Criticized for failing to confront their looming financial crisis, Los Angeles Unified school officials warned Tuesday that they may have to lay off consultants, teachers and other staffers to make up a $550 million budget shortfall.

To close the budget gap, Superintendent Roy Romer told school board members they have to decide which jobs to cut by March 15, when job layoff notices need to be mailed to employees.

"This is very serious," Romer said. "I'm responsible for seeing (that the cuts) happen within the law."

School officials said it was too early to say how many employees would be laid off, but they said all positions from teachers to high-paid consultants would be considered.

The Los Angeles Unified School District has already made more than $1 billion in budget cuts over the past three years, and eliminated 2,000 jobs in the 740,000-student school district.

The LAUSD's swelling budget shortfall has caught the eye of the Los Angeles County Office of Education, which could slap the district with its first unfavorable rating if it doesn't come up with a cost-cutting plan in the next month.

In a recent report that school board member Julie Korenstein described as a "very heavy, heavy-hitting letter," the county criticized the LAUSD for overestimating average daily attendance funds from the state by $40 million and spending too much savings to balance the district's budget.

The county report projected that the LAUSD's deficit could spiral beyond $1 billion by 2005-06 if drastic changes aren't made. It was based on the LAUSD's first interim budget report for the 2003-04 fiscal year, which included actual spending through Oct. 31.

"The letter is a warning about what is obvious: that is, that we have a $500 million deficit that we haven't said how we're going to cover," Romer said.

The LAUSD board is scheduled to approve the second interim budget report March 9. If the county still finds problems, it could change the LAUSD's certification from "positive" to "qualified" or "negative."

A qualified or negative certification could mean lower bond ratings for the school district, which could lead to higher interest rates on bonds the district sells to finance school construction and other costs.

The county superintendent of schools could also hit L.A. Unified with sanctions, including requiring the district to work with a county financial expert, undergo a state audit or obtain permission before it issues certain types of debt.

L.A. Unified is in good financial standing this year, but the county is worried about its financial health over the next two years, said Ken Shelton, assistant superintendent for business at the Office of Education.

"We'll be looking to see what the board chooses to do as part of their stabilization plan when they submit their second interim report," he said. "We would expect to know more about their game plan."

Trustee David Tokofsky said he's not particularly worried about the county's warning.

"This letter is either bureaucratic blah-blah-blah or it's a crisis or it's illiterate," Tokofsky said. "Some of the things are meaningful. Some of them are sort of alarmist."

If it is a crisis, the district needs to look at every way of saving money, including pay cuts, selling real estate assets or furloughing employees, officials said.

Board members agreed to begin meeting March 3 -- the day after they ask voters to approve a $3.87 billion bond for school construction -- to discuss the cuts. While they will draw up a preliminary list of job cuts to meet the March 15 mailing deadline, they are not expected to make final decisions until April 1. This means some employees could receive layoff notices and then be told they will not be fired.