There are two basic ways of cutting a school district budget. The most common way is the wrong way--school board members going in to cut either dollars or activities from a budget that the superintendent and staff support. A school budget should be the educational objectives of a school system translated into financial terms. Once objectives are set, there should be an order of priority among them. The most effective way to cut a budget using the wrong approach involves four steps: 1) analyze costs by laying them out and breaking them down, 2) compare costs against various standards and against each other, 3) question how each budget item contributes to the district's objectives, and 4) cut. The right way to shape a budget is to get staff involvement from the start. The key point is that the superintendent begin the process with the board's dollar figure and the board's goals and priorities. (Author/JG)