The state board charged with overseeing Gary schools voted to extend its management contract with MGT Consulting Group while committing to focus on improving academics.

The state took over the Gary schools five years ago when the district was in dire financial trouble. Indiana lawmakers still don’t have a plan to return control to residents.

The private manager of Gary Community Schools received initial approval Thursday for a new two-year contract, worth potentially $7.4 million in state funds, to continue turnaround efforts in the cash-strapped, academically struggling district.

A financial consultant of the Gary Community School Corporation told state officials Thursday the districts operating deficit is now cut in half to $11 million.

Gary and Muncie schools were taken over for financial problems last year, and lawmakers sought a solution to prevent similar situations from unfolding elsewhere.

Legislation passed this year by state lawmakers directed Indiana's Distressed Unit Appeals Board to form a committee to determine which financial conditions should trigger a state review of school district finances.

Lawmakers passed a controversial school financial management bill earlier this year, and part of it requires a committee to create a list of risk factors for the state to watch, in order to protect more schools from fiscal distress.

The Indiana Distressed Unit Appeals Board unanimously recommended Thursday that the Gary Community School Corp. receive the state loan.

The state-appointed manager of the Gary Community School Corporation told state officials Monday the district faces less of a deficit than it did a year ago.

The district's chief financial officer said Gary was able to get the terms because the district is paying its bills on time.