A specialist teaching unit for excluded pupils in Warwickshire could be closed by September 2012, the council says.
Warwickshire's pupil reintegration unit taught 146 excluded pupils in 2010 but has been placed in special measures by Ofsted following an inspection in June.
The county council said it now wanted to close the unit and re-allocate government funds to help excluded pupils remain in their own schools.
The plans are due to be discussed by the Conservative-run cabinet later.
Warwickshire Council said the proposal was not a money-saving exercise and was designed to help pupils achieve their academic potential.
It said there had been a rise in the number of pupils enrolled at the referral centre in recent years and it hoped by giving funding directly to the schools they could invest in measures to prevent exclusions in the future.
John Lockwood, a member of staff at the centre and member of the National Union of Teachers, said the most recent Ofsted rating was "unfair" as pupils at the referral centre were more disruptive than those in mainstream schools and should be assessed according to different criteria.