SOUTH KINGSTOWN –– The Cranston public schools’ top brass defended their fiscal management yesterday as a courtroom clash with City Hall over millions in local education aid stretched into a third day.

Schools Supt. M. Richard Scherza testified that the 2007-2008 education budget, at the heart of the trial, was lean.

“There was not a lot of fat,” he said, under tough questioning from a city lawyer.

The quality of the school district’s fiscal management is shaping up as the central issue in the long-awaited trial.

The School Committee sued the city for $4.9 million in May, claiming it did not receive enough cash to adequately run the district for the fiscal year that ended June 30.

The city shot back with a legal filing of its own –– asking for a court order directing the schools to live within their budget.

Superior Court Judge Judith C. Savage, who is now hearing the case in South Kingstown, where she is assigned for the summer, approved a consolidation of testimony in the two cases. And the trial kicked off last week.

Ronald F. Cascione, the schools’ lead lawyer, has tried to portray district officials as cost-conscious stewards of taxpayer money who have been shortchanged by City Hall.

City lawyer Matthew T. Oliverio has painted a picture of incompetent fiscal managers in the central office and a School Committee unwilling to make painful cuts.

Those themes were on display again yesterday.

The schools called Joseph A. Balducci, the district’s chief financial officer, to the stand in the morning.

Balducci testified that the district collected budget requests from individual schools and various departments totaling about $135 million for the 2007-2008 fiscal year.

Administrators and the School Committee, he said, eventually trimmed the budget by some $9 million to get in line with the City Council’s appropriation, which includes city, state and federal dollars.

In the end, at the end of the fiscal year, Balducci said, the district came up about $4.5 million over budget –– a little less than the $4.9 million the district was projecting when it filed its lawsuit, known as a Caruolo action, in May.

The district could have filled that budget hole, he said, if the city had given the schools their fair share of a 5.25-percent property tax hike for the 2007-2008 fiscal year and the state had come through with an anticipated $1 million boost in education aid.

But Oliverio took the chief financial officer to task for the way he handled the budget.

Under cross-examination, Balducci acknowledged the schools built the presumed $1 million jump in state aid into the budget even though the state’s education commissioner, Peter McWalters, warned districts in February 2007 not to count on an increase from Smith Hill.

Oliverio also suggested the schools made a number of false cuts to balance the budget –– anticipating a drop in health care expenses, for instance, when costs had shot up for several years in a row.

And he hammered Balducci for failing to institute a series of fiscal reforms recommended by a consultant in 2004.

Scherza took the stand in the afternoon and spoke, at length, of attempts to rein in costs in the midst of the 2007-2008 fiscal year –– leaving some vacancies unfilled, cutting off funding for field trips, lowering the thermostat at district buildings and other belt-tightening measures.

He also sought to expand the legal debate beyond a strict accounting of dollars and cents.

Scherza suggested he has a legal duty, as superintendent, to fight for programs for schoolchildren –– even if he stretches the budget in the meantime.

But Oliverio pressed the superintendent on his obligation, under state law, to live within the school district’s appropriation.

Balducci and Scherza were the third and fourth school administrators to take the stand in the case.

Raymond L. Votto Jr., the district’s chief operating officer and Peter Nero, the assistant superintendent, testified Friday.

Votto testified that the district made significant staffing cuts in recent years.

But Oliverio suggested the schools could have been more aggressive in trimming its workforce and negotiating larger employee contributions to health care coverage.

Nero touted the district’s cost-saving moves to consolidate elementary schools and move sixth graders from middle to elementary schools.

Oliverio noted that the sixth-grade move goes into effect for the 2008-2009 fiscal year, not the 2007-2008 fiscal year at the center of the trial.

And he suggested the district should have moved more quickly.

The city scored a psychological victory Friday before Votto and Nero took the stand.

The school district had hired a pair of consultants, Thomas E. Sweeney Jr. and Walter Edge, to conduct a review of district programs and expenditures in preparation for the trial.

Oliverio has highlighted the limitations of that review, noting that it did little to identify fat in school programs –– an extra administrator here, a stray secretary there.

On Friday, Savage suggested the point had resonated. She pressed Sweeney, with questions of her own, on why the schools had not pursued a more probing audit of its programs.

Without that kind of audit, she suggested, it would be difficult for the court to pinpoint an appropriate award –– if any –– for the schools.

dscharfe@projo.com