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The day before principals were due to submit midyear budget cut plans, the city has decided to fill their budget holes with money set aside for teacher and principal pay raises.

It’s a bittersweet moment for school staff, who could lose out on the 4 percent pay raises other unions have received, but won’t see their schools stripped of money for classroom supplies and technology midyear. The city’s plan rests on its ability to pressure the United Federation of Teachers and the Council of School Supervisors and Administrators into accepting to two percent raises over two years, half of what the unions expected and a proposal both union presidents have met with angrily worded statements.

Marc LaVorgna, a spokesman for the mayor, said the city will swap the savings from halving teacher and principal’s pay raises with the savings that would have come from a midyear 1 percent cut to schools and a planned 4 percent cut for 2011.

If CSA — whose contract doesn’t expire until March — and the UFT don’t accept the lowered pay raises, the city could lose 2,500 teachers through attrition and layoffs, LaVorgna said. Mayor Bloomberg has also warned that if the state goes ahead with Governor Paterson’s budget, 8,500 teachers will be lost.

In a statement sent to reporters last night, UFT President Michael Mulgrew called the proposal “unacceptable.” CSA President Ernest Logan said he was “shocked” by the plans.

“The salary package for my members will not be independently announced by the mayor or the chancellor; it will be reached at the bargaining table with the CSA,” he said.

For Edward Tom, the principal of the Bronx Center for Science and Mathematics, the midyear cut would have amounted to about $33,000, and the subsequent 4 percent cut would have meant losing over $100,000 dollars.

“What would have initially required me to consider reducing spending in terms of professional development, supplies, technology, all of that is restored,” he said. “It’s big news for me, big news for my colleagues.”

Ann Forte, a spokeswoman for the DOE, said some principals had already submitted budget cut plans. “If that’s the case, the funds will be back in the budget sometime today,” she said. “The planning work they’ve done will help prepare them for the future,” when they may have to adjust to other cuts, she said.

Though he’s happy to see his school’s budget intact, Tom said he was concerned about taking a pay raise cut.

“I’m just worried about what type of precedent this would set in terms of collective bargaining agreements,” he said. “But one of the things I heard in the State of the Union last night is we all need to contribute our share. If this our share then so be it.”

Chancellor Joel Klein’s email to principals follows:

Dear Colleagues:

Several weeks ago I informed you that due to the City’s economic constraints every school was required to take a mid-year budget cut. In an effort to help you maintain vital programs and resources, however, Mayor Bloomberg and I have identified a combination of savings in the DOE’s operating budget that will prevent reductions at this time.

As you know, last month I informed DOE managers and other non-unionized staff that I would not fully fund raises already approved for these employees. That decision will help save the Department approximately $12 million this year. Additionally, following our lead, the Mayor has proposed new compensation agreements with the United Federation of Teachers and the Council of School Supervisors and Administrators that would save another $148 million this year, for a total of $160 million. Currently, the City’s collective bargaining reserve includes funds to provide a four percent raise for educators this year and an additional four percent next year. Given budget shortfalls, however, the Mayor has asked the unions to accept a reduced increase of two percent on the first $70,000 of salary for the next two years. This increase would be slightly larger on average than the one that DOE managers received and would recognize the dedication of our educators while allowing their schools to maintain current levels of spending.

These moves will not solve all of our budget problems. The State faces huge deficits, which will likely lead to significant reductions in funding that will impact our schools. But at a time when the City-indeed, the entire country-is being forced to make do with less, this plan allows us to reward educators for their hard work while protecting our schools-allowing them to continue providing the highest level of instruction to our children.

Sincerely,

Joel I. Klein