One hundred days is not much time to streamline a massive and entrenched public school system. But that was the bold promise of Arnold Schwarzenegger when he became California's new governor last November.

Schwarzenegger still has a long way to go, but after two months on the job, he has taken some notable steps.

He appointed an education secretary, Richard Riordan, who is pushing for a radical new way of paying for schools.

In an attempt to reduce red tape, the Republican governor proposed in his budget that $2 billion in funding for 22 separate school programs be consolidated and given to school districts to spend as they wish.

And over the next few weeks, he is expected to make seven appointments -- creating his own hand-picked majority -- to a new 13-person panel called the Quality Education Commission, whose job is to help reshape school financing.

"It is still too early to say how it will all come out," said Michael Kirst, a Stanford University education professor and school finance expert. "But at least this administration is willing to do some conceptual blockbusting, which I didn't see in evidence in the previous administration."

Schwarzenegger made his education promises during a campaign speech at Memorial Auditorium on Oct. 1, six weeks before he took office. He pledged to streamline education bureaucracy and steer more money directly to the classroom.

The proposed state budget, released Jan. 9, holds the first concrete elements of that promise, according to the governor's staff.

"This is the vehicle where we're going to make the reform," said H.D. Palmer, deputy director of the Department of Finance, which prepared the budget. The biggest step, he said, was the proposal to collapse 22 different categorical programs -- representing $2 billion -- and let local districts decide how to spend the money.

Categoricals are special pots of money dedicated to specific purposes, such as teaching non-English speakers or buying textbooks. The state has more than 100 categoricals, totaling more than $11 billion. Over time, the system has grown out of control; it is filled with inequities, a lack of monitoring and red tape.

Freeing up the $2 billion would reduce layers of bureaucracy at both the state and district level and create an opportunity for more money to reach the classroom directly, Palmer said.

It also could lead to potent battles in school districts, where some employees are likely to fight to put the newly discretionary dollars into salary increases, while others may seek to preserve existing programs -- and the jobs that go with them.

Though Schwarzenegger can't order districts to give the money directly to schools, Palmer said, the governor is hoping local superintendents would use the opportunity to involve more principals, parents and teachers in decisions about how to spend it.

"The first step is to tear down the walls that have segregated the money," Palmer said. "The second is to encourage districts to invite everyone with a stake in education to become more involved in the process."

The 22 targeted categoricals, which districts could choose to continue, are an odd hodgepodge.

Two -- Dropout Prevention and 10th-Grade Counseling -- have been around for nearly 20 years and have failed to meet some of their legislated goals. Others, such as Targeted Instructional Improvement Grants and bus transportation, are distributed unevenly, with some districts getting lots of money and others receiving little or none.

The list includes six programs for staff training, yet ignores another dozen dedicated to the same purpose. And it includes one of the few categoricals that call for spending decisions to be made at the school site level -- the School Improvement Program -- despite the governor's stated desire to find more ways to involve principals, teachers and parents.

According to the governor's staff, the targeted categoricals were not chosen based on their merits. Rather, state budget makers went with those that had been stable for several years and had fewer federal or legal requirements. The governor avoided the largest and most politically popular programs, such as class size reduction, special education and funding streams for poor kids.

State Superintendent of Public Instruction Jack O'Connell said he supports giving greater spending flexibility to districts, yet is concerned that the important purposes of some of the categoricals will be sacrificed as schools find other demands for the money.

If teacher training requirements are set aside, for instance, O'Connell said, "the reality is, some districts will walk away from professional development."

Although the budget proposal is expected to undergo challenges and changes by the Legislature, already districts are calculating what the categorical shift might mean to them.

In the San Juan Unified School District, for example, it translates into more than $13 million that the district could spend in other ways.

San Juan's superintendent, General Davie Jr., said that to free districts to spend the money elsewhere, the state must officially lift requirements and mandates tied to categoricals.

If that happens, he said, some major spending changes could come to San Juan.

The district might consider ending bus service for high school students and spend that money to train teachers, Davie said. Or it might shift School Improvement Program money to help pay for smaller class sizes. Other freed-up sources of money might go for employee pay raises, he said.

Davie said more discretionary dollars could lead to more spending decisions involving the public and school staffs. But he and others expressed doubt that the state would be able to go very far with Schwarzenegger's desire to give principals broad control over spending at their schools.

"It would be a mess if every principal had to negotiate their own staff contract," Davie said. Overseeing bus schedules, gardening staffs, payrolls, legal cases and other centralized district tasks would distract principals from focusing on the quality of instruction, he said.

O'Connell and other school leaders said they will be looking to the Quality Education Commission for guidance on the debate over shifting power to principals, along with many other school finance reforms. Once Schwarzenegger makes his seven appointments, the panel will spend the rest of the year working on a funding approach that is fairer and more adequate for students.

Education Secretary Riordan has called for a complete overhaul of the way California pays for schools, and has said he expects the Quality Education Commission to play a critical role.

Riordan wants to fix not only the categorical mess, but also the state's convoluted system of basic per-pupil allotments.

In particular, Riordan is advocating a new "weighted" system of funding, in which schools would receive the same base amount for every student. Certain groups -- such as disabled or poor children -- would be "weighted" based on their needs, generating a larger base share.

That would be a radical shift from California's current system, which begins with a thousand different per-student amounts -- one for every district -- then adds uneven amounts of money for other needs.

"The rhetoric has changed," said Kirst, the Stanford professor. "There's a new dialogue now, and a sense that different things are possible."

Various education experts and leaders praised Schwarzegger's ability, so far, to sidestep the divisive politics that typically mark the state's annual school budgeting process. They noted his savvy in meeting early with top education leaders to work out a compromise deal to cut $2 billion in expected school funding during this year's financial crisis.

"He's being very cautious and very smart," said Rick Simpson, policy director for the speaker of the Assembly. Simpson predicted the debate will heat up in coming months when specific budget legislation is proposed.

Barbara Kerr, president of the California Teachers Association, which represents 335,000 educators, said union leaders are pleased with the fair and honest way they have been treated by the governor's staff in behind-the-scenes discussions.

Kevin Gordon, who heads the California Association of School Business Officials, called the budget proposal a "modest but politically achievable step."

The budget also talks about many other reforms Schwarzenegger and his staff want to accomplish, including getting rid of old formulas that benefit some districts but not others, providing greater publicity when districts are in financial trouble, and reining in excessive pay packages for district administrators. Specifically, the budget noted that superintendents in the nine largest school districts earn an average base salary of $203,813 annually plus other perks, while the governor's salary is $175,000.

"I think this proposal is meaningful," Gordon said. "When you look at the budget document, it hits a lot of the key points in the campaign. This is going to be a long-term effort. You can't change things overnight."