State lawmakers want to figure out how to identify and help school corporations before they fall into financial distress.
Monday a study committee heard about possible ways to evaluate a district’s income and debt.
The state’s Legislative Services Agency, a bipartisan legal analysis group, offered different indicators and methods to analyze those indicators, such as outstanding bond debt and income, to figure out if a district is fiscally sound or trending into trouble.
The analysis, the LSA report says, could be used as an early warning system for school corporations that may be heading toward financial distress.
The report found that 40 percent of public school corporations operate with deficits. The largest deficit found is 34 percent of the district’s total expenditures.
Recently the state hired emergency managers to take over financial operations at Muncie and Gary school corporations. The managers are charged with sorting out debt and determining a path forward for the financially struggling districts.
Sen. Eddie Melton (D-Gary) authored a resolution in the 2017 General Assembly calling for lawmakers to explore ways to avoid intervening in any more school districts.
Melton, in a testimony to the committee, told lawmakers they need to understand how past state policies, such as property tax caps, can negatively impact the financial health of a district.
Melton wants the state to offer help, not act as oversight of how local districts operates.
“The goal is being able to identify those issues and figuring out how to best aid and assist,” he says. “Be it with the technical assistance and prevent any type of repeat as what happened in Gary or Muncie.”
Melton says he wants to learn more about the Legislative Services Agency’s report before commenting on it.
“This resolution is needed to ensure that we are being proactive rather than reactive about issues that may be detrimental down the road,” says Alesia Pritchett, executive director of Business Services at the School City of Hammond. “This is the perfect time to start looking at what will happen or else we’ll be seeing a lot more districts with emergency managers.”
As classes in the Gary and Muncie school corporations began this academic year, private managers were already in control of each district’s finances.
Peggy Hinckley, the state-hired emergency manager for Gary Community School Corp., says the district will need state loans on a regular basis to maintain operations. The district is facing a $1.7 million monthly deficit.
The Indiana Distressed Unit Appeals Board endorsed a $3.1 million loan to Gary schools to help pay bills.
Muncie faces an $8.5 million general fund deficit. This past spring, the district closed three elementary schools and cut about 35 teaching jobs.