State takes full control of Muncie Community Schools
Seth Slabaugh
INDIANAPOLIS — The state’s Distressed Unit Appeal Board voted 5-0 on Wednesday to take full control of both finances and academics at deficit-ridden Muncie Community Schools.
DUAB members acknowledged during a meeting at the Statehouse that MCS has made progress toward achieving financial stability. But they said it wasn't enough. So they designated the district as a "distressed political subdivision," putting Muncie in the same boat as Gary Community School Corp.
The Indiana General Assembly earlier this year had enacted special legislation, signed by Gov. Eric Holcomb, requiring DUAB to send in a state-appointed emergency management team of private consultants to help the financially struggling Muncie district.
► RELATED: Former MCS administrator files lawsuit accusing superintendent of harassment.
The legislation also authorized DUAB, before the end of the year, to either terminate the emergency manager or give it full control of the district’s academics and finances — based on three criteria.
There seemed little to no doubt that the district met two of the criteria for it to regain control: 1) implement a deficit-reduction plan that 2) resulted in progress toward achieving financial stability.
The third criterion was more nebulous: that it was in the best interest of the students, the community, the district and its employees to return local control.
DUAB member Sen. Eddie Melton, D-Merrillville, started the discussion on Wednesday by saying MCS has 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.
State examiner Paul Joyce, another DUAB member, agreed, describing “strong progress” made by the district in the past six months but adding “we’re not there yet. We’re going to get there, I just don’t think we’re there yet.”
Micah Vincent, director of the state's Office of Management and Budget, supported the state takeover because of his concerns about declining enrollment at MCS and the district's mismanagement of a $10 million bond issue.
Vincent also noted the district plans to ask the Legislature for help in the upcoming session. "That's another item that makes me think the role of the state should be to continue to be involved," he said. "It's an element in favor of continued state involvement,"
"We agree more time is needed," said Kent Hatcher, the Indiana Department of Education's representative on DUAB.
Steve Wittenauer, co-founder of Administrator Assistance, the emergency manager of MCS, told reporters he thinks the state takeover will have a “stabilizing effect” on the school district.
He believes unfounded panic over the school district closing its doors fueled more enrollment decline.
Administrator Assistance, a consulting firm of retired Hoosier school superintendents and treasurers, will supersede the school board and superintendent effective Jan. 1.The private firm will remain in charge until at least June 30, when DUAB could appoint another firm to manage Muncie after soliciting proposals.
The Muncie school board opposed the takeover, but board Vice President Andy Warrner took it in stride.
"Whatever happens, Muncie is resilient," he told The Star Press. "It's never bad to have other people's opinions … Here is somebody (the emergency management team) who has no ax to grind, somebody who is coming in from the outside, someone who has expertise, that may come up with some good ideas and give us direction. In a way, it's a good thing to happen."
The Muncie Teachers Association, which has complained that the current administration at MCS has ignored the voice of teachers and taken a "slash-and-burn" approach to deficit reduction, supported the takeover.
MTA President Pat Kennedy said after attending the DUAB meeting: "My gut told me after all the public comments, how could they not seriously consider a takeover. We've already had a six-month mini takeover, and that has been a very positive experience."
MTA has welcome working collaboratively with the emergency manager, including on a new collective bargaining agreement.
"There is no reason not to just roll into this more-maximum support with the same positive attitude," she told The Star Press. Teachers want to "at least feel they are being heard."
Superintendent Steven Baule declined comment to The Star Press.
The district itself closed three elementary schools this year and reduced administrative, teaching and staffing positions. 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 attending MCS, all of which add up to millions of dollars per year in savings and increased revenue.
In addition, the emergency managers raised money for the district by selling three elementary schools and Northside Middle School, and they negotiated a new collective-bargaining agreement with the teachers union that lowered the district’s annual cost of providing health insurance by nearly $2 million.
“We’re going to be just fine,” the district’s treasurer, Bob Coddington, told the school board on Tuesday night. “Just fine. Well, not fine, but a lot better.”
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 months ago to be negative cash flow in the millions.
However, the district still hasn’t dug itself out of the hole it created by spending $10 million in bond revenue on operating expenses. The 2014 bond issue, which functions like a loan, was earmarked for badly needed improvements to school buildings.
Emergency managers have said the district can’t cut itself out of that hole. Coddington said on Tuesday night it would take the district a quarter of a century to make up for the lost $10 million. The district and emergency managers have said it will take state legislative assistance to help the district correct that crisis.
As opposed to cold relations between the teachers and the administration, the local chamber of commerce told DUAB members, the school district has created strong partnerships with many entities in the community, including the city of Muncie, Meridian Health Services, IU Health Ball Memorial Hospital, Ball State University, the YMCA and Boys & Girls Club.
Vincent, the DUAB chairman, said he was mindful of a perception that a state takeover could harm Muncie's reputation and economic development efforts.
He said DUAB also recognizes how important partnerships are between MCS, Ball State and other institutions in Muncie.
He called it "incredibly important" that DUAB hears what involvement Muncie institutions have with MCS, "what vision they have," so that the school district is placed on the best path in the long run.
He particularly would "love to hear from" Ball State — and others — but Ball State came to his mind first.
It is costing the state $3.25 million during the 2017-18 school year for the emergency manager it put in full control of the Gary school corporation. The emergency manager will be paid another $3 million by the state for managing the Gary district in 2018-19. The state will owe the emergency manager hundreds of thousands of dollars more if bonuses are achieved for things like improvement on test scores and an increase in enrollment.
The state agreed to pay Administrator Assistance about $300,000 for six months of emergency management assistance to MCS. Now that the firm is in total control, it will probably cost a lot more than $300,000 for the next six months. Vincent plans to start negotiating a new contract with the firm.