Saying that Alexandria cannot afford to spend less money on its schools and stay competitive, School Superintendent Robert W. Peebles proposed last night that the city's school budget be increased by 6.9 percent to $55.98 million for the fiscal year 1986.

"We have many children coming now that used to go to private school," Peebles said, indicating that enrollment is on the rise for the first time in more than a decade.

"We have a huge influx of refugees -- 15 percent of our student population is from foreign countries -- they have greater needs, so we have more costs," he said.

To maintain the current ratio of 25 students to one teacher, Peebles estimated, Alexandria would have to hire about 15 new teachers in the coming year. He has requested $400,000 for the new positions.

The budget request calls for raising teachers' salaries by an average of 5 percent. Last week the Education Association of Alexandria, which represents most of the classroom teachers in the city, agreed to that figure.

No teaching jobs are slated for elimination. The school system, with about 11,000 students, grew by about 2.5 percent in the last year.

At present, the total spending proposed for next year exceeds the $55.98 million figure presented last night by $130,000, but Assistant Superintendent William F. Leonard said he is committed to finding a place to cut the money in the next few months.

"We are going on the record with the lower figure," he said. "We just have to sit down and decide where to cut."

The budget needs the approval of the School Board and the City Council. City Manager Douglas Harman has issued guidelines for the school system that call for a 6.5 percent spending increase in fiscal 1986.

The City Council has also recommended that pay raises for city employes not exceed 3 percent. Although the City Council does not have the authority to force the School Board to limit its salaries, it is responsible for approving the total budget.

"This is an election year in the City Council," said Pam Walkup, head of the teachers association. "The tax rate is high in Alexandria and that is a hot issue. There will be a lot of pressure to cut our budget."

Alexandria's teachers are among the best paid and most experienced in the state, according to Walkup. The average salary is $29,000.

In his budget statement, Peebles said, "We must offer our teachers salaries that are competitive with neighboring systems. The teacher shortage is becoming critical in this area. We must attract talented teachers to our classrooms . . . We cannot do this if we offer beginning teachers $1,000 less than Arlington and Fairfax counties, our closest neighbors."

Peebles acknowledged that the schools would have to cut somewhere in order to raise salaries and increase staff positions. He proposed a freeze on capital development within the system.

The cost of transportation will decrease slightly because of consolidation of bus routes, said Board Chairman Lou Cook.

Peebles also released results of the Science Research Associates

Most Alexandria students scored in the 5th and 6th deciles, above the national average, according to Jim Akin, who is in charge of planning and research for the school system.

Students in Fairfax County average higher, normally in the 70th and 80th deciles, Akin said. But he said that where schools in both jurisdictions have students with similar socioeconomic backgrounds the results of the SRA tests are nearly identical.

He added that Alexandria scored better this year than last year and better in the early grades than in the older grades. tests yesterday. The standardized tests are used as a tool to measure ability and achievement in grades one through eight and in grade 11 throughout the state.