ENNIS - The Ennis School Board accepted the resignation of Superintendent Doug Walsh in a heated Wednesday night meeting that lasted more than two hours.

The superintendent, who has been accused of fraud, misuse of public funds and collecting unearned benefits, had planned to step down after construction was completed on a new $9 million elementary and junior high school. Walsh will step down June 30.

Walsh and school board members set aside $4 million in property taxes levied for adult education and transportation funds for the construction of the school. Montana Attorney General Steve Bullock recently found that money raised in that way must be used in ways directly related to adult education and that spending it on the school was inappropriate. Construction was completed last week.

"Hopefully everyone can see that the system is here for the kids first and the community second," Walsh read from a prepared statement during the meeting. "Those who argue that the boards, past and present, didn't do the correct thing only need to look at what was just built."

More than 70 people lined the hallways and packed the classroom - which normally holds about 20 or 25 students - chosen to host the meeting.

The crowd was subdued until board member Gary Croy finished reading a list of goals the board hoped to achieve in the current school year, resulting in a complaint from David Kelley.

The comment from Kelley, who had a lawsuit against the board dismissed last fall, spurred shouts of him "spreading poison" and other taunts that brought a police officer into the room to keep an eye on the crowd.

The school board had voted in August to extend Walsh a two-year, $105,000 contract. He had previously been working under two contracts, getting paid a total of $108,000 as a part-time superintendent and part-time bus supervisor. Walsh was hired to those positions in 2001 after a brief retirement. After stepping down that year, he received retirement benefits in addition to his part-time salaries.

The Montana Teachers' Retirement System has concluded that Walsh and the Ennis School District owe the state more than $760,000 combined for retirement benefits Walsh was not entitled to.

It was unclear how Walsh's resignation Wednesday would affect whether he drew retirement benefits. Marc Glines, board chairman, said after the meeting that he wasn't sure but believed that since Walsh left of his own volition that the benefits would not be affected. Glines stated that because Walsh is resigning, the board would not conduct an evaluation of his performance. He also stated that he came to this conclusion himself with no board vote.

The school board plans to work with the Montana School Boards Association in its search for a new superintendent.

The conflict over funds used to build the new school and the amount of money owed the state for Walsh's past retirement did not factor into his decision to tender his resignation Wednesday night, Walsh said after the meeting.

"I've always had this" plan to leave after the school was built, Walsh said.

He also commended the community, saying, "folks have been great" during his time in office.

Several teachers spoke passionately about Walsh's integrity and the good he brought to the school system. A group of five students wrote a letter in support of him that was read during the meeting. About half the crowd greeted the letter and those that spoke with a standing ovation.

The other half of the crowd sat and brought up points of democratic process - no vote was taken on the property tax levy used to drum up the adult education money - and implored the board to be more open with their operations.

No one was thrown out, however, and all left amiably and without incident.

"(It) went a little easier than I thought," Glines said.

Information from the Chronicle's archives was included in this report

Jason Bacaj may be reached at jasonb@dailychronicle.com or 582-2635.