Seattle Public Schools managers overspent their $754 million school-rebuilding program because they weren't told that construction-levy money was coming up $6.5 million short, school-district officials said this week.

The problem, which occurred because managers lacked up-to-date financial information, resembles the school district's financial crisis of four years ago, when financial managers failed to match up revenues with expenditures and ended up $36 million in the hole.

The overspending adds to the deficit of a construction program already reeling from $10 million in inflation-related cost overruns. As a result, the School Board could scale back or shelve the last three projects.

The latest problem occurred in the Building Excellence program, in which two taxpayer-approved levies are paying for rebuilding and renovating 36 schools.

The building program's managers, Don Gillmore and Gary Baldasari, and the district's consultant, Heery International, have gotten high marks for completing projects on budget. But they were basing their budgets on outdated school-district estimates of how much money was coming in from the levies.

Those estimates turned out to be too optimistic. According to district records, a $356 million levy approved by voters in 1995 fell short of expectations by about $1.5 million, while the $398 million levy passed in 2001 is running behind by $5 million, with seven school projects left.

During a School Board work session Wednesday, the school-district facilities department's attorney, Ron English, said the consulting firm, Heery, was not at fault for overspending.

In an interview, Gillmore said the district's financial managers never told them that the levies weren't producing as much money as expected. "Gary and I always had revenue estimates, but it was always the same," Gillmore said. "We always took Accounting at their word that that was the estimate. Year after year, it was the same assumption for revenue."

Upset with the staff's explanation Wednesday, School Board member Mary Bass said, "I don't think anyone manages their pool of money like that."

Gillmore and Baldasari generally completed construction projects on time and within budget, said Edward Peters, facilities director at Edmonds School District and chairman of a committee overseeing the current construction program. He faulted higher-level decisions on capital programs for the overspending.

Since November, the board has chosen largely to keep intact projects under construction or going out to bid soon.

District officials have said there are two reasons the levies fell short of projections. Investment income steadily declined in 2001 as interest rates plunged. And collections on the total levy lagged.

If construction managers knew revenue was going to be lower, there may have been ways to reduce the scope of projects to stay within budget, Peters said.

It was not until a School Board work session last fall that Peters said he learned revenue was short by $5 million. By then, his committee had been in existence for about a year. Since that meeting, construction managers and the oversight committee have been getting accurate revenue estimates.

"The revenue bust was one that was not being reported to us," Peters said. "Every month we got a report that listed all the expenditures and balanced them to a revenue figure. It was always positive. It was always a good report."

English recommended to the board that it allow Heery to complete four projects under way: Cleveland and Garfield high schools, and Maple and Dearborn elementary schools. The district should stop work on three other projects — South Shore building; Hamilton Middle School at the former Lincoln High School; and the planned World School, which would house an orientation center for new immigrants — until the board determines their academic use, he said.

Substantial renovations were done at Lincoln last summer, English said. Because of that, he believes the district can transfer at least $10 million from Lincoln's budget to deal with cost overruns in other areas.

According to the latest report from the district's consultant, Heery, the latest construction levy would end up running a $9.5 million deficit. There's more than $40 million not spent or committed yet on the last three projects, records show. That money may be needed for other projects, including:

• About $10 million in overruns on the four school projects under way due to inflation in construction costs.

• Replenishing capital reserves used in prior years to close deficits in the operating budget.

Sanjay Bhatt: 206-464-3103