Gary Schools Strikes Deal with IRS, Settles $7M In Debt

A new deal between Gary Community Schools and the Internal Revenue Service will provide some relief as leaders continue to address a complex financial situation. The deal comes as the state also considers another loan for the community’s schools.

The financial problems in Gary schools are far from solved, but emergency manager Peggy Hinckley says a new settlement releasing the district from nearly $7 million in debt with the IRS is a step forward.

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“We still have a long way to go, but I think that $7 million is a huge relief that we don’t have that as additional debt,” she says.

The district earned the debt after collecting federal taxes from employees but failing to pay the government. Hinckley says the district was working to pay off the nearly $8.4 million it owed the IRS in taxes and interest when she arrived last fall.

“The district was paying $10,000 a month against that debt, and the IRS had placed liens on all assets of the Gary Community School Corporation, including 28 closed properties, art collections, etc.,” Hinckley says. 

She says liens prevented the district from selling any of its vacant buildings, but the new deal means a payment of $320,000 from the district settles the money owed to the government. Now, she says the team will figure out which buildings to sell for a marketable price.

The State Board of Finance is also expected to approve $3.75 million more in loans for Gary schools this week. Hinckley says that money will go towards employee payroll in May and June.