POTOMAC, Mont. -- While state funding for schools is decreasing, federal test score requirements are getting tougher. One small school is handling the dilemma by eliminating some traditional, age based classes.

Up to 120 kindergarten through eighth graders attend Potomac School. Funding cuts and a failed levy are forcing the Missoula County school to lose one of its nine teachers next year. Tim Johnson is the fourth principal these students have seen in four years. What's more, federal standards continue to rise for math and reading.

Denise Juneau, the Montana Superintendent of Public Instruction tells NBC Montana, "We have a state test that measures proficiency of students in reading and proficiency of students in math so that comes from the federal level. That's where schools have to be accountable, so that is becoming a big focus of schools, is reading and math to the exclusion of a lot of other content areas."

That focus puts the squeeze on schools like Potomac.

Johnson says, "It compels school districts to focus in on certain skills and we assess students based on those skills. In the process of doing that , what we are not addressing with students is the other needs that affect those skills."

Juneau says the tests provide critical information on progress. "A standardized test really isn't meant to take a lot of needs into account. A standardized test is one day of a student's life in a certain area," Juneau explains.

However, educators tell us that snapshot comes with high stakes, including funding decisions for schools.

In the face of deep cuts and high standardized expectations, Johnson's staff says it still can't ignore the rest of the needs of each student. To nurture those needs, the school is eliminating age-based classes in math this fall and will begin grouping children in ways that will better challenge their abilities.

Johnson says, "One of the ways to get the student into the mix, is to focus on all their needs, as the math program does, and to do it in a way that addresses the whole student."

Potomac School ran a pilot project this year and found success.

Sarah Schmill teaches fifth grade and tells NBC Montana, "It can be a frustration when I know I need to be pushing kiddos more or being able to help students more, but you have such a large group at varying levels, so that can be a frustration, so you don't feel like you are teaching to the best of that student's needs."

Johnson says students have embraced the changes. Even though he foresees some growing pains when extending the program through all math classes in the fall, he hopes students will exceed even his high expectations for the program.

If all goes well, the school plans to extend the program to subjects like reading and technology.