WARWICK — How did this happen?

It’s the question on the minds of many in the Warwick schools community in the wake of last week’s announcement that the district will face a projected deficit of between $6.2 million and $13.3 million next year. Warwick officials give different answers to explain it — a combination of finger pointing and frustration that suggests no one is quite blameless.

What is clear, however, is that the seeds of this threatened shortfall were planted years ago in the early days of the teachers contract dispute. Since then expenses have mounted, the result of limited state aid and the new tax cap — all but guaranteeing the current financial trouble.

It’s also clear that school officials ignored at least one major warning of the looming deficit: a 2006 report Mayor Scott Avedisian commissioned from the business-backed Rhode Island Public Expenditure Council that predicted the district would face a shortfall of $6 million within five years, even without a contract settlement with the teachers.

In 2003, months after the Warwick Teachers Union’s old contract expired and talks were failing to produce a new one, questions began swirling about how the district would pay for the eventual contract and whose job it was to start saving for that day.

City Councilman Robert A. Cushman, who at the time was the School Committee chairman, and current board Chairman Christopher E. Friel say that Mayor Avedisian did not include enough money in the schools’ budgets in the ensuing years — while a schools contract continued to elude negotiators — to help prepare for a settlement, and with it the likelihood of retroactive pay.

“We kept warning the city, this is going to hit some day and you have to fund it; you need to budget for it, you need to be proactive,” said Cushman, an Avedisian critic. The district, meanwhile, did its best to trim costs, he said, authorizing layoffs and making other cuts.

The mayor counters those claims, saying his yearly budget allocation did include money he hoped the School Department would set aside in anticipation of a contract. (Despite what School Committee members may have wanted, state law barred the mayor from telling the district what to do with the cash once he handed it over.) He notes that he also allowed the schools to keep their annual surplus in consecutive years and says schools chose to spend at least part of that money elsewhere.

School officials disagree, saying they held on to the surplus money year after year, rolling it over in anticipation of the eventual contract.

The issue came to a head in 2006 when Avedisian proposed withholding the School Department’s surplus of roughly $2 million, as he puts it, to ensure “that the district didn’t keep spending the money.” He also agreed to set aside an additional $750,000 for the contract.

The City Council ultimately elected to give the surplus money and the $750,000 to the School Department to help the district balance its budget in face of a possible deficit that year.

A month later, the School Department and the teachers union reached a $20-million contract settlement that would include three years of retroactive pay to be distributed over three years of the contract.

It was clear Warwick didn’t have enough money to cover the costs.

The mayor blames Cushman and the other School Committee members for negotiating the most expensive contract in the city’s history knowing that the district couldn’t pay for it.

Cushman argues that the teachers union contract was no more lucrative than other city contracts. The schools, he said, felt their backs were against the wall —– the three city high schools faced the threat of losing accreditations if the district didn’t settle the dispute.

“We ran out of time,” he said. “We did best we could when we looked at the whole thing.”

BUT THE CONTRACT is just one factor in the shortfall that is being projected. In 2006, while officials wrangled over finances, RIPEC released its report on the Warwick schools’ finances.

The 147-report described the system as bloated with administrative and facilities costs, spending far more than did neighboring Cranston, which has nearly the same number of students.

That report concluded that even without a teachers contract settlement, the system would run a deficit of a little over $1 million in fiscal year 2007, nearly $3 million in the current fiscal year, which ends next June 30, and a total of $6 million by fiscal 2011.

The School Department ultimately rejected many of the document’s findings. Then-Director of Business Affairs Robert W. Dooley issued a counter-report that disputed RIPEC’s analysis at almost every turn, calling its methodology flawed and its comparisons with other communities incomplete.

The report’s authors and the mayor stood by the conclusions. The schools, they said, were on the brink of serious financial trouble.

Those warnings went largely unheeded, and the size of the looming deficit swelled as revenues from state aid to education and Medicaid reimbursements dwindled.

Susanne Greschner, RIPEC’s director of policy and research and a co-author of the Warwick report, said this week that it was and continues to be critical for Warwick schools to develop a five-year financial forecast as a financial tool to avoid more shortfalls in the future.

“It is always our hope that our recommendations will be used or at least that a committee will be formed to look at them if not implement them,” she said.

The report also advised teamwork, encouraging city and the School Department to form a joint committee to discuss the report’s recommendations with the idea of brokering money-saving solutions, including the possibility of consolidating certain city and school services.

That committee did not meet until this fall, more than 18 months after the report was issued.

The city blamed the schools for the delay. The schools blamed the city.

POLITICS ASIDE, how will the city pay for the shortfall when the next fiscal year starts? The mayor made known this week that he will not draw down the city’s surplus to help bail out the schools as he did last year.

Supt. Peter P. Horoschak and Friel said they expect to make serious cuts on the School Department’s side of the budget to compensate.

The shortfall, they noted, does not take into account anticipated cost-saving measures including the possibility of closing schools or laying off personnel, both of which have been discussed in recent weeks.

But Horoschak and the schools’ current director of business affairs, Leonard J. Flood — both newcomers to the district — believe it best to keep the school community informed about the district’s woes, so families and personnel understand why cuts may be in store. It was Flood who made the dire financial forecast in a memo to the superintendent last week.

“I’m not going to blame anyone or assign fault,” Horoschak said of the deficit. “…One of the reasons I’m trying to be very open about our [financial] situation is I want everyone in the community to know what I’m facing, what we’re facing here.”

cneedham@projo.com