Soaring health insurance costs combined with deep cuts in state aid could force Island taxpayers to bankroll a regional high school budget that's nearly 12 per cent higher than this year.

School leaders have already trimmed $532,000 from a draft operating budget of $11.7 million, but fear they may have to propose further cuts to make the budget palatable to voters at annual town meetings in the spring.

"The next step is to cut teachers out of the classroom. It's the only place to save money for the towns," regional high school principal Peg Regan told members of the school committee this week.

Parents will feel the sting either way. Cuts made this week would institute a fee-based system for many extracurricular activities, requiring students to pick up the tab for joining freshmen sports teams, ice hockey and some clubs. That would save the school $60,000.

Another $27,000 cut from the budget would bring an end to the Saturday morning detention program, the school's primary deterrent for chronically tardy students. The dean of students position would also be eliminated, slicing another $66,000 from the budget.

Mrs. Regan and other school finance staffers began scrambling to pare down the budget when they learned that the state planned to cut more than $350,000 from their aid package and that insurance premiums will rise by more than $200,000 next year.

School employees receive full health coverage and pay just 25 per cent of their medical insurance premiums, leaving the taxpayers to pick up the remaining share - almost $10,000 a year for each school employee who opts for a family health insurance plan.

Overall, insurance costs are expected to climb 22 per cent by next year, from $1,149,212 to just over $1.4 million.

With costs increasing on one end of the budget, the income stream from the state is starting to dry up after three years of hefty checks from Boston. The state, faced with dwindling revenue in the current recession, is cutting aid for transportation to the Island high school from $715,000 to $577,000. Chapter 70 funds will fall from almost $2.3 million to $2.06 million.

The dark financial outlook for the high school comes at a time when enrollment numbers at the school are flattening but employee compensation - especially for adminstrators - is rising.

High school enrollment has hovered around 800 students for the last three years. The current census counts 806 students at the high school. Last year, the school budget was up by only five per cent, nearly all of that due to teacher salary increases already negotiated.

But six months ago, the regional school committee voted to give additional pay raises to much of their administrative staff. The upshot is that even in the midst of belt-tightening, some administrators will still enjoy paychecks next year fattened by as much as 14 per cent.

Vineyard schools superintendent Dr. Kriner Cash is slated to earn a base pay of $129,423 next year, up from his current salary of $118,294. With a two per cent performance bonus on top of that, his pay could top $132,000.

Budget figures show that Mrs. Regan's salary would go from $94,925 to just over $100,000 a year, and vice-principal Doug Herr would see an increase from $92,730 a year to $106,538.

Despite increases in health insurance and pay for administrators, the operating budget for the high school is up by only six per cent. The lack of state aid is fueling the increase in how much the school will need to assess towns.

This week, Mrs. Regan expressed concern about making any more budget cuts in a year when the regional high school is undergoing its 10-year reaccreditation.

"As a principal, to start ripping programs as it enters accreditation is very damaging to teachers' morale and to the whole school," she said.

Mrs. Regan pointed out the school hired five new teachers in the last three years to reduce class size and to stem the rate of dropouts. School leaders also budgeted extra funds for students who couldn't pass the state MCAS exam.

These efforts, she said, have helped students graduate and demonstrated the commitment of the high school not to leave any students behind.

"This is what gets kids across the stage at graduation," she said.

But school committee members are still wrangling over how much budget cutting they can support. Tim Dobel, the school committee member from Oak Bluffs, said a double-digit increase in the high school budget would be "staggering" for voters in his town.

To trim the budget more will mean pink slips for teachers, said Mr. Cash. "We're seeing some pretty hefty cuts in here, and as a responsible educator, we don't want to cut anything," he said.

School leaders looked to the elected committee members for direction. They must certify the budget by Dec. 9.

George Schiffer of the Tisbury finance committee, a longtime critic of school spending, told the school committee this week there's room for further reductions in the budget.

"You still have a course in microwave cooking here, and as long as there are things like that," he said, "you've got things to cut without hurting the education you offer."