MARTINEZ - Every faculty member in the Contra Costa Community College District will receive a pink slip as the administration struggles with how to close a $8.9 million shortfall in a district reeling from fiscal troubles.

The five-member board voted 4-1 at a special meeting Monday night to notify all 540 academic employees they could lose their jobs. District officials have no intention of laying off everyone but say they want flexibility in handling the continued fallout from California's fiscal crisis and the rising cost of health and retirement benefits.

"It's our responsibility to make sure that this organization is on an even keel," said board member David Girard, who voted for the resolution. "It's not on an even keel. We're in a financial mess."

Jess Reyes, John Nejedly and David MacDiarmid also voted for the resolution. Sheila Grilli opposed it, agreeing with faculty that the pink slips are a tactic to force the union's hand during ongoing contract salary negotiations.

"I don't necessarily believe you need to give pink slips to affect negotiations," she said. "It seems to be a tool for negotiations."

At the heart of the controversy: District officials want everyone in the district to take an across-the-board permanent pay cut, including administrators, who have already agreed to a reduction that could be as high as 6 percent, said Chancellor Charles Spence.

Officials want faculty to take a 5 percent salary cut. But instructors at the district's three colleges, Diablo Valley College in Pleasant Hill, Contra Costa College in San Pablo and Los Medanos College in Pittsburg, say they can't afford it. Instead, they argue the administration is top-heavy and bloated and should be winnowed before instructors are let go.

If everyone agrees to a salary reduction, the district may only have to lay off 15 employees, Spence said. If they don't all agree to a cut, it could be as many as 100. The state education code requires the district to notify by March 15 any employee it plans to lay off later this year.

Sue Shattuck, a DVC professor and president of the United Faculty of the Contra Costa Community College District, believes the pink slips are an intimidation tactic.

"We are shocked, dismayed and disappointed in this callous and destructive action," she told the board. "You're making it more difficult for students to fulfill their educational needs."

More than 50 faculty and students attended the meeting at the district's office in Martinez. Some held signs that read, "Protect Our Teachers." Earlier in the day, DVC student Frank Runninghorse, 49, lamented the proposed layoffs and the fiscal crisis hurting the community colleges.

"The community colleges were put here so the working class could get an education," he said. "It's an attack on the working class. We're going to hold the politicians accountable."

The district's fiscal picture keeps worsening. Last week, the administration projected next year's shortfall at $7.6 million on a $135 million operating budget but Monday night raised it to $8.9 million. Increases in health and retirement benefits have played a role in the shortfall as has an unexpected $1.2 million midyear cut from the state, said John Hendrickson, vice chancellor for finance and administration. Last year, the district experienced $4.6 million in state cuts.

By law, the district must have 5 percent of its general fund expenditures in reserve, but now has just 1 percent. The state has placed it on a watch list and could take over the district's finances, Spence said.

The faculty take issue with the size and recent growth of the district's administration. The three colleges have replaced their faculty division chairs with full-time deans, which Shattuck estimated cost the district more than $1 million. The district went from spending $8.22 million on management in 2001-02 to $11.32 million the following year, a 38 percent increase.

"I've seen the administration grow by leaps and bounds," said Debra Barnes, a biology instructor at Contra Costa College, who has spent $1,000 of her own money this year on such basic supplies as photocopies for her students. "These layers and layers and layers of administration do not come cheaply."

The union has made a highly unusual offer to the district to help solve its financial problems. It contends that if the district reopened 200 courses at the three colleges (hundreds of classes have been cut), it could boost enrollment and increase its per-pupil funding from the state. If the district wasn't able to fill those courses, which instructors say seems unlikely since both the University of California and California State University plan on redirecting thousands of eligible students to the community colleges next year to save money, the faculty would pay the one-time cost of offering them.

Spence said he couldn't comment on the proposal because it's under negotiation, but did say "I'm delighted there's an idea on the table to support growth."