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The City Council urges a tougher budget plan than the one recently offered by the superintendent.

By KELLEY BOUCHARD Staff Writer August 21, 2007

Portland school officials must fix their own budget problems and develop a more aggressive financial management plan than one recently offered by Superintendent Mary Jo O'Connor, city councilors said Monday.

It was the first meeting of the council and School Committee since the city's finance staff took over the School Department's finance office on Aug. 2, after School Finance Director Richard Paulson resigned.

The city's finance staff is working with School Department accountants to reconcile an estimated $2.5 million deficit in the $82 million budget that ended June 30. They're also examining the current $85.7 million budget to determine whether it will have similar problems with overspending and revenue shortfalls.

O'Connor and City Manager Joseph Gray Jr. presented a written and signed agreement that limits the responsibilities of the city's finance staff in helping the School Department over the next two months.

The collaboration could last longer, especially if city officials decide to consolidate the two finance offices.

The agreement stipulates that Ellen Sanborn, the city's budget director, and her staff will provide financial oversight, assistance, analysis and advice to the superintendent and the School Committee.

Sanborn also will supervise the work of the School Department's four accountants. However, the superintendent and the School Committee will remain responsible for overall management of school finances.

Despite that caveat, City Councilor Jill Duson said she is concerned the new agreement will allow the council to infringe on the School Committee's autonomy in managing school finances, which is required by law. The council sets the school budget's bottom line and the superintendent and School Committee decide how to spend it.

Duson described the new agreement as a potential takeover by the council. She said it would be inappropriate for the city's finance staff to do more than help school officials get their budget back on track and leave them to run things.

"It puts our finance staff in an impossible position," she said.

Councilor Cheryl Leeman said she's concerned the city's oversight of the School Department's accounting staff won't be enough to correct financial management problems that led to the deficit.

O'Connor offered a financial plan two weeks ago that calls for providing more frequent and detailed financial reports to the School Committee. Leeman said it's not enough.

"Somebody still has to process the information out of the School Department," Leeman said. "Consolidation of financial functions doesn't give us that guarantee At some point we're going to hand the ball off. Are you going to be able to pick it up and run with it?"

Later, Leeman said, "Our credibility has been ruined At some point we have to repair that damage."

Lori Gramlich, School Committee member, agreed with Leeman and noted that the committee has hired an attorney, Bryan Dench of Skelton Taintor and Abbott in Auburn, to investigate the deficit and find out who's responsible. Dench's report is due Sept. 6 but could be completed sooner.

John Coyne, School Committee chairman, said he will release the report to the public as soon as he receives it. Coyne also said the committee is developing a financial management plan based on several factors, including the superintendent's financial plan.

Part of the $2.5 million deficit will be covered by $1 million in surplus school funds. The remainder will be covered by the city's $20 million reserve account, which must be repaid to maintain Portland's high financial rating.

The committee is preparing to reduce spending this year and next year to repay the reserve account. O'Connor said she is working with her staff and the teachers' union to develop cost- cutting proposals.

Some possibilities may be discussed Wednesday at the committee's meeting...