With his schoolmates and teachers cheering him on and a physical therapist supporting him, Stefan Dodich stood for the first time, just weeks ago.

Key points: St Paul's College is a Melbourne school that educates students with complex disabilities and care needs

St Paul's College is a Melbourne school that educates students with complex disabilities and care needs The school says it has been told it will lose nearly $500,000 in funding for support staff

The school says it has been told it will lose nearly $500,000 in funding for support staff The school believes it has become caught in a funding dispute between the Victorian and Federal governments

Stefan is a student at St Paul's College in Balwyn in Melbourne's east, a school for children with disabilities.

His father, Walter Dodich, said it was a big achievement for his son.

"I know for an everyday child that is just a normal event but for us that is a milestone," he said.

Stefan was born with a brain condition called lissencephaly and has been attending St Paul's College for five years.

At school he has had access to the physiotherapy that helped him achieve his big moment.

"Certainly if he wasn't coming to this school he wouldn't be having the physiotherapy that allows him to do that," his dad said.

School 'changes lives'

Principal Tim Hemphill said St Paul's College had been teaching children with disabilities for 60 years and provided an education to students with the most complex care requirements.

But he said the school had been told it would lose nearly $500,000 in funding that it had been using to pay for nurses, physiotherapists, speech pathologists and support workers.

St Paul's students Jack and Luca benefit from the school's support staff. ( ABC News: Peter Drought )

Many of the parents of students at the college rave about the support services that help their children attend school.

Kate Beattie's son Tom started prep this year, after being diagnosed with a form of childhood dementia four years ago.

"[The diagnosis] means he is going to lose every skill he has physically – his speech, his sight etc," she said.

"So he has quite complex physical and intellectual disabilities associated with that condition."

Kate Beattie said her son Tom had thrived at St Paul's College. ( ABC News: Darryl Torpy )

She said she had been amazed by what Tom had achieved at his new school.

"We have gone from a position of thinking his future was very bleak to being really excited about what he has done at the school."

Students caught in funding dispute

But Mr Hemphill said the Victorian Government had told the school it would not continue to provide funding to pay for staff to help students with things like eating, going to the toilet, moving around the school and speech.

Ethan is one of 60 children at St Paul's College, a school for children with special needs. ( ABC News: Peter Drought )

"St Paul's has been put into what you would call a bureaucratic limbo, where you have the State and Commonwealth saying the other is responsible for funding," he said.

"And whilst they handball responsibility to and fro between them, the future of our students and the ability for them to access their education is under threat."

Mr Hemphill said the school had been told by the Victorian Government that the NDIS was now responsible for disability funding, while the NDIS had told the school that the State Government was responsible for school funding.

"I think the decision to withdraw funding effectively means if your child has complex needs that don't fit into a bureaucratic funding model, then the government will forget about you," Mr Hemphill said.

Students at St Paul's College have access to specialist staff and facilities like this calming sensory room. ( ABC News: Peter Drought )

He said many of St Paul's students could not attend school without the assistance of classroom support workers.

Can a school for high-needs children change its 'business model'?

The Victorian Minister for Disability, Luke Donnellan, declined an interview with the ABC.

In a statement he said the Commonwealth was now responsible for disability funding through the National Disability Insurance Agency (NDIA).

"The disability funding previously available to the school is now provided through their pupil's individual NDIA plans, this is the same for all Victorian disability service providers, and St Paul's College is currently the only school in Victoria still receiving disability supports through DHHS (Department of Health and Human Services Victoria)."

He said the State Government had been working with the school on the issue for two years.

"We've provided a number of extensions for St Paul's College to update their business model in order to leverage funding from the Commonwealth and the NDIA."

It's a message that outrages those at St Paul's College.

Villa Maria Catholic Homes, which operates the school, sent a letter to DHHS in early December, where it described the suggestion it could change its business model as "unconscionable".

"Changing our 'business model' as DHHS describes it, is simply a euphemism for cutting the very services that our students can't access anywhere else," the Catholic body said.

What does the Federal Government say?

The Federal Government told the ABC state and territory governments committed to providing funding for personal care to schools for children with disabilities at a Council of Australian Governments (COAG) meeting in 2018.

"States and territories are responsible for the delivery of these supports until 31 December 2023, and claim discounts to their NDIS funding contribution for doing so," a Federal Department of Community Services spokesperson said.

"The specific funding arrangements with St Paul's school are a matter for the Victorian Government."

St Paul's College student Marcus enjoys playing on the swings. His school teaches children with a range of physical and intellectual needs. ( ABC News: Peter Drought )

In response to the Federal Government's claim, Mr Donnellan said in a statement that the Victorian Government had made a number of requests to the school about its personal support requirements for students.

"We are awaiting information from the school to further understand their operations to determine personal support needs that can be funded," he said.

But St Paul's College said it had been told by the Victorian Government that its funding would not continue next year.

It said it only learnt of the COAG agreement last week, and had not been asked to provide any further information, since its last meeting with DHHS representatives.

Parents back school's fight for funds

Parents of students have said they are shocked that the school could lose funding.

"There is not enough funding as there is, to actually suggest they are going to reduce funding is completely ludicrous," Mr Dodich said.

St Paul's College students Lola and Isla share a hug while at school. ( ABC News: Peter Drought )

Ms Beattie's frustration with the funding impasse was palpable when she spoke to the ABC.

"I am dismayed that anybody would think about taking resources from really the most vulnerable people in our society — children with the most complex disabilities," she said.

Mr Hemphill said the school would continue to employ its support staff next year, but without its funding issues resolved, the school's long-term viability was threatened.