Schools that cater for asylum-seekers could receive fewer resources next year because of an inflexible funding system, according to a new report.
Teachers and council officers say long-term planning is impossible because funding is linked to declining numbers of new arrivals, and does not recognise the continuing needs of children whose families have been granted asylum.
The National Foundation for Educational Research (NFER) also found that funding did not recognise the extra costs incurred by children with special needs.
Angharad Reakes and Robat Powell, the report's authors, said: "A significant concern (of teachers and council officers) in the research was the inflexibility of the funding system and the dependence of funding on new arrivals."
Dedicated funding, which is spent on staffing, interpreters and costs such as uniforms and trips, increased this year by pound;200,000 to pound;2.3 million. But there are concerns that fewer new arrivals will mean less money next year.
The cash is paid to local education authorities by the Welsh Assembly government and is based on pupil numbers throughout the year - but those who gain refugee status are not counted. Instead, they are covered by the Ethnic Minority Achievement Grant (EMAG), used by LEAs to provide English as an additional language support to recently-arrived pupils.
But this only kicks in once they have featured in an annual January census - leaving 11 months where they may not attract any extra cash. Critics say this fund is already over-stretched, although the Assembly increased its budget by pound;650,000 to pound;4.5m this year.
In Cardiff there are around 400 school-age asylum-seekers, down on 2001's high of 500. Weekly arrivals are also falling from a high of 20 to around 11.
Marilyn Burge, asylum-seeker co-ordinator for Cardiff LEA's Ethnic Minority Achievement Service, saw seven supply staff laid off in March because of cuts, despite demand for extra resources from the 600 children who have left the asylum register.
She said that Cardiff was worst affected because 83 per cent of those granted asylum in Wales move to the city.
"We can set up lots of things but then we have to let staff go if the funding's not there," she said. "We need it to be more consistent - perhaps over a three-year period."
The city's Moorland primary school has taken in 80 children of asylum-seekers since 2001 and currently has 30, from 20 countries. Head Anne Rees is already worried about next year's budget.
She said. "Last April funding was cut from the equivalent of 1.4 teachers to 0.6 to support these children and that's devastating."
Newport is also facing cuts because the flow of new arrivals has slowed dramatically to just four since April. Gwen Pounder, deputy service leader of Gwent Education Multi-ethnic Support service, said: "We need long-term help, not something that is there one minute and gone the next."
In contrast, a statement issued by Swansea council, which has 350 asylum-seeker children, said its programme had been "well funded, and fully funded, by the Welsh Assembly".
Jane Davidson, education and lifelong learning minister, said: "We fully accept that the additional costs, particularly of those that have been given leave to remain, must be covered.
"Over time the local authority costs will be included in local authorities'
revenue support grant settlements as they will be counted into the school rolls. Once asylum-seekers are granted leave to remain, they are also eligible for support from EMAG."
She added: "These issues are, however, likely to form an integral part of the discussions that will be taking place between my officials and the individual local authorities in the early part of next year."
David Farnsworth, chief executive of the Welsh Refugee Council, stressed the situation should be "closely monitored to ensure funding matches changing needs".
The NFER's self-funded report was based on interviews with school and education authority staff at three authorities in Wales between autumn 2003 and spring 2004. Despite concerns, the study found that schools and LEAs were positive about the cultural diversity introduced by asylum-seekers.
None of the contributors was identified, but the only areas of the country to have received asylum-seekers since the UK government embarked on a nationwide dispersal plan are Cardiff, Swansea, Newport and Wrexham.