GARY | The Gary Community School Corp. will likely get a $15 million interest-free loan to pay down its debt.
The Distressed Unit Appeals Board met late last week and unanimously approved a plan to recommend to the State Board of Finance a $15 million loan from the state common school fund as allowed by IC 6-1.1-20.3-6.9.
Sources say after a full presentation by the school district's financial adviser, Jack Martin, a Michigan-based financial turnaround specialist, and discussion, DUAB unanimously approved the loan.
The Gary Community School Corp. is $23.7 million in debt and is having trouble paying vendors and teachers. It has total debt of nearly $92 million.
That debt includes more than $7.1 million in taxes and interest due the IRS; $4.15 million owed to NIPSCO; $730,000 owed to AT&T; about $1 million to Illinois Central Bus Co.; and $440,000 owed to the Gary Sanitary District.
Martin said the loan will be used to pay critical vendors to continue services.
The school corporation had 146 retirees and 49 resignations. The exact number of certified and non-certified staff who were laid off still is being calculated as some people were called back to work.
A new law gave the district a chance to work with the Distressed United Appeals Board and select a financial specialist to take control of the district's budget, sharing responsibilities with the Gary Community School Board and the city. It selected Martin.
The new law allows DUAB to delay or suspend any payment of principal or interest to the Common School Fund. The board has the ability to recommend the State Board of Finance make an interest-free loan to Gary schools from the Common School Fund.
In September, the Indiana State Board of Accounts issued a report saying it could not determine if the school district's bank balances and spending reports are accurate. They expressed concern whether the district could continue because of the significant number of negative cash balances.
Other issues in the audit report include the school corporation's lack of documentation for employee pay rates and hours worked, the comingling of federal grant awards with other school district funds and the submission of inaccurate financial data to the Indiana Department of Education.
A couple of years ago, IDOE also declared Gary a "high risk" district, which allowed the state to oversee Gary's federal grants.