,42 Schwinn Motor bike Gears Not in Alignment

I built a track racer from a '42 Schwill 24" ladies bike and it came out awesome. I went through the engine and sorted out any issues it had before running. The only thiong is that the gear on the crank sticks out about 1/8" from the clutch gear. I couldnt get the small gear off to see if I could push it back but no go.
Anyone see this issue before? Is there a way to line the gears up by shimming or lathe work?

Thanks! I will shoot some pics and post.