In the face of a state fiscal crisis, the Mt. Diablo school district has instituted a spending freeze, temporarily called off employee contract negotiations and warned of $15 million in monumental budget cuts that likely will cost hundreds of jobs.

Assistant Superintendent Dick Nicoll said the district will need to slash $14 million in expenditures in 2008-09, a 5 percent reduction in the $300 million tentatively earmarked for spending that year. An additional $1 million must be trimmed from this year's budget.

Cuts of that magnitude mean eliminating the equivalent of 300 full-time employees, said Superintendent Gary McHenry.

"It's literally about 10 percent of our workforce," McHenry told the school board Tuesday night.

The district already cut $3 million to pay for anticipated increases in employee compensation. However, the dire new budget predictions largely reflect trouble brewing at the state level.

To help fill a $14.5 billion hole, Gov. Arnold Schwarzenegger proposed cutting 10 percent from departments across the board and suspending Proposition 98, which ensures a baseline of public school funding.

The governor also called for shaving $360 million from statewide K-12 funding in 2007-08. To make these midyear cuts, he declared a fiscal emergency and called a special legislative session.

State lawmakers must make a decision by March 15 or they will be barred from voting on any other legislation. The proposal needs two-thirds approval to pass.

Although the outcome could be less drastic, local school districts must base their formal budget estimates on the governor's proposals.

Schwarzenegger's plan would give the district $291 million for 2007-08, about $1 million less than previously estimated, Nicoll said. For the following year, the district would receive $284.4 million, or $17 million less than expected.

"Clearly, this is going to be a challenge to the district," Nicoll said.

Since the school year is about half over, the district likely will try to avoid midyear layoffs by trimming other costs, McHenry said. All spending on nonessential items will be suspended.

"With this big a number, we have to look at saving every dollar," McHenry said.

Any hope of resolving contentious contract negotiations will have to wait.

On recommendation from the Contra Costa County Office of Education, administrators said the district would not settle any contracts until the state provides a clearer picture of school funding. Offers given in past negotiation sessions are void.

"Our first goal is to balance the budget," said April Treece, school board president.

The office of education, which must sign off on employee contracts and their fiscal feasibility, recently refused to approve agreements in the Acalanes, Oakley and San Ramon Valley school districts in light of expected state cuts.

The Mt. Diablo school board is expected to make more reductions at the next meeting, Feb. 12.

Shirley Dang covers education. Reach her at 925-977-8418 or sdang@bayareanewsgroup.com.