My kids, have never been to a school in which they make you invite ALL the kids to a party.
What my kids Teachers did say is: if you have a party and make invitations, do not pass it out yourselves... but give it to the TEACHER and then she will discreetly, give it to the parents, of the child. NOT to the child themselves, because a child will blabber mouth it to everyone or get it lost.
So that is how it is at my kids schools.
It is unfortunate, that the school is dictating that you have to invite the ENTIRE class.
Maybe just invite other kid friends that your son has. Friends that are not school, related.
And NO... not all 3-4 year olds get big parties. My son did not. His friends did not. Its OKAY.
Do not feel guilty, okay?
And certainly, do not break your budget.