From 2016, State Sen. Earline Rogers talks with Eddie Melton, then a candidate for state senator. Melton won the senate seat replacing Rogers, who was retiring from office.

More than money needed to fix Gary's school debt

Contributed By:The 411 News

To solve its financial problems, the Gary school district took a 3-prong approach. Ask voters for a property tax increase. Ask the City of Gary for a share of its TIF (tax increment financing) districts’ funds. And ask the state legislature to eliminate or write-off its debt.

Its request to the state is being formulated in several bills in the current session of the Indiana General Assembly. At Friday night’s meeting of its legislative committee, State Sen. Eddie Melton gave the Gary Board of School Trustees details of two bills being considered in the senate.

Together, the bills by Sen. Melton (SB564) and Sen. Luke Kenley (SB567) seek help from the state’s Distressed Unit Appeals Board, Dept. of Education, and Dept. of Finance to restructure the school corporation’s debt and provide new interest free loans. Melton is a co-sponsor on Kenley’s bill.

Board member Carlos Tolliver had questions about the emergency manager in Sen. Kenley’s bill. “The emergency management model hasn’t work anywhere else. They had 6 in Detroit and each one increased the debt. Why should we expect anything different?”

“If not done correctly, it could look like Detroit. It depends on how it’s implemented,” Melton responded. “Let’s revisit the legislation that brought Jack Martin here.”

Sitting next to Melton at Friday night’s meeting was Earline Rogers, his predecessor. Rogers added language to the 2015 Indiana budget bill giving the school district a $15 million loan. The district would be given a fiscal specialist, selecting from a list of three provided by the state. It stipulated that the fiscal specialist, the school board, and Gary’s mayor must work together to help relieve the school district’s financial crisis.

The relationship between Martin and the school board has soured. Board member and legislative committee chair Nellie Moore described Martin as telling “alternative truths.”

“When Martin was selected, everyone wasn’t involved,” Melton said. Rogers added, “The mayor of Gary should have been involved in the selection, but she wasn’t. I think that was a mistake.”

Sen. Melton asked the district to “take control over the narrative” and tell its story to legislators.

“You have to tell what you have done over the years to address the debt. You have made cuts, closed schools. That story has to be shared downstate. They don’t know. Right now, they’re looking at what hasn’t been done based on his [Martin’s] recommendations,” Melton told the board. “Don’t let that happen again. Everyone in this piece of legislation has to be involved; you have to be at the table.”

Rogers commended the freshman senator for finding an ally in Sen. Kenley, a Republican and chairman of the senate’s powerful appropriations committee. She applauded his approach of pointing out the state’s fiscal policies and the practices of the school corporation as the root causes of the district’s financial distress.

“This is a shared accountability. I couldn’t just come to the table with the board didn’t do this or the board didn’t do that.” Sen. Melton said that has been his narrative to downstate legislators.

“Policies the state has implemented over the years and I’m not even mentioning the tax breaks to the steel mills” have impacted the school district’s revenues, Melton said. Adding to that loss were the tax caps, charter schools and vouchers. “We have experienced an exodus of 40% of our students now attending charter schools.”

A 20 percent loss in population since 2000, abandoned buildings not on tax rolls, a property tax collection rate between 30 and 40 percent, and with a debt of $101 million, Sen. Melton described it as unprecedented for an Indiana school district.

The senator then turned to the district. “This is what legislators look at downstate – reports from the State Board of Accounts.” He read, “In 2015 the State Board of Accounts pointed to multiple findings of mismanagement by the school corporation and the board.” The SBoA found inadequate records for cash and investment balances, not enough evidence to reconcile balances with bank deposits, and inadequate time and attendance records to account for payroll disbursements.

A Lake County tax official reported to Melton, “The district has been spending like it was collecting all of its property taxes and as if there were no tax caps.”

The district is in debt to the state for $30 million in common school fund loans. It has a $50 million bond debt. It owes $8 million to the IRS and owes other creditors. The district anticipates a shortage in operating funds of $8.5 million for 2017 and $6.7 million for 2018.

Both bills would reduce the roles of the superintendent and the school board in governing the school corporation. And both limit the superintendent to academic and curriculum duties.

Melton wants a 3-member fiscal management board, one each appointed by the school board, Gary’s mayor, and state school superintendent. That board would appoint a fiscal manager to carry out the day-to-day operations and programs of the district. His bill sets benchmarks of financial improvements within a 5-year timeline ending July 1, 2022 to get the district in financial health. “Ultimately, by meeting those benchmarks, I would like to see some common school fund loans forgiven,” Melton said.

Kenley proposes the DUAB designate the school district as a distressed political subdivision and appoint an emergency manager to handle all financial matters of the school district instead of the superintendent and school board. The emergency manager would rely on support from a 3-member fiscal management board, one that Melton also proposed.

Both bills require the school district managers to work out payment agreements with creditors.

Not only must the board look out for student education, Sen. Melton said, the board has a responsibility to the taxpayer.

Each bill will have to get senate approval before it goes to the house for more discussion. “We still have a long way to go, all the way to April 29 when the 2017 legislative session ends,” Melton said.

Story Posted:02/14/2017