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Cuts in school budgets will mean teachers and other staff losing jobs, Education Minister John O'Dowd has said.

Principals have been told their financial allocation will be reduced by 5% this year, around 2% more than expected.

Mr O'Dowd said it was an "unsavoury but necessary decision".

A letter outlining hard times ahead was sent by the department of education to school boards of governors on Friday.

The letter mentioned the £40m of extra money which Mr O'Dowd has released, but he said despite that, the reductions in funding would be unprecedented and a "real and significant challenge".

Mr O'Dowd said: "The harsh reality of the cuts imposed on this administration by the British government is that we are going to face job losses among our teaching staff, among our school staff, going into the future."

"The scale of the savings required in education has been clear since the Budget 2011-15 process concluded in March this year.

"Two weeks ago I mitigated the impact on the aggregated schools budget by putting £40m from my budget into it over the next three years. Otherwise the decrease next year would have been more than 5%," he said.

Education committee chair Mervyn Storey said the minister should find other ways of saving money if jobs are not to be lost.

"This is a financial bombshell which has been landed with boards of governors and with school principals," he said.

"They have been working on the premise that the reduction in their budgets would be something in the region of 3%. They are now being told it's 5%."

Gerry Murphy, northern secretary of the teachers' union INTO, said the education minister should find alternative means of tackling the budget cuts.

"We now urge the minister to reflect on the seriousness of the planned budget cuts outlined by his officials and begin to engage constructively with INTO and other stakeholders to find a different way to overcome the financial challenges we undoubtedly face," he said.

"INTO is prepared to act responsibly and engage in meaningful negotiations to this end."