MANCHESTER — A plan to use $350,000 left over from a city bond issue to hire more teachers in the Manchester School District is illegal, the Board of School Committee has been told.

The legal opinion wipes out more than half the money the board targeted last week to rehire about a dozen teachers laid off in June.

Struggling with overcrowded classrooms, the school board wanted to use money left over from bonds authorized for parking improvements at the district headquarters to pay for teachers. But using money from a long-term loan to pay for teacher salaries runs afoul of state law.

The state Municipal Finance Act provides that a community “shall not issue bonds or notes to provide for the payment of expenses for current maintenance and operations.”

The law also provides that local government bonds can only be used for the reason specified when the loan was authorized and can't be used to fund something with a useful life shorter than the repayment period.

“We can't use the money to pay for computers either, since the life expectancy is less than the 20 years of the bond,” said Mayor Ted Gatsas, who cast one of two votes against the plan.

Gatsas has consistently voted against, and vetoed, the use of what he terms “one-time money” to pay operating costs in city departments.

The city authorized the borrowing for its share of the cost of upgraded parking facilities at 195 McGregor St., where the city bought condo space for school administration offices in 2010. The parking project was scaled back.

At its meeting last week, the school board combined the unused portion of the bond with “reallocation” of federal special education funds to earmark $650,000 to rehire teachers.

The mayor has called a school board meeting for a week from Monday to discuss any suggestions for reducing the number of district classes that enroll more students than allowed by the state.

Gatsas said he welcomes putting any possible solution on the agenda for the Sept. 24 meeting.

“I think it's wide open; we need to have solutions on the table and discussions so we can get a reasonable decision made,” the mayor said. “We will have discussion about reducing the credits for graduation from 22 to 20.”

Cutting the credits required for graduation from one of Manchester's high schools could reduce enrollment by eliminating students returning for a fifth or sixth year of high school to earn a diploma.

Thomas Brennan, school superintendent, is expected to report back to the school board on the number of students attending high school for longer than the traditional four years.

The schools are under an Oct. 1 deadline to cut high school class sizes to within the maximum of 30 set by the state. Candia and Hooksett have threatened to walk away from the agreement to send students to Manchester if overcrowding continues.

Gatsas said he prefers to work with the out-of-town districts.

“In the past, we have had conversations; we had a special committee three years ago,” Gatsas said. “I hope we can come to a common understanding.”

Gatsas said he has not had any further discussions with the union representing teachers concerning contract concessions to save teaching jobs.

“My door is always open,” Gatsas said. “If they call, I'll give them the time.”

The teachers union membership previously rejected proposed health benefit concessions to save money that could be used to save teaching jobs.

Manchester Education Association President Ben Dick has said the union membership is within its rights to reject a proposal to modify an existing contract.

In the meantime, Brennan continues to use his newly won authority to adjust curriculum and staffing to balance class sizes. The superintendent last week transferred teachers to the Henry Wilson Elementary School to reduce class sizes.