New funding rules for nursery children are causing chaos and confusion, a survey by the charity Early Education has found.
The Early Years Funding Formula (EYFF) - due to be implemented in April - will affect all schools with pre-school children, but it is maintained nurseries that will feel the biggest impact, the research found.
Early Education discovered widespread fears of redundancies and even school closures as some budgets look set to be slashed.
One head said: "Our school will lose pound;153,000. We have been told we no longer need deputy headteachers. Just looking at the headteachers' and nursery nurses' salaries alone, we are pound;50,000 short. We are looking at redundancies on a massive scale."
Another added: "We have had none of the responsibilities of a school removed from us to create this level playing field. The budget cut we will face will be devastating."
The Government has asked authorities to come up with a single formula to fund all early years settings in their area - whether maintained or private. One of the biggest changes is funding maintained schools by the number of pupils attending, rather than by the number of places provided.
The aim is to improve quality for children, but 97 per cent of those surveyed said the new funding regime will not help.
Megan Pacey, chief executive of Early Education, called for the Government to change tack.
"The lack of knowledge is creating fear," she said. "The schools in our survey who had heard were looking at 20 to 25 per cent of their budget disappearing. The local authorities are struggling to put together a formula and central government's response is to tell them to do a bit more consultation.
"The single funding formula looks so fundamentally flawed that it is not achieving anything that it was set out to do. The Government would be wise to put the brakes on and re-assess."
Jean Ensing, former HMI with national responsibility for early years and chair of governors at Bognor Regis Nursery School and Children's Centre, said: "We will be about pound;100,000 down and that is with pound;40,000 transitional funding. In two years' time, the school budget will be cut by a quarter.
"Our school has been rated outstanding by Ofsted. The governors can't believe that either central or local government intends to affect an outstanding setting so severely just to give peanuts to the PVI (private, voluntary and independent) sector.
"In West Sussex, there are four nursery schools, 13 nursery classes and more than 400 PVI settings. The pound;100,000 from us means about pound;250 for each PVI - it just doesn't make sense."
But Purnima Tanuku, chief executive of the National Day Nurseries Association (NDNA), which represents the private, voluntary and independent sector, disagreed.
"These reforms are an important step in ensuring that funding for the free early years entitlement is fairer and more equitable across all sectors," she said. "NDNA is committed to a healthy mixed market, and these reforms are essential in supporting this."
The Early Education survey of 138 heads and teachers in maintained nursery schools found that the majority of authorities had allowed for the higher costs of teachers in maintained schools. But only one in five knew last term what their funding would be next year.
However, Vernon Coaker, schools minister, said: "The common-sense shift to funding per child from funding per place - where places can currently stand empty and still be state-funded - should not mean a threat of closure and our pilots this year have demonstrated that.
"Providers and local authorities have been preparing for this for more than two years."
SOLVING THE FORMULA
What is the Early Years Funding Formula (EYFF)?
An equation to decide how much funding a setting will get for its three or four-year-olds. Each authority sets out base rates that give the amount per child.
Does this mean a single rate of payment?
No. There are unavoidable costs that providers face that vary by area and between providers, a core principle being that all settings are funded on the basis of participation not places.
Who are the winners and losers?
The biggest impact has been on the maintained sector. The private, voluntary and independent (PVI) sector has reacted more positively.
Any long-term issues?
Keeping a mixed market is tricky. The short-term concern is that nurseries will close. It is also possible that primaries will admit children earlier to maintain funding, reducing the PVI market.