WINTHROP — It will take better budgeting to get the town’s school system out of the financial hole it’s been in for several years, an auditor told Town Council and residents on Monday.

Bill Hall, an accountant and audit manager with RHR Smith & Co., answered questions about his firm’s preliminary audit for the town, which projected a deficit of $420,000 for Winthrop Public Schools when the fiscal year ends on Sunday.

The deficit is because of unfunded summer salaries, which are payments to employees in July and August for work done in the past year, and was exacerbated by revenues coming in lower than the school department anticipated.

The town will have to advance the school department the money to pay summer salaries, leaving the town’s surplus lower than recommended. The problem will recur next year and in the years to come until the school department can budget to pay the full amount in the year in which the salaries and benefits are earned.

“If the town is healthy, it can help out the school by funding its salaries, but the town is not healthy enough to do that,” Hall said at a Town Council meeting on Monday. “The school is going to have to work out this problem by itself.”

The school department has finished each fiscal year with a deficit at least as far back as 2009, Hall said.

After the meeting, he said that’s not a common situation in his experience. RHR Smith audits a few dozen school districts, and last year none of them finished the fiscal year in a deficit.

Hall said having a deficit can cause cash-flow problems — which in Winthrop’s case affects the entire town government, not just the school department — and does not provide for surplus that can be applied to future budgets to offset taxes, as many school districts do.

Gary Rosenthal, superintendent of Alternative Organizational Structure 97, said that starting this year, Winthrop schools will be able to redirect about $70,000 per year that’s now going toward debt payments. Over the course of the next several years, that money will be used to build up a fund to pay summer salaries from the budget in the year when they’re earned.

“This is not something new that we created when I came in, this is something that’s been going on for a number of years,” Rosenthal said at the meeting. “It’s something I feel we need to take care of, but we’re not going to do it in one year.”

Rosenthal became AOS 97 superintendent in August 2011.

Concerns raised by the Town Council and confirmed by the preliminary audit’s findings have delayed the approval of Winthrop’s school and municipal budgets. Earlier this month, the council approved two continuing resolutions so the school system and town government operate at the same level of funding through July.

The school board may cut about $202,000 from its budget to make sure the budget is tax-neutral for Winthrop residents. But that number could change.

“Before we start recommending any cuts to the board, we want to make sure that our revenue picture is clear,” Rosenthal said. “We don’t know at this point what the Legislature’s going to do.”

The state budget approved by the Legislature would provide more state subsidy to Winthrop Public Schools, but Gov. Paul LePage vetoed it on Monday.

Rosenthal said he does not think further job cuts will be needed to reach a tax-neutral budget.

Susan McMillan — 621-5645
smcmillan@mainetoday.com