BELFAST – The school district’s red ink has raised red flags at City Hall.

With the city already paying 58 percent of SAD 34’s annual budget, the likelihood of having to kick in more to cover a looming deficit has City Manager Terry St. Peter anxious.

He suggests in this week’s manager’s report to the City Council that the city meet with officials from the communities making up the school district to see if they could find ways to cope with the financial sting of the district’s solution to its money problems.

The district plans to borrow its way into the black.

“While the school district is separate, and municipal officials have no voice in the school district’s budget, the city and towns are the ones that collect the money for the schools, and the current situation is likely to have a major, major impact on next year’s tax rate,” St. Peter advised the council.

The SAD 34 board last week agreed to ask voters in Belfast, Belmont, Northport, Morrill, Searsmont and Swanville for permission to borrow $834,326 to erase the projected deficit. The vote is scheduled for March 14.

St. Peter noted that, for the city, the $834,326 deficit followed on the heels of an 8.1 percent increase in the city’s portion of the school budget. In 2005, city taxpayers contributed $6.2 million as their share of the $19.6 million school budget.

St. Peter said that if the borrowing proposal wins approval, the city’s share of the budget is bound to increase.

“That money obviously will have to be paid back in future years, on top of ongoing increased expenses,” he said.

The school administration attributed the deficit to under-budgeting in areas such as medical and workers’ compensation, unforeseen spending demands brought on by staff illnesses and the need to hire additional substitute teachers and overruns on the East Belfast School construction project.

There were also situations where nonbudgeted people were hired at the beginning of the school year and that money from the 2005-06 budget was used to make up for overruns from the year before.

Superintendent of Schools Bob Young recommended in December that the school board consider eliminating more than 30 positions as way to fend of the deficit. The board rejected that proposal.

The board also rejected an offer from the Belfast Education Association to give back days in the form of loan. The union had proposed giving up one day’s pay for the rest of the year, provided the district agreed to repay the money in its next budget.

The board’s solution to the deficit was to approve a spending freeze, eliminate a few part-time positions, lower the thermostats and institute three across-the-board furlough days between now and the end of the year. The employee association rejected that proposal by a vote of 142-13.

St. Peter urged the council to consider holding a meeting with members of the representatives of the SAD 34 board and officials of the member towns to explore what created the deficit, what the impact will be if the measure fails in referendum, and what the impact will be if the referendum passes.

“We should know what the plan will be for the future, or help develop a plan for the future if there isn’t one,” he said. “I think the school district’s attorney should attend so that the legal ramifications could be explored as well.”