INDIANAPOLIS — The Gary Community School Corp. will continue to need state loans, likely on a monthly basis, to maintain basic operations, as the district's emergency manager works to increase enrollment and reduce expenses.

Peggy Hinckley, who was appointed six weeks ago to lead the financially struggling school district, told the Indiana Distressed Unit Appeals Board Tuesday that ongoing state support is necessary due to the projected loss of 500 students compared to last year and district financial records that are "in total disarray."

She said the district currently is running a $1.7 million monthly deficit that almost is certain to get worse based on the results of the upcoming student count date.

Each lost student costs the district about $8,000 a year in state funding.

Moreover, she said the district is trying to reduce the approximately $8.5 million in accounts payable to vendors and the IRS for expenses incurred prior to the state seizing authority from Gary's elected school board and giving near-total control to Hinckley.

Records show the district also owes $40 million for past state loans, another $40 million in private loans and $15 million on school construction bonds.

"This is an assessment time for us to figure out not only how did we get here in Gary, but (also) how we get out of it," Hinckley said. "We can't make enough cuts to eliminate all these issues."

In the meantime, the four members of the state's distressed unit board endorsed Hinckley's request for a $3.11 million Common School Fund loan to pay off overdue employee health insurance premiums and meet payroll through mid-October.

She indicated that her team from MGT Consulting Group expects to be back for more loans every month going forward until they can put in place a comprehensive plan that balances district revenues and expenses.

The September loan recommended by DUAB now must be officially authorized by the State Board of Finance, composed of the governor, state auditor and state treasurer, which is next scheduled to meet Sept. 19.

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Dan is Statehouse Bureau Chief for The Times. Since 2009, he's reported on Indiana government and politics — and how both impact the Region — from the state capital in Indianapolis. He originally is from Orland Park, Ill.