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State takes full control of Muncie (Ind.) school district

Indiana's Distressed Unit Appeal Board designates the deficit-ridden district as a "distressed political subdivision."

The Distressed Unit Appeal Board in Indiana has voted 5-0 to take full control of both finances and academics at deficit-ridden Muncie Community school district.

The Muncie Star Press reports that although the district has made progress toward achieving financial stability, members of the appeals board decided it wasn't enough. So they designated the district as a "distressed political subdivision," which puts Muncie in the same boat as Gary Community School Corp.

The Indiana General Assembly enacted special legislation earlier this year that required the appeals board to appoint a state-appointed emergency management team of private consultants to help the financially struggling Muncie district.

The legislation also stated that before the end of the year, the appeals board had to either terminate the emergency management team or give it full control of the district’s academics and finances.

Appeals board member and state Sen. Eddie Melton, said Muncie had made some progress fiscally but “remains in a difficult situation” and "state assistance is still needed.” Six months of state-appointed emergency management was not really long enough to get the mission accomplished, Melton said.

Steve Wittenauer, co-founder of Administrator Assistance, the emergency manager of the Muncie district, says the state takeover will have a “stabilizing effect” on the school district.

Micah Vincent, director of the state's Office of Management and Budget, supported the state takeover because of his concerns about declining enrollment in Muncie and the district's mismanagement of a $10 million bond issue.

Administrator Assistance will supersede the school board and superintendent effective Jan. 1. It will remain in charge until at least June 30, when the appeals board could appoint another firm to manage Muncie.

Muncie closed three elementary schools this year and reduced administrative, teaching and staffing costs. It employed a new bus company that cut costs. With the help of the emergency managers, the district refinanced a large portion of its debt; began collecting retroactive insurance premium reimbursements from teachers; and reached an agreement with other school districts to speed up payments for tuition of special needs students.

In addition, the emergency managers raised revenue by selling three elementary schools and a middle chool, and they negotiated a collective-bargaining agreement with the teachers union that reduced annual health insurance costs by nearly $2 million.

As a result of the deficit-reduction efforts, the district is expected to end the year with a surplus of $2.3 million cash in the bank instead of what was projected six month ago to be negative cash flow in the millions.

However, the district still hasn’t dug itself out of the hole it created when it spent $10 million in bond revenue on operating expenses. Funds from the 2014 bond issue were supposed to be spent on badly needed improvements to school buildings.

Muncie District Treasurer Bob Coddington says it will take the district a quarter of a century to make up for the lost $10 million. The district and emergency managers say Muncie will need state legislative assistance to help eliminate that deficit.

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