Changes in the timing of budgeting decisions and reallocations of resources forced some schools to cut basic services this year, a report released yesterday found.

The study by the Independent Budget Office, a nonpartisan city agency, investigated how a 1.6% reduction in initial allocations to schools for the 2004-05 year translated into cuts of more than 1.6% in funds for individual schools, and why, even when more money was infused into the system, some schools still received less than the year before.

“The cuts that many of the schools initially experienced arose from formula changes that shifted money between schools and between types of students,” the report says. “This reallocation of resources – even if done in order to distribute money more fairly – has the potential to result in the elimination of some basic services at some schools.”

Before Mayor Bloomberg took over the Department of Education, the Board of Education sent money to the offices of the community school districts, which in turn doled out money to individual schools.

When Mr. Bloomberg won control of the system, the department created a formula to distribute money directly to schools. It was based on such factors as the number of students, the number of special-education students, the number of teachers a school requires, and the amount of overhead expenses a school requires.

Although the city budget adopted in June included an increase of $570 million in funds for education, the department distributed $64 million less to schools over the summer than it had the year before. That is something the department’s chief financial officer, Bruce Feig, disclosed to principals in June.

As a result, in the initial school allocations, the per-student allocations of large schools declined by an average of 11%, and the per-pupil allocations of small schools declined by an average of 18%, according to the report.

When Albany approved its budget in August, granting $288 million in new education money to the city, the education department decided to distribute extra resources totaling more than $100 million to the schools.

Ultimately, the city sent additional money to individual schools, but because that money wasn’t distributed according to the formula, and because of changes in numbers of students, overhead costs, and other factors, some schools still received less money than they had the year before. Further, those schools whose funds were restored in late-coming allocations were sometimes unable to restore programs they had cut in the summer.

“Even if what the education department is doing is trying to work toward a better way of allocating funds to the schools, it can be putting some significant pressure on principals, and making it much harder for them to plan year to year,” said the Independent Budget Office’s chief of staff, Doug Turetsky. “That’s not to say that you don’t do it, but you have to recognize the difficulties that these kinds of changes create.”

He said in some cases principals eliminated positions or programs over the summer when they saw their initial allocations. When the city handed out more money before the start of the school year, it was too late to restore the programs, he said.

“It’s very hard for principals, who are being handed more and more responsibility over their individual school budgets to plan ahead, when it’s unclear how much funding they’re actually going to have,” he said.

The president of the principals union, Jill Levy, said, “We were out there, last year, trying to get the DOE to own up to some transparency to their expenditures and their budgeting of the schools.”

She said principals now fall into three categories – those who have less money than last year, those who have more money than last year, and those who have money allocated to certain programs that they have no use for but can’t use for other purposes. She said none of them understand why.

“It’s a mess, and nobody understands the basic allocations that they received, how they were determined, why they’re getting it,” she said. “It’s a mess.”

In a statement, the education department said the report was correct in most respects. But, it said, “The IBO report indicated that we had flexibility to increase school budgets prior to knowing the state budget. We did not have this flexibility.”

It explains, “The $570 million, for example, includes categorical funds, such as Title I, which are targeted to specific purposes. The $286 million, while flexible city funds, were allocated to cover collective bargaining, increased fringe benefits and other fixed costs.”