FOR years, the Amity Regional School District, which includes 2,400 high school and junior high school students in the affluent New Haven suburbs of Orange, Woodbridge and Bethany, had been one of Connecticut's most respected regional school systems.

But a report issued earlier this month by a special tri-town investigative committee charged that a budget deficit of $2.8 million was caused by top school administrators and school board members who improperly shifted and commingled money from different accounts and different school years.

The report accused the school board of fiscal mismanagement for, among other things, misspending money from a $2.85 million bond issue in 1998 earmarked solely to correct mold and fungus problems at Amity Regional High School. The findings have left the education community concerned, with many students, parents and educators worried about how the problems will affect the quality of education.

The district is in such financial trouble that residents in the three towns voted in a referendum to come to the district's aid by paying a special tax to save as many as 80 teachers' jobs. Now, the district is seeking a $29.5 million budget for next fiscal year and there is concern that voters, angry about how school funds were used in the past, may not approve it, further worsening the economic problem.
 
The committee determined there was possible criminal wrongdoing that is being reviewed by the New Haven state's attorney, Michael Dearington. The committee also recommended that nine of the 12 school board members resign.

Michael Lohne, the chairman of the school board, said he had no intention of quitting.

''There isn't anybody at Amity who isn't embarrassed by what has happened, but I believe we can now move forward and learn from the mistakes that have been made,'' Mr. Lohne said, adding that he ''welcomed a criminal investigation. Let them look all they want, I have nothing to hide. We're innocent until proven guilty.''

Many teachers are indicating they may leave and many parents are already applying to area private schools for their children because they fear that potential cuts in programs and teacher defections could leave the district in a mess by September.

''It's ironic because when we moved here 11 years ago it was because of the school system, and the local elementary school is still excellent,'' said Kate O'Brien of Orange, whose 14-year-old son, Liam, attends Amity Regional Junior High in Orange, but would attend the regional high school in September.

Like many other parents at Amity, Ms. O'Brien said she may send her son to a private school in the fall.

''We are seriously considering enrolling our son in a private school and have already submitted applications because we don't see how the debacle at Amity is going to improve any time soon,'' said Ms. O'Brien, co-chairwoman of Amity Community for Education, a tri-town political action committee.

Karen Shinkman, president of the Amity Education Association, said as many as 20 of the district's 200 teachers are looking for new jobs.

''Teachers are concerned because we want to just get back to the classroom and concentrate on teaching again,'' she said. ''But if a budget for next year doesn't pass, we don't know whether we will have the supplies and staff to continue to function as a viable school system. At this point there's just a feeling of complete uncertainty about what is going to happen next. That's resulted in a lot of people talking about leaving.''

Some have already left.

Joseph Campbell, hired four years ago as the school system's information technology coordinator, has taken a similar job in the Brookfield school system.

''I had to get out of there because of the complete lack of stability,'' Mr. Campbell said. ''They have already cut my funding so severely I cannot provide the vision that they hired me to create. I may be the first to leave, but I won't be the last.''

Jim Clifford, a social studies teacher, feared he could be out of a job if the board's proposed budget is not approved and the district is forced to make cuts.

''We thought the worst was behind us when the referendum was approved by voters in December, but now everything seems up in the air again,'' Mr. Clifford said. ''I left another school to come here because Amity was always known for its excellence in education. But right now the only thing Amity seems to be known for is this controversy.''
School administrators said they are trying to save the school system by placing strict controls on spending and implementing emergency programs that include intervention by a group of financial advisers.

''No purchase order goes through unless I sign off on it, and if there is no money in the account I don't,'' said Michael Nast, the interim school superintendent who was hired in January to replace the last superintendent, Rolf W. Wenner.

''We know it's not business as usual any more, and there's no denying the impact this has all been having on students, teachers, parents and the community,'' Mr. Nast said. ''But we still do have students to educate and we are trying to do that in spite of everything that has happened.''

After meeting with Theodore Sergi, state commissioner of education, Mr. Nast said he will be taking Mr. Sergi's advice and relying on help from the Connecticut Association of Business Officials to come up with new fiscal procedures for the district. He said he hoped they will both improve fiscal responsibility and gain trust from the community.

But even the strongest education supporters said they believed any budget the school board tries to present will be defeated in referendum, and that would mean reverting to the current year's $28 million budget and no increase in spending, which administrators said would actually mean a decrease because of rising budget obligations.

Critics of the district are vowing to defeat the budget as long as school board members don't resign and are threatening to make the budget vote a referendum on the school board itself.

''It's a sinking ship and there's chaos throughout the district,'' said Robert C. Sousa, a former first selectman of Orange.

''The only way to save the school system is for this school board to just go away,'' he said.

Student leaders said it's tough being part of the Amity school system because of the controversy.

''Many students and teachers are very pessimistic and worried because there is a very real possibility voters are never going to approve a budget and nobody knows what that's going to mean to programs and teaching staff next year,'' said Anthony Monelli, 17, a senior of Bethany. ''This entire school year has been like a roller coaster ride, but unfortunately we also know the worst could still be ahead.''

Some students said their faith in the adults running the school system has been shattered.

''Kids really feel that the board has let down our school system and has set a bad example for students,'' said Melissa Zoock, 17, a junior of Orange. ''We have always felt this was a great school system, but the school board is dragging us down and dragging down the reputation of the school. Kids are worried about how all this could impact programs next year and whether teachers might leave.''

Patricia Varanelli, Amity's director of pupil personnel services, said she ''never thought things would ever come to this,'' but she and other administrators have been meeting every week to prepare for a worst-case scenario that could include massive teacher defections and serious cuts to programs.

''We began the school year not knowing if we would be able to make up the big deficit discovered last summer and we got a reprieve when voters approved the referendum,'' she said. ''Now it looks like we're going to approach the end of the school year much the same way as we started out -- complete uncertainty about what happens next.''