A nine-page report published on the School City of Hammond’s website earlier this month warns immediate action is needed to correct the district’s current financial direction.
The report, compiled by Indianapolis-based MTW Consulting, was requested this fall by the Hammond School Board, outgoing board member Cindy Murphy said.
The board wanted to evaluate the district’s preparedness for the 2020 tax cap deadline and the likelihood of being placed on a new watch list issued by the Indiana Distressed Unit Appeal Board, the same agency responsible for the state’s takeover of Gary and Muncie schools.
“In simple terms, we have a serious cash flow problem," Murphy said.
Last year, Hammond schools finished in the red for the first time in a decade with a general fund deficit of more than $1.3 million, according to Indiana Department of Education records.
But Marvin Ward, author of the MTW Consulting study, said Hammond is taking steps to right its deficit and can consider itself better prepared financially than other area districts.
“The two headline-grabbing schools are Gary and Muncie,” Ward said, “But Hammond is a long way from that.”
Hammond has been challenged in the last year with declining enrollment. The district lost 545 students last year, about 300 more than anticipated. If that trend continues, Ward’s report estimates Hammond schools will lose more than $1.8 million in state funding next year.
At a Dec. 19 School Board meeting discussion of the MTW Consulting report, outgoing board Secretary George Janiec noted that enrollment could easily trend in the opposite direction and cautioned the public not to overreact.
“This board has always been effective at being able to provide a balanced budget, provide the services, and to provide the pay necessary to retain current teachers,” Janiec said.
Ward’s report recommended Hammond schools create a reduction task force to consider school closures and consolidations. This fall, the school city convened a committee of teachers, administrators and Hammond residents to do just that. The committee met in five four-hour-long meetings, Murphy said, and presented its ideas for consolidation in a Dec. 11 public work session.
The district also is working to transition more employees to a high-deductible health plan, which Ward said could save the school tens of thousands of dollars, considering the MTW Consulting study found Hammond schools pays about 3 percent more than the state average in employee wages and benefits.
Ward said these steps taken by Hammond schools show positive signs that could keep the district off DUAB's financial distress watch list, created in the last legislative session. Because the watch list is so new, school administrators across the state are watching closely to see how the state will determine districts to be in financial distress.
DUAB is expected to select districts in need of a corrective action plan by June 2019 and work with selected school superintendents to carry out the plan. Any that do not could be at risk of being added to the DUAB watch list. The state's goal, according to legislators, is to identify and remedy potential issues before they become insurmountable and thereby avoid further state takeovers of school districts.
“Hammond realized they have budget issues, and they’re taking steps to address those budget issues,” Ward said. “If they end up on that watch list, they can clearly document that they’re taking steps to right their financial situation.”
Murphy expressed concerns the ideas presented in the Dec. 11 public work session — many of which proposed the closing of multiple Hammond schools — could not be implemented quickly enough to meet the state’s June 2019 corrective action plan date.
“They put in a lot of hours, a lot of thought, a lot of discussion,” Murphy said of the Hammond study committee. “But these are only ideas.”
She said the district now needs to focus on establishing a strategic plan with realistic goals for closing schools.
“You have to forecast this stuff,” Murphy said. “We have to get it out there.”