Gov. Arnold Schwarzenegger is proposing a major overhaul of California's school system without eliminating any of the major academic initiatives or accountability programs launched by his predecessors in the past decade.

The new Republican governor, in his first budget proposal since taking office in November, is calling for dramatic shifts in how education is funded and vowing to give school districts significantly more control over how money is spent.

His proposal fires a broadside at the state's confusing and convoluted system of funneling money to school districts, which often leads to extreme disparities among campuses. The new plan also takes aim at a Capitol tradition of tying strings to any new funds for education.

"Putting control back at the local communities was one of the top priorities for Governor Schwarzenegger during the campaign and since he was elected," said Richard Riordan, former Los Angeles mayor and the state's new secretary for education.

"People at the local level -- parents, teachers, principals -- know more about how to teach and train kids than the bureaucrats and politicians in Sacramento," Riordan said.

Schwarzenegger's budget would retain key school initiatives enacted during the past decade, including the high school exit examination and statewide academic testing and performance ranking of schools.

The budget proposal, subject to legislative approval, would cut $2 billion from school entitlements next year without sparking angry demonstrations by teachers, administrators and school boards. In fact, they support it.

By accepting the one-time financial hit, California's educational system would avoid the possibility of even deeper cuts this year or next, and schools would receive Schwarzenegger's commitment to provide sizable sums in coming years that could be used, in part, for salary increases.

The deal would split in half a $4 billion increase that schools otherwise would be entitled to next year under Proposition 98, the 1988 ballot initiative that requires the state to set aside a specific percentage of its revenue each year to K-14 education.

Schwarzenegger's proposal would allow the state to eliminate $2 billion in school funding next year and defer an additional $800 million. Kindergarten, middle and high schools nonetheless would receive a funding boost, about $1.9 billion, much of it in discretionary money that could set the stage for teacher salary increases at a time when many other state programs face cuts.

Per-pupil spending would increase $216 per student next year, Schwarzenegger said. School revenues from all sources would total $58 billion. Forty percent of the state's general fund budget goes to K-12 education.

Education leaders say the governor also promised them privately that he will support providing state funds to cover school cost-of-living and enrollment increases for every year he is governor.

Riordan, questioned about the commitment Friday, said only that the administration will make such increases a top priority.

Assemblywoman Jackie Goldberg, a Los Angeles Democrat who chairs the Assembly Education Committee, said the proposal to cut $2 billion in school entitlements represents a suspension of Proposition 98. For that and other reasons, Goldberg said, she does not support the budget proposal.

Many school districts, hit hard by budget cuts the past two years, justified not laying off many employees last year by projecting that schools statewide would receive the full $4 billion entitlement in coming months, Goldberg said.

"And they're not going to get that money," she said. "So what you're going to see are people who might have been laid off last year will certainly get laid off this year instead."

Others downplay any serious effects.

"We don't see anything in here that hurts education," said Kevin Gordon, executive director of the California Association of School Business Officials. "We think the governor has demonstrated his very, very high commitment to public schools."

As a first step toward radically reforming education funding, the governor's budget proposal calls for untying the strings on 22 programs -- called "categoricals" -- that receive about $2 billion in state funding for use in specific programs. The plan would not cut funding for the targeted programs, but would allow school districts to decide for themselves whether to divert the money to other educational purposes.

Affected programs could include 10th-grade counseling, bilingual teacher training, year-round schools, busing, peer assistance review, beginning-teacher training, library materials, dropout prevention, assistance for English learners, International Baccalaureate programs, and teacher training in mathematics and reading.

Not every categorical program would be targeted -- for example, the proposal would not alter funding sources for class-size reduction, special education, vocational education and other major services.

Jack O'Connell, state superintendent of public instruction, said he generally supports simplifying educational funding and providing more local flexibility.

"I am concerned, however, that the budget no longer targets funds to beginner teacher training and to standards-based professional development for veteran teachers," he said.

"In an era when we are focused squarely on results," he added, "it is important that teachers can count on having the tools they need to teach high standards."

Schools that receive additional financial flexibility under the governor's plan would be required to meet stricter accountability requirements.

Specifics have not yet been released, but components would include additional public input on school spending decisions, state intervention for low-performing school districts, enhanced budget review by county education officials, and restrictions on compensation for administrators of failing districts.

Schwarzenegger also proposes to set aside $110 million in "equalization" funding for school systems that currently receive less money per pupil than other school districts.

Statewide, extreme disparities exist in school districts' basic, general-purpose funding -- called revenue limits. The low statewide is $4,400 per pupil and the high is $8,300 per pupil. The new proposal would narrow, but not eliminate, that gap.

Schwarzenegger's proposals mark a beginning, not an end, to efforts to dramatically change how California pays for educating its 6 million students in 1,000 school districts.

Aside from financing shifts, the budget calls for eliminating "excessive" pay for school superintendents, who average $203,813 in base salary, and for cutting $165 million from education-related child-care services. The plan would eliminate such care for 13-year-olds, limit services to 11-and 12-year-olds, and revamp fee requirements, instruction incentives and other components.