Gary schools present $82.3 million 2026 budget; auditors and finance staff flag past misallocations and teacher-salary floor shortfall

The Gary Community School Corporation on Thursday presented a proposed 2026 budget of $82,300,000, up from $76,000,000 last year, while staff briefed trustees on recent audit findings and a shortfall against a state-required teacher-salary funding floor.

At the budget hearing, a district presenter said the increase reflects multiple cost drivers: a statutory rise in the teacher-compensation ratio now set at 65% (up from 62%), a 0.5% pay increase for licensed staff beginning Jan. 1, an expected 4% increase in medical costs, and an unconfirmed midyear rise in other compensation; the presenter said the district has cash balances that can cover a budget gap if state aid and tax revenue fall short.

The presenter said the Department of Local Government had reviewed the Form 3 and that the district does not plan new debt or a referendum for 2026. He also noted insurance proceeds for tornado damage at McCullough that an adjuster estimated "in excess of $2,000,000," and said the district's budgeted debt service payments were realigned into the 2026 plan.

Separately, the district's finance officer reported two prior audit findings tied to years of misallocated medical and benefit expense posted to clearing accounts rather than to the proper funds. The officer said the accounting team reallocated hundreds of line items, completed a corrective action plan, and received confirmation from the Indiana Department of Education (IDOE) and the State Board of Accounts (SBOA) that the corrective actions addressed the findings. "This will not happen again," the presenter said.

The finance review also reported cash balances through August: an education-fund ending cash balance of $23,152,428 and an operations-fund cash balance of $7,329,295. The district said it will distribute corrected slides to board members who did not receive them.

On statutory compliance, the district identified a teacher-salary funding-floor calculation under Indiana Code 20-28-9-27. The state's calculation produced an FY25 funding-floor amount of $16,306,944; the district reported FY25 expenditures for full-time teacher salaries of $15,901,241, leaving the district approximately $406,000 short of the floor. The presenter said the law does not count contracted services used to fill teacher shortages, and that IDOE is currently not including contracted-teacher costs in the funding-floor calculation. The presenter said there was no immediate penalty reported but the shortfall must be acknowledged and discussed publicly.

Board members and public commenters asked for greater transparency in board materials and for salary line-item detail to be included in future personnel reports and the board docs prior to meetings.

The board scheduled the budget-adoption vote for Oct. 23 at 1 p.m. at the district's central office; trustees said taxpayers who object to the proposed budget have a statutorily prescribed process to file an objection petition within seven days of the hearing.

The district said the Form 3 will be updated as needed before the Oct. 23 adoption vote and that staff would answer follow-up questions from board members in advance of that meeting.