 30, 2015 the school corporation had $3.8 million in tax anticipation warrants outstanding, $11.8 million in school bonds, $42.9 million in notes and loans and $16.5 million in common school loans.
Voters in the Gary school district have twice within 18 months rejected referendums that would have raised property taxes.
The last vote on Nov. 8 asked voters to approve about $8.7 million of new taxes annually over the course of seven years. The vote came within 1% of passing and would have allowed to corporation to enact a financial stopgap measure and help fill the budget shortfall it faces.
The district has struggled to meet payroll.
Under the legislation, the Indiana Distressed Unit Appeals Board would appoint an emergency manager and chief financial officer to replace the elected school trustees and take charge on all financial issues for up to five years.
The emergency manager, assisted by the CFO, would craft the school corporation's budget with a focus on paying off debt, could negotiate reduced payments to creditors, and could adjust employee salaries after current labor contracts expire.
The bill would also establish a three-person Fiscal Management Board, with members appointed by the school trustees, city mayor and state superintendent of public instruction, that could advise the emergency manager, but decisions would be subject to approval by DUAB.
DUAB also would be allowed to award grants to the school corporation if it hits specific financial targets, as well as forgive outstanding state loans to Gary schools or award additional zero-interest loans.
Melton said he wants the fiscal management board to remain local and have more community input in the process of getting the corporation's finances back in order.
Gary mayor Karen Freeman-Wilson has said she supports the bill and lauded Kenley and Melton for their support of the Gary schools.
"The fiscal stability and effective management of the Gary Community School Corporation is paramount to the success of the city of Gary and state of Indiana," Melton said. "This issue requires the collaboration of the Gary Schools, City of Gary, State of Indiana and the community at-large."
Rep. Vernon Smith, D-Gary, also introduced two bills in January that would offer relief to the ailing school district. HB 1628 asks that Gary Schools receive compensation from the state budget's General Fund to pay off existing debts and other school-related expenses. HB 1632 asks for $50.2 million from the General Fund to pay off existing bond obligations. Both bills have been assigned to the House Ways and Means Committee. To date, they have not received a hearing.
