Gary schools get $3.1 million state loan

Sept. 13--The emergency manager for the Gary Community School Corp. provided the state a look into what she found in the schools when she arrived in August as she asked for and received a $3.1 million loan on Tuesday.

Emergency manager Peggy Hinckley, a retired superintendent who works for the MGT Consulting Group, said her accounting team discovered the district had "no internal controls for anything" and continues to struggle to dig out of a $104 million financial hole.

"Our fiscal house is in disarray," Hinckley told the Distressed Unit Appeal Board in Indianapolis.

She said the district has operated on an antiquated payroll system that dates back 30 years. Many of its functions are done manually, she said.

"We heard there was ghost employment, but you have to prove that," Hinckley said. "When we came, human resources didn't have control of payroll or benefits."

Creating a new payroll roster is a key objective, Hinckley said.

School board President Rosie Washington and Superintendent Cheryl Pruitt sat in the audience but did not address the DUAB.

With money left from a previous state loan, Hinckley said, maintenance crews fixed leaky roofs and bathrooms and purchased toilet paper and soap. Money is also committed to fixing past fire code violations, noted in a recent inspection.

Hinckley said the district has lost about 500 to 600 students from last year. Its enrollment as of Sept. 8 was 5,114 students.

"Times $8,000, that's a lot of money," she said.

It amounts to between $4 million and $5 million since Gary receives about $8,000 from the state per student.

Part of the new loan money will go toward paying Cigna, the district's health insurance provider. The district's past debt to Cigna is between $3 million and $4 million. She said it pays it down each month but is unable to take advantage of possible lower rates because of the liability.

State Sen. Eddie Melton, D-Merrillville, a non-voting member of the DUAB, said he hoped the state would consider a steeper investment to Gary to stem the boomerang effect of the district returning to DUAB every few months and going deeper in debt.

"We cannot cut or loan our way out of this," Melton said. "We have to figure out a more proactive approach."

His comment brought a rebuke from state Rep. Milo Smith, R-Columbus, another non-voting DUAB member.

He said the state has made a substantial investment to Gary by hiring the emergency manager for the next three years. Smith pegged the amount at $10 million to $12 million, although the contract with MGT hasn't been disclosed yet.

"That won't be reimbursed. All taxpayers in Indiana are footing that bill," he said.

Paul Pastorek, Hinckley's chief of staff, said they're developing a strategy to cope with some 28 shuttered schools in the community. There have been fires in four of them since August, he told the DUAB.

Pastorek said one of the closed schools will serve as a depository for old textbooks and school records. He said transcripts at Lew Wallace High School were underwater in a basement.

As for academics, Hinckley said two schools are facing state takeover, and a team of retired educators were working with principals and teachers.

"We have five schools in one or more categories of single-digit achievement -- 95 percent didn't pass the state assessment," she said.

"It's a daunting task," Hinckley said. "However, we've found many, many people in Gary that want to find solutions and see the corporation improve."

Carole Carlson is a freelance reporter for the Post-Tribune.

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