Otago secondary school principals are starting to feel the financial "pinch" as the implications of the Ministry of Education's change to quarterly roll counts begins to take effect.
One principal believes the new funding system could eventually force some schools to close some classes mid-way through the year.
In previous years, operational funding for pupils in years 9-13, in all state and state-integrated schools, was provided on the basis of school rolls submitted to the ministry in March and July.
However, changes to the school funding system this year means operational funding will be allocated using quarterly roll counts.
Funding for each quarter will be based on a roll count, taken the month before funding is due.
Education Minister Anne Tolley said quarterly roll counts were introduced to ensure funding was more accurate, and directed to where it was needed.
"I'm sure taxpayers will be astonished to find out that schools have previously received funding for students who are no longer attending.
"This change provides an incentive for schools to retain students. If students are at school and engaged in learning they have a much higher chance of gaining qualifications and skills.
"It will also mean schools which enrol students during the year will now receive funding for them."
To ensure school funding increased overall in 2011, a 4% increase was applied to school operational funding in Budget 2010 and a further 2.92% in Budget 2011, she said.
Otago Secondary Principals' Association acting chairman and Kaikorai Valley College principal Philip Craigie said the new system was "most unfair" and it would impact on some schools more than others.
"The irony of it is, you are penalised for being successful.
"If we get pupils into a job, an apprenticeship or further training, we consider it a success.
"Schools where pupils finish their year early to go into employment or further training courses will lose funding."
Mr Craigie said funding cuts meant budgets to buy more classroom materials may have to be postponed, and in the worst case scenario, if a school lost enough pupils, it could be forced to close classes mid-way through the year.
"When you lose money, it makes things tougher. Something's got to give."
Given that Kaikorai Valley College had the highest number of pupils in Otago finishing school early to go into employment, Mr Craigie said the worst case scenario was a very real possibility.
"We will be one of the biggest affected," he said. "We knew it was coming, but now we are starting to feel the pinch.
"Our third funding instalment was lower than we budgeted for and it's having a significant effect on our budget."
Mrs Tolley said schools had experience in managing costs and anticipating roll counts, and they would not suddenly lose a lot of money they were expecting.
"This change will mean they get funding for the actual amount of students who are in classrooms.
"Any savings will go towards off-setting the cost of initiatives which improve the transition between school, tertiary education and employment, such as the Youth Guarantee, Trades Academies and Service Academies - 4000 young people who were at risk of disengaging from education will be taking part in these schemes this year."
