Education spending in NSW will be slashed by $1.7 billion with independent schools expected to share the pain with the public system.
Premier Barry O'Farrell has described the cuts as "difficult but necessary".
How will the cuts affect Illawarra schools? Find out in Wednesday's Mercury
The Education Minister, Adrian Piccoli, said he would cap per capita funding for indepedendent schools at the current level, which will save the government $116 million over four years. Public schools would lose $201 million from their budgets.
"It will not be capped forever and the cap won't come into affect until the first of July 2013," Mr Piccoli said.
"The intention of these changes is that the impact on non-government schools is the same as government schools of around 3 per cent."
The government sector would be expected to shed 600 staff in state and regional offices over four years - as part of a total cut of 1800 from the Department of Education.
While Mr Piccoli said no teachers would lose their jobs, the independent school sector said it would lose teacher numbers as a result of the funding cuts.
"I am the minister for all schools so I've taken the decision that the savings measures should be spread across all funding programs and grants across the education portfolio except teachers in [public] schools which have been quarantined from the Labor expenses cap," Mr Piccoli said.
"There has to be a shared impact of these savings measures and I have asked the director-general to ensure the impacts on education will be minimised by as much as possible.
"These changes include reducing staff working more efficiently within reduced operating budgets, adjusting non-government school sector funding and increasing revenue from fees and services."
TAFE NSW institutes would be forced to increase fees by 9.5 per cent and would be forced to cut 800 jobs over the next four years.
The concession fee will increase from $53 to $100. The overall annual increase will range from $44 for certificate one and two courses to $150 for advanced diploma courses.
"We know that the increase in fees are hard on every household," he said. "These proposed fee increases are within national averages for TAFE fees."
Aboriginal students would continue to receive expemptions and students with disabilities would receive subsidies.