Cannelton schools 'running short of funds'

Superintendent works to spread debt payments over years

CANNELTON - "We are running short of funds," Cannelton Superintendent of Schools Al Chapman said Wednesday. "We're trying to work it out with the bank."

The bank, specifically German American Bancorp., doing business as First State Bank, filed a complaint with the Perry County Court Tuesday seeking repayment of $900,000 borrowed since January 2007.

Chapman said the school corporation had just received a tax draw, but owes banks $1.5 million. "We're working to resolve that," he said.

If that resolution isn't possible, "we are concerned about our ability to pay our teachers and the other bills we have to pay," Chapman said. The teachers asked him to meet with them about the situation, and he did that March 1, he said.

Jerry Smith, president of the Cannelton Teachers Association, did not return News phone calls seeking comment.

Chapman noted nearly $600,000 in personnel cuts were made to help get the corporation back on firm financial ground. He announced cuts in April 2006, when he anticipated $200,000 in state-funding cuts and the corporation owed $800,000 to the Indiana Bond Bank.

"Those were the first reductions in teaching staff they've had in years," he noted.

Circumstances working against the school system's financial solvency include continually delayed payments from the state, a phenomenon pushing many Indiana schools to borrow money to tide them over, and in Cannelton, debts arising from reporting more students to the state than are enrolled. A September report in the Morgan County Reporter-Times noted Hoosier school systems borrowed more than $236 million last summer, up from the approximately $41 million borrowed the summer before.

The school board serving in late 2004 adopted a recommendation from Chapman to begin borrowing from local banks instead of the Indiana Bond Bank.

Local interest rates were slightly higher, he noted, but the corporation could borrow money as needed, instead of having to borrow lump sums the bond bank required. He also pointed out school-board members could walk into local banks at their convenience to check the corporation's balances.

The board's vote at the time authorized borrowing up to $600,000 from Fifth Third Bank, where the corporation was conducting its routine banking.

Board members adopted in October a bond resolution intended to repay a $544,000 temporary loan to that bank, which had obtained a court judgment demanding repayment. Chapman said at the time he hoped payback could be extended over seven years.

He reported at a Jan. 16 meeting the state tax board had approved the sale of bonds, and he expected their sale to occur that month.

He reported at a meeting last month he was awaiting word from state officials about financial consequences of overreporting for the 2003-04 academic year, uncovered in a 2005 audit, which also said the count for 2004-05 was one student short.

Chapman was hired in June 2004, so the 16-student overcount, like others dating back to 1998, occurred before he arrived.

A News report about the February school-board meeting erred in saying in its headline the school corporation was caught inflating its student numbers "again." The overcount was discussed at a May 2006 board meeting, and reported by The News at the time.

Debbie Hineline, director of the Indiana Department of Education Office of Financial Management, Analysis and Reporting, said Friday the corporation owes $544,709 in state payments based on student population, and "our normal policy is to ask for repayment within 30 days."

"This is something that’s been going on a long time, and we’ve been doing a lot of cleanup," school-board President Christal Moskos said.

She said Chapman hired an Indianapolis lawyer last year in hopes of converting the short-term debt into long-term notes, leading to the attempt to sell bonds, and likened the corporation's financial situation to "some-one coming up to you and saying we want you to pay off your house today."

Note: The last six paragraphs of this story were omitted when this story was posted Monday morning. They have been included as of 2:10 p.m. Monday.