D.C. School Superintendent Arlene Ackerman recently refused a request by the District's chief financial officer to draft an operating budget for the current school year that would be predicated on the school system receiving $30 million less than the $601 million it has been expecting.

Instead, in an angry Nov. 1 letter, Ackerman accused city officials of dangerously underfunding city schools.

"Such a reduction would have grave consequences for the children we serve," Ackerman wrote Chief Financial Officer Valerie Holt, warning that the underfunding could increase class sizes, reduce incentives for teachers and slow reform efforts for special education. "I will not participate in or authorize the formulation of a budget that is significantly less than $601 million, unless directed to do so by the [D.C. financial] control board."

Although classes began 2 1/2 months ago, it is still not clear exactly how much money public schools will receive for the current school year, a situation Ackerman said makes planning impossible. The District is believed to be the only major school system in the country that does not yet have its operating budget in hand, school officials said.

"Trying to run a school system like this is crazy. Even Superwoman couldn't do it. . . . I'm frustrated," Ackerman said. "The policymakers could make this easier for us."

Ackerman's critics on the D.C. Council, however, say the superintendent should have estimated how much money she will receive and designed an operating budget based on that amount. They also say the system has enough money and that Ackerman's administration should manage it better.

The budget battle is a result of a complicated process that involves layers of the D.C. government as well as Congress, which approves the entire District budget. The fiscal year began Oct. 1, but Congress wasn't expected to finally approve the D.C. appropriations bill until this week. After that, it still will be a few more weeks before the school system knows its specific appropriation because the control board must decide how much money will be earmarked for the city's fledgling charter schools.

Ackerman's original request was for $627 million in local appropriations, a figure calculated from a new funding formula she devised that was hailed by education advocates. But the council and Mayor Anthony A. Williams (D) cut that request last spring to $601 million, saying the school system didn't need more funding than that. They also decided to withhold 5 percent of the budget--$30 million--to distribute to charter schools if their enrollment increased.

If the charter schools receive the entire $30 million, as city officials expect, the school system will wind up with $571 million for the current school year.

Charter schools are funded each year based on how many pupils are currently enrolled, while regular D.C. public schools are supposed to be funded based on enrollment from the previous year.

Distribution of the $30 million will not be decided until the control board audits enrollment figures for charter schools. But Holt recently asked the school system to prepare a budget based on the lower $571 million figure.

When Ackerman refused in her Nov. 1 letter, the school system's chief financial officer, Don Rickford, offered his own proposed budget the next day. He proposed cuts in Ackerman's funding requests for such federally required services as special education transportation and private placements of special education students.

But, Rickford wrote Holt, funding at the reduced level "would not provide DCPS sufficient resources to perform all the state-level services mandated by federal law and several court decrees." Failure to provide these services, he said, "would inevitably lead to negative publicity and would likely result in the placing of the special education functions into receivership."

The school system lost control over its own finances in November 1996 when the control board took over the system. Thus, while Rickford is the chief financial officer for the schools, he actually reports to Holt, not Ackerman.

Holt did not return a telephone call yesterday seeking comment about the schools' budget and the letters from Ackerman and Rickford.

Some council members and other city officials say Ackerman is making much ado about nothing in complaining about the funding cuts and her problems finalizing a budget. They say she knew last spring that her $627 million request was being cut to $601 million.

"To hit Oct. 1 without an operating budget, it is fiscally irresponsible," said D.C. Council member Kathy Patterson (D-Ward 3), who wrote Ackerman a month ago saying she was "gravely concerned" that the school system did not have a spending plan yet for the current year. Patterson and other officials say Ackerman knew that the $30 million was being withheld and could be given to charter schools--and should have planned for a worst-case scenario.

"You have to be blind not to see there is going to be growth in the charter schools," said a control board staff member, who asked not to be identified.

Some also said that Ackerman's original proposal did not include enough money for special education transportation given that the number of children needing that service has grown significantly. Noting that the school system's general enrollment has been declining for years, these critics complain that Ackerman hasn't moved quickly enough to fix problems and adjust the spending.

Ackerman and some education advocates said that if policymakers had stuck to the new student funding formula they initially agreed to, she would have received her original $627 million request. The advocacy group Parents United is discussing possible legal action, saying the city government's handling of the school funding issue violates legislation enacted last year on how to fund the schools.

"What they are doing is just a disgrace," said Mary Levy, a longtime budget analyst and counsel for Parents United. D.C. policymakers "decided in advance how much they wanted to spend on education, and it had nothing to with the number of students or the students' needs."

Levy said it would be easier for the school system to operate if its fiscal year ran from July to July--like that of nearly every other school district in the country.

"There is no reason why we can't do it, except that we are tied to the federal government," she said. "Of course [federal and city officials] could untie it, but do they ever do what makes the most sense?"

CAPTION: SUPERINTENDENT ARLENE ACKERMAN . . . says proposed budget would underfund D.C. schools