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Last year's deficit is now pegged at $2.1 million, and more overspending is projected for this year.

By KELLEY BOUCHARD Staff Writer September 26, 2007

The Portland School Department spent $387,000 more on grant-funded programs last year than it received, pushing the district's deficit to more than $2.1 million, School Committee members learned on Tuesday.

City finance officials have nearly completed a full accounting of the district's grants, so they were able to update their August report, which showed that the School Department overspent its $82 million budget by $1.73 million.

Committee members also learned that some parts of this year's $85.7 million budget, which started July 1, are on track to be overspent by at least $300,000 unless school officials take steps to reduce costs elsewhere.

Budget areas already heading for the red include bus maintenance, special education, teachers' pay increases and, possibly, legal fees related to the ongoing budget crisis, said Ellen Sanborn, the city's budget director.

"It doesn't give you any cushion," Sanborn warned.

Sanborn said the committee is moving in the right direction, having already put a hold on filling 12 positions that will save $520,000 if they remain open.

She said more spending reductions will be necessary in the coming months to make up for the $2.1 million deficit and comply with the state's new school consolidation law.

Benjamin Meiklejohn, the School Committee's finance chairman, noted that the budget information Sanborn provided at Tuesday's finance subcommittee meeting was months earlier and more detailed than anything committee members received last year.

"It gives us a lot of time to plan ahead and adjust the budget," Meiklejohn said.

It's unclear how the $387,000 deficit in grant spending occurred, said Sanborn, who has overseen school budget matters since the district's finance director, Richard Paulson, resigned on July 30.

Sanborn said school officials may have expected larger grants than they got or failed to use available grants by certain deadlines. The deficit occurred in two grants, one for multilingual programs and another for children of migrant workers. Both grants have since expired, Sanborn said.

Sanborn gave committee members no paperwork related to the grant deficit. She said the accounting of grant receipts and expenditures is largely complete but some smaller grants remain outstanding. Portland receives about $7 million in federal grants each year.

Sanborn noted that the district's grants had a negative balance of $586,000 in the 2005-06 school year, but the School Department had excess revenue to cover the difference.

Part of the overall $2.1 million deficit was covered by $1 million in school reserves, Sanborn said.

The rest will be paid from the city's $20 million reserve account, which the School Department must replenish within two years to maintain Portland's high credit rating.

The School Department must have a deficit recovery plan to ensure the city gets low interest rates when it borrows money early next year for its annual $10 million capital improvement program.

For the same reason, the city must develop a similar recovery plan to account for paying the recent $1.2 million settlement of its legal dispute with Scotia Prince Cruises.

"We have to show (bond rating agencies) that we are financially viable and that we plan to be so in the future," said Duane Kline, city finance director.

Both recovery plans are expected to be done in late November, when the district must submit its cost-cutting plan to the state to comply with the consolidation law.

To meet that deadline, interim Superintendent Jeanne Whynot- Vickers and other administrators are looking for long-term savings and cost-sharing initiatives throughout the district.

Budget areas under inspection include transportation, special education, maintenance, administration, professional development and high school staffing, said Whynot-Vickers, whom the committee named last week to replace Superintendent Mary Jo O'Connor,...