The move has sparked tension between the two levels of government, with federal Schools Minister Peter Garrett calling for the Victorian government to spend the money as intended.

Last year, the Gillard government gave $9 million to the Victorian treasury as part of a scheme to improve literacy and numeracy in schools.

In 2010, 210 Victorian schools received funding under the scheme.

But literacy and numeracy programs are now in doubt, after the state government refused to pass on the funding to schools.

Charles La Trobe College in Macleod received more than $100,000 in federal and state literacy and numeracy funds in 2009 and 2010.

But principal Maria Karvouni said schools across the north were told in November the funding was no longer available.

At a meeting of more than 40 schools, principals were asked to share access to literacy and numeracy coaches paid for out of federal funding for low socioeconomic areas.

Charles La Trobe must now share three literacy and numeracy coaches with students from three other schools.

Across the state, other schools have been forced to abandon their programs.

Australian Education Union Victorian secretary Mary Bluett said schools had been expecting to receive ongoing funding based on their improved results but had now been left "high and dry".

Treasury spokeswoman Kate Walshe said the funds had been received in the second half of 2011 but were considered "untied revenue".

Education department spokeswoman Megan McNaught said the state government was "considering how best to use these funds".

She said the issue would be further assessed as part of the budget process in May.