The City of Portland could dip into emergency funds to address an $870,000 reduction in state support, the school’s chief financial officer says, but the district could face even bigger cuts down the line.

Portland needs to cut about $870,000 as part of a $12.6 million reduction in state aid for K-12 education under Gov. Paul LePage’s recent curtailment order, which trims spending across state government to balance the current year’s budget.

In a memo to Portland school board members outlining their options, Chief Financial Officer Michael Wilson said the $870,000 in cuts could be offset by drawing on the $2.4 million in the city’s general fund unreserved balance. The cuts affect the current $94.2 million budget for 2012-13.

However, he warns that “the state of the economy remains uncertain and . . . We thus may need our unreserved fund balance in future years, including in FY2014 where we face structural issues that drive a sharp escalation in operating cost.”

The school board did not discuss the memo at its meeting Tuesday night, but will take it up next week.

Wilson offered several other cost-cutting options:

• Freeze non-critical hiring, currently representing about $380,000.
• Freeze all grant-funded non-critical positions so long as it does not jeopardize the grant. He estimates that would save about $279,000.
• Review labor costs in general, though he noted that the 90-day layoff requirement means this savings could not be implemented immediately.
• Consider cuts through deferred maintenance or tightening energy costs. Wilson noted these costs are hard to control and would likely result in only minor savings.

Most of these proposed cuts could be authorized by Superintendent Manny Caulk, such as freezing hiring or deferring maintenance. However, a decision to dip into emergency funds would need to be approved by the board, and the city council.

“We face painful choices absorbing such a large cut so late in the school year,” Caulk said in a written statement. “Although we will try to minimize the impact of cuts on students, a large funding reduction forces us to consider difficult options.”

Caulk refused to say what his own priorities are for making any of the proposed cuts to Portland’s budgets.

Board Chairman Jaimey Caron said he expected the board will spread the cost of the cuts among the various options.

“The complicating thing for Portland is that it’s a difficult year next year, too,” Caron said Wednesday. “I believe it will be a combination of those things (in the memo) that will be used to meet the curtailment order.”

Portland Mayor Michael Brennan said he is still hopeful the Legislature could reduce the amount local municipalities have to give up under a curtailment. For example, Brennan suggested the state could use money from the state’s rainy day fund to pay for the education cuts. “My focus now is on talking to legislators to try and get it reduced,” Brennan said.

While there has been no public discussion among state lawmakers so far about reducing the amount of the curtailment order, Education Commissioner Steve Bowen is scheduled to address the Legislature’s budget-writing committee on Thursday about the cuts.

As for Portland’s proposed cuts, Brennan said he was meeting with Superintendent Caulk on Thursday to discuss the matter.

“At this point I remain hopeful that the Legislature will minimize and mitigate a lot of the cost shifting to local municipalities,” Brennan said. “I think it’s premature to make any hard and fast plans.”

Wilson also noted that the likely opening of a new charter school will cost the district about $500,000.

“The curtailment shows that this economy remains fragile. We continue to face rising costs and declining revenue. The struggle to find resources to support the district’s programs continues,” Wilson wrote.

“This new landscape means the district must take steps to stay competitive, and it needs to do so in a cost-effective way, given limited resources.”

Staff Writer Noel K. Gallagher can be contacted at 791-6387 or at:
ngallagher@pressherald.com