School leaders in Martinez find themselves in the awkward position of celebrating passage this month of a school parcel tax and fretting about possibly losing $1.2 million in state funding this school year.

Board members took pains Monday to thank voters for approving the $50 annual parcel tax, even as they explained that the extra revenue would not dig the district out of a deep budget hole if the governor cuts $2.5 billion from schools statewide.

"When we made the decision we had no idea things would be this bad, we thought (the parcel tax) would make up what Sacramento is going to be cutting, but it's not going to go that far," school board President Ron Skrehot said solemnly.

The parcel tax, which is expected to generate about $578,000 per year, takes effect next July. But board member Vicki Gordon pointed out that the district won't see any money until the end of next year.

The tax dollars also come with strings — Martinez can use them only to pay for science, art and music programs, update technology, maintain library services, keep small classes in grades K-3 and provide counselors.

"We don't know what we're going to do," Skrehot added.

Gov. Arnold Schwarzenegger has proposed spending cuts and tax increases to close an $11.2 billion budget gap that could balloon to $24.5 billion by 2010.

By eliminating an already reduced 0.68 percent cost-of-living increase and cutting $300 per student, the governor hopes to slash $2.5 billion from the state budget deficit.

Martinez had faced a $1.9 million budget shortfall in January due to reduced state funding, declining enrollment and employee salary and health benefit increases. Then Schwarzenegger backed off deep education cuts in May.

The restored state funding, combined with a reduction in teaching positions, mostly due to retirements and resignations rather than layoffs, left the district down about $200,000 this school year. Martinez schools have an annual budget of about $31 million.

Eliminating the annual cost of living increase this year will cost Martinez $150,000, said Mike Lenahan, interim chief business manager. But district leaders built the budget on the assumption the state would restore the yearly inflation adjustment to 5.6 percent in 2009. If that does not happen, Lenahan said, Martinez will lose an additional $1.25 million next school year.

Lisa P. White covers Pleasant Hill and Martinez. Reach her at 925-943-8011 or lwhite@bayareanewsgroup.com.