Headteachers are threatening to scupper the teachers' workload agreement, because they claim they do not have enough money to implement the reforms.
In a hard-hitting letter to the Education Secretary Charles Clarke, David Hart, general secretary of the National Association of Head Teachers, said the deal was unworkable because of inadequate budgets. He said his union would block the next stage of the agreement if his concerns were not met.
After heavy lobbying from councils and MPs, ministers this week released an extra pound;28 million for 36 of the hardest hit education authorities, admitting that changes in funding "may result in lower than expected budgets for schools".
But Mr Hart said it was not enough. In his letter to Mr Clarke he says that only a minority of schools will see real-term increases in their 20034 budgets and that heads in many areas are "overwhelmingly angry" about the situation.
"It would not be an exaggeration to say that there is an unmanageable crisis in funding in a number of areas," Mr Hart writes. "Members are talking about this as the worst position they have faced for years."
The letter says that the timetable for implementation of the workload agreement, due to start in September, needs to be changed and the funding issues resolved.
The funding row will dominate the union conference season, which begins in Birmingham today, where Mr Clarke is due to address the Secondary Heads Association.
John Dunford, SHA general secretary, said the Secretary of State would face some "difficult questions". But he welcomed the money and said the funding problems were not specific to the workload agreement, which was signed by ministers, employers and eight unions, and should not be jeopardised.
A combination of factors including increased pay, pension and national insurance costs, changes to the council funding system and the scrapping of some direct grants have put pressure on school budgets.
Secondaries are reporting shortfalls of up to pound;700,000 and primaries of up to pound;200,000. Teachers and support staff in some areas have already been made redundant.
The East Riding of Yorkshire is among several struggling authorities which will not receive a share of the pound;28m. It has given its schools permission to set deficit budgets to "buy time" until the summer term.
In Essex, Terry Creissen, head of Colne community school in Brightlingsea, said he would not be replacing five members of staff when they left next term. Councils including Kingston upon Thames, and Plymouth have predicted job losses. And the NAHT in Barnet Bristol, Salford and Wales, said teachers face redundancies.
Mr Hart's letter, sent without consulating the other deal signatories, received a mixed reception. Gerald Imison, joint acting general secretary of the Association of Teachers and Lecturers, said: "The Government is now facing a serious situation which it needs to contemplate."
But Eamonn O'Kane, National Association of Schoolmasters Union of Women Teachers' general secretary, said: "People should understand that when they sign the agreement they have a responsibility to carry negotiations through, not to start looking for obstacles."
In an advert in today's TES, the National Union of Teachers continues its anti-agreement campaign, saying that contract changes should include limits on teachers' hours.
All parties involved in the workload deal will meet on Monday.
A Department for Education and Skills spokesman said: "It is early days to be talking about vetoes. It is understandable that the NAHT wants to be sure that the reforms are manageable and affordable."
SHA conference, 8 Leader, 24