AUBURN – Councilors on Monday leaned toward doing away with the Auburn School Department’s rainy-day fund in favor of tax relief.

School officials are considering using $631,000 in unanticipated revenue left from the 2008-09 budget to help fund the 2009-10 budget.

The schools are also expecting $461,000 in federal stimulus money passed through from the state. That’s money that state officials have cut from the school department’s revenues in the form of curtailments – about $90,000 per month since January 2009.

City Manager Glenn Aho suggested that at least part of that money should be put aside to maintain a rainy-day fund.

“Some might be used to bring them back to even with the current budget, but the rest could be put back into the fund balance,” Aho said.

School officials and city councilors agreed to create a school fund balance in 2004. School officials used $575,000 last year to balance the budget.

Aho told councilors it made fiscal sense to have schools keep some money in reserve.

“It’s sound fiscal policy to have some fund balance, to protect against revenue losses down the road,” Aho said. “When the schools have their own fund balance, it creates less liability for the city.”

Councilors didn’t vote Tuesday, but leaned toward leaving the schools without a rainy-day fund. Councilor Ron Potvin suggested letting schools spend part of the $461,000 stimulus in their 2009-10 budget and using the rest to reduce property taxes.

“Part of the state’s effort to fund education is to reduce property taxes,” Potvin said.

Councilors seemed to agree. Councilor Dan Herrick favored liquidating the school’s fund balance once and for all.

“This is just money that’s set aside and is just going to go right into the budget anyway,” Herrick said. “It’s just there so that they can intimidate city councilors to use it when the time is right. My suggestion is just let them use it now and just eliminate the fund. They’ll just end up using it next year anyway.”

Councilor Robert Hayes didn’t think it would help taxpayers much – but it would help students. Using $150,000 of that money to pay down property taxes would reduce the tax rate about seven cents, about $11.20 on an average home.

“Nothing gets my ire up more than when people point to some budget savings and pick it apart because it’s so small,” Potvin said. “That’s how we do it. We don’t have a silver bullet, a $5 million item that’s going to reduce the budget all at one. We have to do it 5 percent, 100 times.”

Councilors are scheduled to meet Wednesday for a quick meeting to sign the ballot warrant for the May 5 school bond referendum. They’re scheduled to continue reviewing the city’s budget afterward.

They’re scheduled to vote on the budget April 27.