At issue is millions of dollars in state aid that the district was counting on when it passed its budget in May. Now the district won't know how much money it's getting until a final state budget is passed.
Gov. Rendell has criticized a compromise legislators reached on Friday, vowing to veto it.
As the school year forges ahead, alternative-school providers say students are suffering.
"It's a step backward for Philadelphia," Frome said yesterday.
"The city said high-school dropouts are a priority. . . . We're going to have a lot of people without the skills to get back into society."
The School Reform Commission approved $47 million for alternative-school contracts in April, more than doubling the number of seats available, up 2,725 from 1,275 last year, to students who either dropped out or aged out of district schools, said district spokesman Fernando Gallard.
But now that the district's budget is in limbo, the district has delayed nonessential contracts with vendors, and alternative-school providers especially have taken a hit.
The district has cut more than 600 of the new seats and put one contract - Frome's school, the Center for Media Arts and Education, which was to open in November - on hold, he said. Disciplinary schools have not been affected.
Frome, who also runs Youth Build Charter School, said she was notified last week that the three-year, $3 million contract she signed to run the CMAE had been held.
The school, at Broad Street and Lehigh Avenue, was located in an area with one of the highest dropout rates in the city, according to a 2005 report by Project U-turn that Frome's organization cited.
"This is a disenfranchised population," she said. "Graduation rates are low. There needs to be major change in Philadelphia and we just had a major setback."
She believes district officials discarded the school's teachers, employees and 100 students.
Martin Nock, an alternative school provider who runs a program called Community and Schools, isn't as convinced that the district abandoned them.
"They did leave the door open," he said. "If things change for them, they would revisit us."
Nock's group, whose contract was worth about $1 million, would have educated 300 students at two different sites, he said. But now enrollment had been slashed in half, he said.
Masch said that many district departments have been cut to deal with the budget delay and said the cuts are temporary.
"It's not that we don't want to do these contracts," he said. "We're just saying that we don't know how much money we're going to have."