DALLAS -- Indiana named a consulting firm to serve as emergency manager for Muncie Community Schools, one of two fiscally troubled school districts taken over by the state under legislation signed in April.

The state also said it was close to appointing an emergency manager to manage the finances of Gary Community School Corp., the state’s other fiscally failing school district. The appointments made under Senate Enrolled Act No. 567 paved the way for the first state school takeover of districts.

The state’s Distressed Unit Appeal Board appointed Administrator Assistance as the emergency manager for Muncie Community Schools. The consulting firm is made up of retired Indiana school superintendents, business managers and teachers. The district, which opposed the state takeover, is designated a fiscally impaired district but it can avoid the more expansive distressed subdivision designation if it quickly turns around its fiscal condition.

Wilson Junior High School in Muncie, Indiana
Wilson Junior High School is among Muncie Community School Corp.'s facilities. The state appointed an emergency manager for the district.

“It was very clear that they were familiar already with the situation,” said Courtney Schaafsma, commissioner for the Indiana Department of Local Government Finance and a member of the DUAB. “And given then their background of being retired superintendents and school business officials, they would be able to quickly come in and get moving really from day one.”

The EM will manage efforts to implement the district’s deficit reduction plan and is charged with the goal of achieving financial stability. Based on the Muncie’s “fiscally impaired school corporation” designation, the EM’s powers will include the ability to negotiate and enter into labor contracts, set salaries and compensation, outsource services, close facilities, and sell or lease properties. The EM must sign off on spending, most contracts, loans, and hiring, and must report to the DUAB monthly.

If Muncie’s school district becomes financially stable by the end of this calendar year, the emergency manager will be terminated. If progress is not made by then, DUAB will designate the district as a "distressed political subdivision" and the emergency manager would remain but would assume all powers, authority and responsibilities granted to emergency managers of school corporations.

“There is no way that they are going to be able to get out of current financial deficit in six months,” Administrator Assistance's Steve Wittenauer said. “So our charge is to try to put together a plan to work out of deficit as soon as we possibly can.”

Muncie is struggling with a negative cash balance of $11 million that’s projected to shrink to $9.4 million by the end of the year. The district’s compounded structural deficit over the last decade rose to $23.7 million in 2016 and “cash flow is at a crisis point,” the district warned in a May 1 presentation to the DUAB.

In Gary’s case the DUAB announced on Monday that it is currently reviewing applications but did not release the names of the applicants or even the number of candidates, citing with state procurement rules.

The Board expects to hold a public hearing the week of July 10 for Gary city residents to evaluate the emergency manager proposals. Gary sought the state takeover.

Gary district remains more than $100 million in debt and has a $25 million hole in its operating budget. It enrolls 5,800 students this year, down from 8,900 in 2012-2013 school year.

The district is designated as a distressed political subdivision which specifies the powers and duties of a Gary district EM over finances and academics. The EM will hold broad powers over spending, contracts, hiring, and budgets.

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