With a deficit of $1 million or more, Pittsburgh Ballet Theatre is considering downsizing or merging with another arts group.

The deficit, coupled with an ongoing search for a managing director to replace Steven Libman, who resigned in May, has left the ballet in a precarious position.

PBT reported disappointing sales for "Dracula" in October and "The Nutcracker" last month. The company, which has an $8 million budget, receives 58 percent of its total ticket sales from the Christmas warhorse. A day before "The Nutcracker" began its run, PBT asked musicians who play for its performances to take a 50 percent pay cut.

Subscriber renewals and single-ticket sales also were down 15 percent to 20 percent this season, said Jeanne Gleason, president of PBT's board.

PBT officials have met with the Pittsburgh Cultural Trust to explore a merger. The trust, which has a $47 million budget this year, owns three of the cultural district's four major venues, presents artists and performers and is building Downtown housing.

J. Kevin McMahon, president and CEO of the Pittsburgh Cultural Trust, said his organization offered assistance to PBT when Libman left.

"We said, 'Until you find a replacement, if there's anything we can do to help, let us know.' We've not officially taken on any specific job functions for the ballet," McMahon said.

The ballet is important, McMahon said, adding that, "We see the value in having a local resident ballet company in the community, and we want to do everything in our capability to help them thrive."

Pittsburgh Dance Council, which presents international and national dance troupes, merged with the Trust in 2002.

PBT participates in the Trust's shared services program, which saves six major arts groups money by purchasing, collectively, such things as office supplies, health care and direct mail marketing services.

Talk of a merger is not new. Last year, Nadine E. Bognar, the president of the Pittsburgh Opera board, asked Gleason if PBT would be willing to explore some type of partnership. Gleason told Bognar the PBT board was not interested. Gleason denied that PBT's leaders had met with Cultural Trust executives about a merger.

In the 1980s, local foundations funded the ballet by contributing several million dollars for operational support while PBT made internal management changes and planned for a capital campaign.

Eight years ago, PBT was facing a $2.4 million deficit and received a $5 million grant from the Howard Heinz Endowments. The money was given with the stipulation that PBT never go into debt again. Since then, PBT has done fiscal and organizational planning, said Terrence Orr, PBT's artistic director and interim managing director. He would not elaborate.

PBT angered some subscribers in February when it began a Premiere Circle Seating program. The program, which began in the fall, charged subscribers who held the best seats in Benedum Center from $150 to $250 per seat to keep their prime real estate. The additional money was to generate $140,000 that would pay for hiring more dancers and mounting new ballets. At least a few board members now say it was a mistake.

Orr said this week that the company recently completed a search for a managing director. Five candidates were interviewed and a job offer extended to one person, but the two sides did not reach an agreement.

"Those negotiations have been discontinued, but we will continue our search," he said.

The job description remains on the Web site of Genovese-Vanderhoof & Associates, an international search firm based in Toronto that is frequently hired by dance companies.

Despite its financial troubles, the company will complete its 2004-05 season, Gleason said. Orr said PBT considered canceling its appearances in March and April at the Joyce Theatre in New York City. PBT will spend $21,000 to rent the theater when it performs there later this year.

"We did contemplate canceling. We definitely didn't think about it for very long. Basically, we have done our fund-raising for it," Orr said.

When it tours, Orr said, PBT is an ambassador for the city.

"That's what this is really all about, for us to go to New York City and show that Pittsburgh is more than steel mills and the Pittsburgh Steelers, although I love the Steelers," he said.

Musicians who play for the ballet voluntarily took pay cuts in 2001 and 2003. The 50 percent pay cut that PBT requested recently would mean the 45 to 50 musicians would each receive $70 per performance instead of $140. The $70 fee would be well below the $120 house scale for musicians at Benedum Center, Heinz Hall and Mellon Arena.

Cynthia Anderson, who co-chairs the musicians' orchestra committee, said the musicians responded to the ballet's request in writing Thursday. Anderson declined further comment, saying negotiations were continuing.

Since 1997, PBT dancers, administrative staff and musicians have voluntarily taken layoffs of four to five weeks with no pay, saving the company from $500,000 to $700,000.

More layoffs are not the answer, Orr said.

"It makes it very difficult to run an organization when you have people who are on layoff," Orr said.

The company, which employs 125 people, has six principal dancers, six soloists and 18 members of the corps de ballet for a total of 30 dancers.

Kristine Sorensen Griffin, a member of the PBT board, believes the organization will survive and prosper.

"I'm very confident that the ballet is going to come out of this challenging time as a stronger organization, and we have a lot to be positive about. Our endowment is already at $9.5 million. We're one of the top ballet companies in the country and we have a staff that has excellent experience both on the administrative and artistic sides."