ANDERSON — In his budget proposal, Gov. Mitch Daniels claims to provide a 2 percent increase in education funding, but some Madison County school officials say the claim is misleading at best.

“If you have two education accounts and one’s named Peter and one’s named Paul, all this is doing is robbing the Peter account to pay the Paul account,” said Alice Mehaffey, superintendent of Alexandria-Monroe Community Schools.

Local school officials say Daniels’ boost comes from the temporary injection of federal stimulus funding that won’t be replaced by other funding sources when those dollars disappear after 2011.

“I understand the governor’s objective in trying to show an increase in funding to schools,” said Anderson Community Schools business manager Kevin Brown, who called Daniels’ claim of a 2 percent increase in education funding “terribly misleading.”

The Indiana General Assembly is in special session as lawmakers work to develop a new state budget. Daniels presented his outline last week. House Democrats on Friday said they planned to offer their own budget plan.

Under Daniels’ budget plan, ACS funding would increase from $64.1 million in 2009 to $65 million in 2010. It would then drop to $63.3 million in 2011, according to the Indiana State Budget Agency. But those totals for 2010 and 2011 include about $2.6 million in federal stimulus money the district will receive that can only be used for narrow purposes.

Without stimulus money, ACS’s 2011 state funding would be $60.8 million, Brown said, compared with a 2008 budget of nearly $68.5 million.

“Those are catastrophic and precipitous reductions in our revenue,” he said. He noted that the proposed budget does nothing to address deficits that ACS and other school districts have experienced. He said stimulus funds cannot be used to offset those shortfalls.

“Larger urban districts that are losing enrollment are going to get hammered the worst,” Brown said. That’s because state education funding is distributed based on the number of children in a school district — about $6,000 per student on average.

Brad Rateike, a spokesman for Daniels, said that under the proposed budget, “all districts in the state receive more dollars per student,” though that incorporates stimulus funding.

“These are dollars that are spent improving the quality of education for Hoosier students,” Rateike said. “It represents more money and should be displayed in the budget.”

ACS is estimated to lose 502 students in the next two years, a decline of 5.5 percent. Alexandria is expected to lose 69, or 4.5 percent of its enrollment.

“The governor is trying to say, ‘Here’s a new budget, yes we’re making cuts, but we’re giving education all kinds of increases,’ but they’re not,” Mehaffey said. “He’s trying to fool the public is what it appears to me.”

Brown said federal stimulus funds might allow ACS to recall some of the 36 teachers who were laid off last month. The school board will discuss the use of stimulus money at its meeting Tuesday at 7 p.m. at the ACS Administration Center, 1229 Lincoln St.

Frankton-Lapel Community Schools superintendent Bobby Fields said Daniels’ proposed budget probably comes closer to an increase of about one-quarter of 1 percent for education when stimulus money is removed from the equation.