Town and school officials in Millinocket and East Millinocket are bracing for tough times ahead after their biggest taxpayer – Great Northern Paper Inc. – told a bankruptcy judge this week it won’t be restarting its paper mills.

The two towns, which were carved out of the wilderness a century ago, rely heavily on GNP for the bulk of their tax revenues. The company accounts for about 71 percent of East Millinocket’s tax base, or $3.43 million this year; and 54 percent of Millinocket’s tax base, or $4.4 million. So far the company has not paid any current taxes on its paper mills.

Without GNP’s tax revenue the ability of the two towns to repay loans they took out in anticipation of receiving tax revenues has been threatened, according to officials. The loans, which total about $3.6 million, are due June 30.

The problem has caused officials to reassess their budgets and the idea of combining area schools. School officials also are looking to top state education officials for help in case the towns run out of money.

This is typically the time of year when town and school officials begin preparing for the upcoming budget deliberations, but right now officials are more concerned about getting through June 30, the end of this fiscal year, without running out of money.

Gene Conlogue, Millinocket town manager, and Mary Morris, East Millinocket administrative assistant, are optimistic there will be a new owner for GNP’s idle mills. But both agreed Thursday the area could be in for some difficult times in the next few months.

“If the bankruptcy proceeding drags out and no relief from the court can be obtained on the payment of some of these taxes, the town’s financial position will be severely jeopardized,” said Conlogue. Morris agreed.

Because of the dire situation, Conlogue is monitoring spending closely. He is looking at possible cuts in the current budget. He said a more formal review of the town’s expenses would take place soon. The town has a $1.2 million tax anticipation note, but he said the town would be faced with a cash crunch by early June.

“We face some real challenges, but we have got to analyze these challenges and develop a plan to address them,” Conlogue said. “I’m not going to make a crisis out of it and I’m not going to react in a panic.”

Morris said East Millinocket’s department heads on Thursday were asked to obtain prior approval for all purchases and to avoid or reduce overtime. She said selectmen will continue to discuss ways to cut costs at future meetings. Before GNP filed for bankruptcy, selectmen were discussing 4 percent to 6 percent budget cuts and a thorough review of upcoming budget proposals. She hopes the town won’t have to tap into its $2.4 million tax anticipation loan for at least a few months.

Conlogue and Morris said they are concerned about their towns’ respective cash flows from July when the new fiscal year begins until new tax revenues start coming in.

“Recent events have temporarily put a real cloud over the area,” Conlogue said. “Basically, the mills are now in an operational coma, but will snap out of it when they get a new buyer, but the problem is we don’t know what the time frame might be.”

Meanwhile, school officials are taking a similar approach to the pending financial crunch.

“We are looking at every expenditure very carefully and we are postponing anything we can,” said Brent Colbry, Millinocket’s school superintendent. “That won’t completely solve the problem, but it will help. We are working on contingency plans for this year and into next year.”

Colbry said staff and students were asked to conserve energy by shutting off lights and computers when not in use. He encouraged staff and students to recycle more in an effort to save the town money on waste disposal fees. Also, the school department has reduced the price of admission to athletic events.

Sandra MacArthur, East Millinocket’s superintendent of schools, said a spending freeze implemented in November will continue. “We are not making any purchases that are not absolutely essential,” she said.

MacArthur said she would not fill positions that become vacant and had cut a third referee for boys’ basketball games. She said these actions were implemented after Christmas when the mill shutdown was extended.

School officials say the upcoming budget deliberations will be difficult.

“It is almost impossible to build any kind of budget at this time because there are so many unknowns,” Colbry said.

MacArthur echoed those comments. Both superintendents agreed the timeline for area school consolidation needed to be advanced.

“The kinds of things we had hoped to do with school consolidation – invest the savings into more offerings for students – probably won’t be possible,” Colbry said. “We will need that money to survive.”

But Colbry issued a warning. “Consolidation of area schools regardless of what form it takes is not going to solve all of the financial problems we are facing,” he said.