By Erick Johnson, Gary Crusader
State Senator Eddie Melton on Tuesday, September 12 was rebuked during a meeting in Indianapolis with the Distressed Unit Appeal Board, where he expressed concern after Emergency Manager Peggy Hinckley received a $3.1 million loan for the struggling Gary school district.
The meeting provided a glimpse into the problems that critics say legislators knew about all along, but did not do enough to stop a spiraling crisis in Gary schools. Now, critics are saying the state is beginning to listen only because Hinckley is in charge.
At the meeting it was a tense moment in the room at the Indiana Government Center Building where the five-member DUAB announced its decision to grant another loan to the district during a meeting live streamed on its website.
The move was the first big financial move by Hinckley who was appointed as the Gary School district’s emergency manager in July. Hinckley works with the Florida-based MGT Consulting Group.
With over $100 million in debt, the district has been unable to pay bills and was forced to borrow millions from the state to make payroll, during the 2016-2017 school year.
With School Board President Rosie Washington and Superintendent Cheryl Pruitt watching silently in the audience, Melton, a non-voting member of the DUAB, said he hoped the state would consider a steeper investment to Gary rather than have the district returning to Indianapolis every few months for loans that will sink the Gary school district deeper in debt.
It’s a concern that for years has been echoed by critics, who say the Republican-majority state legislature has not done enough to help the Gary school district as property tax revenues and dwindling enrollment became a problem that was beyond their control.
Melton, a Roosevelt graduate, has fought for the Gary school district since he was elected in 2016, replacing political veteran Earline Rogers, who retired after 34 years in politics.
His speech at Tuesday’s meetings signaled the beginning of a heated battle to address the underlying root of problems facing the Gary school system, which many critics say is the lack of commitment from the state.
“We cannot cut or loan our way out of this,” Melton said. “We have to figure out a more proactive approach.”
That’s when state Rep. Milo Smith, R-Columbus, another non-voting DUAB member stepped in and rebuked Melton.
Smith said the state has made a substantial investment to Gary by hiring the emergency manager for the next three years. The state’s contract with MGT Consulting hasn’t been disclosed yet, but Smith estimated the amount to be between $10 million to $12 million.
“That won’t be reimbursed. All taxpayers in Indiana are footing that bill,” he said.
In an interview with the Crusader, Melton said, “I think it’s a typical response from an individual on the side who feels money and resources is not the issue, but they are the issue. No matter who gets put in the place, the district will need the funds to get out of this predicament.
“The state has not done enough to help Gary schools,” Melton continued. “I’m grateful for the assistance, but the state is much more accountable to the fiscal state of all schools in Indiana.”
At the meeting, Hinckley, a retired superintendent said her accounting team discovered the district had “no internal controls for anything” as it struggles to dig out of a $104 million financial hole.
“Our fiscal house is in disarray,” Hinckley told the Distressed Unit Appeal Board in Indianapolis.
Hinckley said the district has operated on an antiquated payroll system that’s three decades old. She said many of its functions are done manually.
“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.”
Hinckley said creating a new payroll roster is a key objective. She said there is money left from previous state loan. Hinckley said with money left over, maintenance crews fixed leaky roofs, bathrooms and purchased toilet paper and soap. Hinckley said there are also funds to fix past fire code violations, noted in a recent inspection, where all 12 Gary schools had violations.
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.
Gary schools receive about $8,000 from the state per student.
Hinckley said some of the $3.1 million loan will be used to pay Cigna, the district’s health insurance provider. Hinckley said the district’s past debt to Cigna is between $3 million and $4 million
Hinckley’s chief of staff, Paul Pastorek, said they’re developing a strategy to cope with some 28 shuttered schools that remain vacant in Gary. He said four of the abandoned buildings have had fires since August. Hinckley said transcripts at the closed Lew Wallace High School were underwater in a basement.
