Indiana Gov. Eric Holcomb is making an emergency $12 million loan to keep Muncie's school district operational a top priority in a special legislative he has called for May.

Holcomb said in a press conference on Monday that the district is in "dire need" of the state loan to ensure it continues to operate and complete capital projects. “This is time sensitive and cannot wait,” Holcomb said.

Eric Holcomb
Indiana Gov. Eric Holcomb wants lawmakers to prioritize a loan for Muncie schools in a special legislative session. Bloomberg

Muncie is under state emergency management. The loan would provide funds for capital improvements like heating and ventilation upgrades and roof repairs, which were supposed to be funded by $10 million of bond proceeds that the school district misused for operating expenses.

The Muncie district’s possible takeover by Ball State University won’t be a priority in the special legislative session.

“I am encouraging us to stay focused on what is urgent,” Holcomb said in a press conference. “I am trying to lead by example with an agenda item that I was unsuccessful getting across the finish line, and I am not putting on our to-do list for a special session. It can wait, as can other bills.”

“I think [Muncie Community Schools] have a really good emergency manager team that, when you see what they’ve done so far, it’s amazing. And I think if we get this loan it can really make a big difference,” State Rep. Sue Errington, D-Muncie, said in a statement.

Holcomb said he will call for a special session in mid-May, after the 2018 primary election. It will be the first special session since 2009 and the first during a typically less contentious, non-budget writing year since 2002. The cost of the special session could be more than $30,000 a day. “Whatever that cost is, is dwarfed by the cost of inaction," Holcomb said.

Holcomb predicted legislators would only need to meet for a few days and urged them to focus on Muncie and three other bills related to school safety, aligning state and federal tax policy, and complying with IRS rules.

Legislators ran out of time during the 2018 legislative session, which ended last Wednesday, to vote on a bill that would have provided the emergency state loan to the Muncie schools and also paved the way for a Ball State takeover. House Bill 1315 also included provision for the emergency management of Gary Community Schools District and set up a process for the state to monitor and assist other financially struggling school corporations.

The state in a first-time action took full control of the Gary district and partial control of the Muncie district last year. The state recently expanded its oversight of Muncie. Both Muncie and Gary are suffering from drops in student enrollment.

Muncie has a budget deficit of $12 million mostly created by the misspending the bond proceeds. The 2014 bond issue was earmarked for badly needed improvements to school buildings.

S&P Global Ratings downgraded the Muncie Community School bonds by one notch to BB-minus on Jan. 26. It had cut the rating to junk in August, lowering it to BB from BBB-plus.

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