After watching and waiting for the state Legislature to adopt a budget, local school officials have learned that, at least initially, they will not suffer the drastic cuts they expected from state funding.

But they are not out of the woods yet. Some administrators say more cuts could come in the second half of the year as state officials try to cover huge deficits caused by the economic downturn.

By law, all school districts in the state must pass a budget by July 1, even though they did not know how much Sacramento would contribute to education this year.

The final 2008-09 budget promises to give California schools slightly more money than last year, but cuts could still be on the way if state tax revenues fall short.

This year the state allotted $58.1 billion for the education budget, a $1.5 billion increase from 2007-08. The new budget includes a .6 percent cost of living adjustment, although some analysts say the cost of living increased by more than 5 percent in the last fiscal year. It does not cut special programs by 6.5 percent as originally expected.

But despite the relatively good budget news, the battle may not be over.

"We are not going to spend any of the money because we are afraid they are going to take it back," said Joe White, associate superintendent of business services in the Mountain View-Los Altos High School District.

Given the collapsing stock market, financial woes have increased since the Legislature passed the budget on Sept. 23, a record-breaking 85 days late. The state will now have $3 billion less than expected due to the mortgage crisis and high unemployment rates, and politicians are looking at possibly cutting education to make up the difference.

Mountain View Whisman and high school district trustees planned their budgets in June, based on a May revise from Gov. Arnold Schwarzenegger which predicted harsh cuts to education. Local administrators say districts are going to put the extra funds from the new budget aside to compensate for cuts, which they are sure will come later in the year.

"It isn't 'is there is or isn't there' going to be mid-year cuts," White said. "It is how much."

White's high school district receives the majority of its funding from property taxes. It cut $600,000 from adult education, special programs and deferred maintenance. Under the new proposal, it will not lose this funding.

But even if the state does not make mid-year cuts to education, White said, the budget is "still not a good deal." This is mainly due to the skyrocketing cost-of-living increase, which the new budget does not reflect, he said.

For its part, Mountain View Whisman is a revenue limit district and receives the majority of its funding directly from the state. The district had reduced its budget by $434,000 and faced a $2.1 million deficit. Craig Goldman, the district's chief financial officer, said the 6.5 percent of funding originally cut from special programs "will be part of the reserves they put aside."

"We based our budgets on the worse-case scenarios and we have reserves," he said.

"The good news is we did not get a cut in funding," Goldman said. "The bad news is the government holds the right to cut mid-year."

County shielded from stock crash

Many of the state's school districts face even steeper losses due to the stock market crash. Some counties had invested school district funds in companies that have since failed.

This is not the case in Santa Clara County, however, according to Larry Slonaker, spokesperson for the county Office of Education. The county had invested education funds in mortgage finance companies Freddie Mac and Fannie Mae, which have since been "government-backed."

Slonaker said the county investor said the investment pool is sound.

"She is comfortable with the quality of the investments in the portfolio, and all indications are we should be able to weather this storm reasonably well," Slonaker said in an e-mail last week.

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