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Muncie schools broke, face $11.5M shortfall

Posted at 6:44 PM, Apr 26, 2016
and last updated 2016-04-26 18:45:56-04

MUNCIE, Ind. -- Muncie Community Schools are in dire financial straits, according to a new letter from the district's superintendent.

Dr. Steven M. Baule sent a letter to parents, faculty and staff Tuesday outlining the projected $11.5 million shortfall the district faces this year.

Even worse, Baule said the district no longer has any remaining operating fund balance to allow it to make up the difference in deficit spending.

By the end of 2019, Baule said Muncie Community Schools are projected have a $37.7 million deficit.

"The projections show a dire fiscal picture for MCS unless it is able to make significant reductions in its spending habits," Baule said.

The numbers come from enrollment projections done by the Ball State Center for Business and Economic Research. Compounding the problem, an audit by the Indiana State Board of Accounts showed the district faces millions in unfunded obligations.

Baule said he and district CFO Deb Williams have met with numerous state officials, including Superintendent of Public Instruction Glenda Ritz and Gov. Mike Pence, to ask for assistance addressing the issue.

Baule said the district will have to find ways to dramatically cut operating expenses. Last July, the district said it may be forced to end bus service in three years. Voters rejected a 2013 referendum that would have provided more funding for the school bus fleet.

MORE | Muncie schools could end bus service in 3 years | Staff, students, alumni say goodbye to Muncie Southside High School

In 2014, the district consolidated Muncie Southside High School into the new Muncie Central High School due to budget constraints.

Baule also laid blame on the Property Tax Circuit Breaker Law pushed heavily by former Gov. Mitch Daniels, and passed in 2008, for disproportionately affecting Muncie schools – which, he said, have lost $14.2 million in the last four years due to the tax caps.

The law capped property taxes on homesteads across the state at 1 percent, and required local governments, including schools, to fund projects or additional operating funds through referendums.

"The negative impact of the Property Tax Circuit Breaker Law on MCS is potentially the most severe in the state," Baule said. "The DLGF projections for levies don’t take the circuit breaker into account. This year, MCS will lose more than $7.5 million in revenue, due to this law, including $3,005,942 in the Debt Service Fund. These losses will have to be made up from elsewhere in the budget. MCS’s bonded debt must be paid on time under Indiana law."

Below: Muncie Community Schools description of effect of tax caps on district revenue.

MORE | Circuit Breaker Caps Fact Sheet

Baule said Muncie schools have been asked to develop a deficit reduction plan similar to the one currently in effect in Gary.

"However, the corporation will have to find enough new sources of revenue, reductions and efficiencies to total at least $11.5 million," Baule said. "Some of these reductions have already been put in place to the scope of over $4.1 million in annualized savings. We are also working to continue to improve our partnerships with other local government bodies to improve efficiencies and reduce overall costs. Ultimately, MCS will most likely need to ask the voters for a referendum."