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Mayor Michael Bloomberg insists his hands are tied, saying he's getting less from Washington and Albany while expenses are rising.

The mayor is pushing state lawmakers to allow him to lay off teachers based on a merit system, not seniority. But critics charge he doesn't have to lay off teachers and that he's just using it as a threat to get his way on doing away with the civil service protections of last in, first out.

"Two months ago the mayor projected the same number of teachers being laid off yet there's a billion dollars more in the city budget. So his complete insistence on teacher layoffs seems bizarre to us at this point. And we think it's more of a political game and scaring people," said United Federation of Teachers President Michael Mulgrew.

Still, some new teachers say they may not be able to wait around to see what happens in this game of budget chicken. Schools like Brooklyn Brownstone would be hit particularly hard by seniority-based layoffs -- 50 percent of teachers there would be let go, since they've been in the system three years or less.

"We talk to each other about it. We're nervous. I've even mentioned today that maybe I will start getting my applications out and my resume out and preparing for the worst. This might just be a tactic but to me it's scary," said Brooklyn Brownstone Teacher Alex Brunner.

But if the mayor thinks his hands are tied with the budget, principals say his new schools chancellor is doing the same thing to them. This week, principals got an email from Cathie Black saying they'll have to spend their entire budgets by the end of June. If they try to save any money for next fall, she'll take half.

A key part of the mayor's school reforms has been giving principals control of their budgets. But school leaders say this new policy penalizes those who have been responsible and saved for the future.

"Given the time of year that this is, we've already made our budget plans for the year so we were thinking that we would be able to take that money and save it for next year and hopefully be able to save a few positions. Seeing as we keep being told that we're going to see teacher layoffs," said Urban Assembly School of Law Principal Shannon Curran.

Department of Education officials would only say they had decided the savings option would not be "prudent" in the current budget climate. Why that is, they wouldn't explain.

The principal's union says it’s been flooded by calls from principals dismayed by the new policy.