While the Andrews government has vowed to turn Victoria into the "Education State", a growing number of principals say inadequate funding has forced them to cut programs, hire cheaper teachers and limit the VCE subjects they offer.

At the end of last year, 361 of Victoria's 1528 government schools were in deficit.

The situation was so challenging at 66 schools that they had to call in help from the Department to pay staffing costs.

Bendigo Senior Secondary College principal Dale Pearce said his school had been in deficit for a decade and managing the budget was the most stressful part of his job.

It is around $300,000 in the red, has had to cut senior teaching positions and is unable to offer the literacy and numeracy support that it would like to.

"Being in deficit is really challenging for any school," he said.

Mr Pearce said the funding model was not keeping up with the needs of schools, and senior schools were in a particularly bad situation because it was more expensive to educate Year 11 and 12 students.

Ballarat High School principal Gary Palmer, whose school is in deficit again this year, said he would like to do more for his students.

He employed a numeracy tutor five years ago and a lab technician but had to let them go. He has also recently axed the Extended Investigations VCE subject.

"Our kids still have a good curriculum but I want to make it a great one," he said. "The toughest part is going to people and saying you don't have a job any more."

He said while his school was still struggling financially, it was in a better position thanks to $380,000 of equity funding from the state government.

Education Minister James Merlino said the number of schools in deficit had fallen significantly over the past six years.

"We are making a record investment in our schools and every single Victorian government school received extra funding this year as part of a $747 million Education State funding package announced last September," he said.

It is understood some schools have used this extra money to pay off their deficit.

Australian Education Union Victorian branch president Meredith Peace said schools were not funded for the actual cost of their staff.

"The reality with schools in deficit is they stop running their additional literacy support, they might not run their music programs, they have to make difficult decisions," she said.

"It impacts on our kids."

She called on the state and federal governments to fund the final two years of the Gonski school funding agreement, which she said would give schools more certainty.

Each Victorian public school student received $2253 less state and federal government funding than the national average in 2013-14, making them the lowest funded in the country.

Declining enrolments often led to schools being in deficit, Victorian Association of State Secondary Principals president Judy Crowe said.

"It is a really difficult situation to manage because it ties your hands in terms of being able to plan for the future," she said. She said the situation put pressure on schools to employ younger staff.

Opposition education spokesman Nick Wakeling said government schools were facing financial hardship despite Labor's promise to make Victoria the Education State.

"Under Daniel Andrews, classrooms are overcrowded, education standards are slipping, and schools are struggling for money just to operate," he said.

The number of schools in deficit increased from 356 in 2014 to 361 last year, but has dropped from 525 in 2009.

An Education Department spokesman said the financial circumstances of all government school were regularly monitored.

It is unlikely that the number of schools in deficit will change this year.

A review into school funding by former Victorian premier Steve Bracks, which was commissioned by the state government and released in April, recommended a revamp of funding to ensure it covers school costs.

henrietta.cook@fairfaxmedia.com.au