Each night after she became principal of McClymonds high school in Oakland, California, Lynn Dodd recalls returning home with a knot in her stomach. Academic league tables left the school vying with another from gang-ridden south central Los Angeles for the title of worst school in America’s most populous state. Just 20 pupils graduated in 2000 from the cohort of 200 that started as 13-year-olds five years before.

McClymonds, a 725-pupil secondary, serves a part of San Francisco Bay on the breadline. The struggle to survive often overshadows educational considerations. Close to the school, vagrants pushing their belongings around in shopping trolleys, and billboards for Citizens Against Homicide are a common sight. Last year, there were a staggering 113 murders in Oakland, a city of 400,000 people. Half of these murders were in the school’s catchment area.

But such challenges did not cut any slack with impatient local education chiefs mulling the ultimate sanction of dismissing McClymonds’ staff and reconstituting the school with fresh teachers three years ago. These were the stakes when Ms Dodd, a former middle-school head, was asked to lead a turnaround. Ms Dodd, 55, enlisted a West Coast think-tank, WestEd, to conduct an audit of staff effectiveness. Then she had to make some tough decisions. “It was clear where there was outstanding teaching and where there was no teaching,” she says. “Teachers were put on notice that if they didn’t improve: they were going to be asked to leave.”

Subsequently, nine teachers left. “It’s agonising because you know you’re doing the right thing for the welfare of students, but you’re also playing with the lives of adults,” she says. Since then, Ms Dodd and her “dream team” of 32 teachers have worked wonders. This year, 101 pupils out of 130 gained their high school diploma, and 85 to 95 will proceed to higher education, compared with just two in 2000.

A vivacious former dancer from New York’s Bronx, Ms Dodd did not shrink from the bloodletting. Since then, she has rallied staff and eschewed an autocratic style of leadership in favour of facilitation and delegation.

Staff meet one Saturday a month to brainstorm ideas.

“She’s created an atmosphere that encourages teachers to take risks,” says Jennifer Ough, an English teacher. “You’ve got to treat people as professionals.”

Using discretionary funds, Ms Dodd pays teachers up to $25 (pound;15) an hour for their extra-curricular time. But maintaining morale is difficult amid President Bush’s sweeping academic accountability legislation, the No Child Left Behind Act, and a crisis in America’s public finances stoked by recession.

Since 2001, McClymonds’ staff have raised the proportion of pupils attending state-wide assessments from 61 per cent to 91 per cent. But the White House is poised to dock $255,000 from its annual funding for falling shy of the mandated 95 per cent. This will cost the school five posts. At the same time, McClymonds expects to be branded “failing” by assessment-based reporting rules with which each US state must comply this summer. There are steadily escalating sanctions, culminating in possible closure unless the school meets academic targets.

The law’s opening salvo - allowing pupils to transfer to higher-performing schools - is “demoralising” to schools like McClymonds, where 81 per cent of pupils are black and 15 per cent Hispanic, Ms Dodd explains.

“You’re saying to minority students, ‘You can’t achieve unless you go to another school.’ It’s saying that because of who you are and your environment, you can’t learn. Meantime, we don’t have the tools to make up the deficit.”

Schools across America are in the grip of swingeing cuts as state governments scramble to recoup a collective $50billion deficit. But Oakland, already $82million in debt, may be hardest hit of all. As part of a $100m rescue package, state education bosses seized control of the city’s schools and appointed Randy Ward, who had invoked drastic austerity measures in Los Angeles, to restore solvency.

If budgetary projections hold true, Ms Dodd must pare eight staff positions, on top of the cuts stemming from declining federal funding. Yet educating pupils at-risk cannot be done on the cheap.

“We are talking about helping the whole child in academic, social, physical and emotional areas to get them through major life complications,” she says. Like a charity boss, she spends time going cap in hand to philanthropic foundations. And for staff professional development, she solicits funds from the nearby universities, Berkeley and Stanford.

The need to juggle managerial duties with bureaucratic overheads means Ms Dodd often works 16-hour days, far in excess of the 65-hour week average for members of the National Association of Secondary School Principals (NASSP). Most weeks, she makes a point of standing in for one teacher: it makes them feel valued and she can find out what students are learning. But her own support has been whittled down from three assistant principals to one.

It is a worrying trend across America, says Michelle White of the NASSP.

“Before the role was mainly administrative, but now principals need to be instructional leaders too,” she says. “They can also be replaced pretty easily.”

In New York, principals who face the sack for low test scores and unruly pupils say they are being made scapegoats for system-wide ills.

Performance-based contracts are deterring prospective recruits. Primary and middle-school heads’ earnings rose by less than 1 per cent to $73,000 and $78,000 respectively in 2001-02, far below inflation. It marked the lowest pay level in a decade.

Stagnant salaries, spiralling demands and job insecurity have turned headships into poisoned chalices, judging by the dwindling interest in vacancies. With 40 per cent of US principals due to retire within five years, experts fear the recruitment malaise could escalate into a full-blown crisis. Certainly McClymonds’ staff are not keen to occupy Ms Dodd’s hot-seat . “It’s overwhelming what you’re bombarded with,” says Pauline Taylor, an English teacher.

But Ms Dodd hopes she has laid the groundwork for a collaborative approach to school leadership that will engage rank-and-file teachers. “You have to be comfortable in understanding you’re here today and could be gone tomorrow,” she says.