Responding to the referendum vote that affirmed the budget set by the Council, at tonight's Portsmouth School Committee meeting, the administration delivered a set of expenditure reductions and use of one-time revenues to balance the budget for the 2010-11 school year. And for a while, it looked like they just might have found a solution: by expending all Medicaid funds, emptying the fund balance, using one-time ARRA money, and taking the gate receipts from football and basketball, it seemed that the committee might make it through this year (although it would mean starting next year with a $982,000 structural deficit.)

There was only one problem: the PCC said they can't use the funds.

You heard that right. Those funds that the PCC said the school committee "discovered," and which they used as evidence that the referendum was unnecessary?

The position taken this evening by Larry Fitzmorris, President of the PCC, was that adding those funds would be illegal.

Follow me down the rabbit hole, if you will.

The first action the school committee took this evening was to formally adopt the budget approved by the Council and affirmed by Portsmouth voters at the referendum. Update: To be very clear, the vote to accept the budget was unanimous, 7-0. Since that budget produced a deficit, the committee, as required by law, then considered a deficit reduction plan.

"When you see this plan," said school committee chair Dick Carpender, "There is going to be the utilization of one-time money." He warned that some people would jump to conclusions: "They're going to jump up and say see, they had the money all the time. But although this gets us through this year," said Carpender, "This has a tremendous impact on next year." What Carpender was trying to make clear is that this was not found money; this money was budgeted in successive years to address the loss of ARRA funding and the impending state funding formula cut.

But in order to maintain programs this year, the committee considered using the entire Medicaid balance ($140K), the entire fund balance ($116K) and the entire 2010 ARRA one-time funds ($124K), for a total of $380K of of one-time monies. That's a far cry from the $700,000 that the PCC "bag of rocks" flier asserted that the schools had "discovered."

School finance director Mark Dunham also outlined expenditure cuts: a $15K reduction to supplies, $50K for one less school bus, cuts to art and music, middle school and JV sports, and $290K in "contractual adjustments." Taken together, the added revenues and reduced expenditures would balance the budget. Carpender added to the mix the idea of using the gate receipts, which are earmarked for athletics, to preserve the PMS and JV sports programs.

Supt. Lusi warned the committee that this was cutting things very close. "I just want to respectfully submit that additional costs can come down the pike," she said."If the goal is to empty out every last plus, when the minuses come along they will become increasingly difficult, if not impossible to manage."

By a 6-1 vote, with Cynthia Perrotti the lone "no," the deficit plan was approved.

The next item was the legally required notification to the Town Council and the RI Auditor General of their deficit reduction plan. And that's where PCC, Inc. President Larry Fitzmorris objected. His position was that the use of one-time money was illegal.

"The town council sets your budget," said Fitzmorris. "You guys don't get to set the operational budget."

Carpender asked about the PCC position in the runup to the referendum. "If the argument was, 'you have the money,' and now, you're going to stand up there and tell me we can't do that, why did you spend the last three weeks telling everyone in the world we could do that?" Carpender pressed him. "Is it your suggestion that we cannot go to the Council and they cannot change it?"

"Absolutely you cannot," said Fitzmorris.

Carpernder indicated one of the PCC's fliers. "In all these advertisements, where you said, they have the money, now you're saying we can't do this?"

"You're breaking the law," said Fitzmorris.

If I understand his argument, Fitzmorris was saying that because the Town Council sets the bottom line budget for the schools, and because that budget had been positively affirmed by the referendum, the addition of one-time revenues which would exceed the approved number was unlawful. And since the schools are required to have a balanced budget, it appeared that the only way to balance the budget would be through cuts to get to the bottom line.

Supt. Lusi asked. "Are you saying that the revenue, that you and other people said we had, now cannot be used?"

"No," said Fitzmorris.

"Then walk me through the steps," said Lusi.

"We all recognize that this fiscal year is very difficult," said Fitzmorris. "The school committee does not operate in a vacuum. The municipal departments lost $1.4M from revenue. We are in a financial crisis. This year has been a real bad year. If the school department wishes to do so, the school committee can manage its cost structures. Labor and health care are rising a bit faster than your revenue is, that's the core problem," said Fitzmorris. "If the administration wishes to solve the instabilities, you have an opportunity to do that."

Did he answer the question?

I didn't think so. Lusi tried again.

"Respectfully, the argumemnt was put forward that the school department had revenues," said Lusi. "I read the results of the budget referendum as saying no more taxes, and that it was felt that we should use the money at our disposal. Clearly, from your perspective, I got it wrong again."

"I didn't say you can't use the one-time revenue," said Fitzmorris.

But he didn't say how they could, either.

The school committee voted, 6-0, to proceed with the deficit reduction notification. Cynthia Perrotti abstained, saying "I don't understand."

I'm not going to bother putting a disclosure on this post. You know I'm running for the school committee, you know I supported the referendum. And while I was disappointed with the result, and very concerned about what the use of one-time revenue would mean for the budget next year, I could understand people making the argument. Use the one-time funds now, get through the year. And if that's what the people of Portsmouth want, then the school committee and administration need to respond.

And they did. They came back with the best plan possible under the circumstances. It wasn't pretty. Any budget with a million-dollar structural deficit going into the next year is pretty awful.

But to go through all that, and then have the PCC stand up and say, no, wait, you can't use that money either. You need to cut the full $765K.

That's just not right. I do not believe that's what the people of Portsmouth thought they were voting for when they chose Option 1.

Update: Added a line emphasizing that the vote to accept the Town Council/referendum budget was unanimous, 7-0.