A slowdown in revenue has Baltimore school officials scrambling for budget adjustments that won't require the system to raid its rainy-day fund or cut central office positions and school programs.

Officials face a $31 million deficit in next year's budget, due to factors that include a dried up stream of grant funding, fluctuating financial commitments and a halt to rapid growth in enrollment.

Now, the school board has asked administrators to come up with alternatives to their proposed budget reductions, which included staff layoffs, breaking contracts and cutbacks to summer school. Administrators say that won't be easy.

"I think we can come up with some alternatives, but they're all going to be unattractive," Victor De La Paz, chief financial officer for the school system, said, adding, "But, it's going to come down to the lesser of evils at the end of the day."

While school officials have found about $4 million in cuts and emphasized layoffs will not be part of ongoing proposals, they said the $27 million hole that remains could require the board to dip into its "fund balance," money designated for unplanned expenses.

But many board members are reluctant to dip into the reserve fund — some of which was required in the deal that gave the schools a $50 million bailout from City Hall a decade ago.

As the board moves to adopt a budget in May, some members also wonder how the system got to the point of having to sustain school operations on emergency funds.

Board members note the district faces several major expenditures that could require the use of a deep rainy-day fund: a facilities plan that will require a $20 million annual expense for several decades, pay-for-performance union contracts and rising costs such as transportation.

"We knew things were not going to get easier," Shanaysha Sauls, chairwoman of the city school board, said, adding, "but using the fund balance to pay for recurring expenses is a temporary solution, at best."

The school system operates on an annual budget of about $1.2 billion.

The system is proposing to increase the amount of money given to schools this year, but acknowledged it's primarily to cover increasing personnel costs.

Under the district's funding formula, schools receive a per-pupil expenditure, which is expected to increase in traditional schools by $146, to a total of $5,336. Charter schools will see a decrease of $151 in per-pupil funding because they will have to pay for their own teacher pension expenditures this year.

School officials attributed part of the budget crunch to the smallest increase in state funding in the past five years. State funding is the school system's largest revenue source, but will increase by only about $7 million this year.

That's because the system only grew by 84 students this year, compared with nearly 400 last year.

"If the district does not continue to grow by a few hundred kids every year, we will continue to feel that squeeze," De La Paz said.

The number of students who receive free and reduced-price meals — students for whom the district receives additional money — has also leveled off, school officials said.

Sauls pointed out the reserve fund is even more important because the district's most consistent revenue stream is tied to enrollment. "So what's left, but the responsible management of existing resources?" she said.

She said layoffs were never part of the board's discussion, though the system initially said that was an option if the deficit had to be absorbed by the central office.

School officials said such a move would force the district to scrutinize the largest departments at the central office, including the 140-officer police force. The second largest staff is the 70 people who make up clusters of support staff, called "networks," created by former schools CEO Andrés Alonso.

The head of the city police union said in an email to members that there was no cause for panic.