A small but powerful panel controlled by the state would run the troubled Baltimore school system for at least the next 16 months under a tentative agreement brokered last night between Gov. Robert L. Ehrlich Jr. and Mayor Martin O'Malley.
Officials called the new Baltimore City School System Authority a "superstructure" that would temporarily assume all the powers of the current school board, and would balance the system's books and cut costs. The agreement, which requires General Assembly approval, would pave the way for the schools to receive a state loan of $42 million or more to solve a cash-flow crisis.
With an accumulated deficit of at least $58 million and a crushing cash flow problem, city schools could run out of money to pay bills by the end of next month with no help. Questions surrounding how the deficit came about have drawn the attention of U.S. Attorney Thomas M. DiBiagio, whose staff has begun interviewing people familiar with school affairs.
State leaders would not say last night whether teachers would face immediate pay cuts or layoffs under the new management structure.
Outlines of the pact were hammered out during a closed-door State House meeting last night that appeared to deliver a significant victory to the governor, who has lobbied to bring more accountability to the deficit-ridden schools.
O'Malley entered the meeting with a final trump card: Early in the day, he had received agreements from current school board members that they would resign under certain conditions that would protect teachers. But the mayor's suggestions were quickly tossed aside.
While details were to be completed over the next three days, with emergency legislation ready by Monday, the authority's shape largely followed a proposal drawn by Ehrlich advisers. By reaching a tentative understanding, city and state officials have discarded the option of placing the system in receivership, a far more drastic step that would have abolished union contracts.
With talks close to conclusion, the governor appears to have broken a promise he made early in the week that parents and community groups would be included in negotiations. State Budget Secretary James C. "Chip" DiPaula Jr., the architect of the plan, said that parents could come to bill hearings in Annapolis to let their views be known.
Panel to take shape
Ehrlich would likely appoint a majority of the new panel of at least three people, and would name its chairman, giving the governor far more oversight of city schools than exists now. The board would have budget and audit control, and while the governor proposed a three-person panel, some lawmakers suggested it include five people - with two appointees each by the governor and mayor and a fifth from an independent entity.
The governor said he would probably name former state Sen. Robert R. Neall, a financial administrator with the Johns Hopkins Hospital and Health Systems as one of his appointees. Neall volunteered as an adviser to the school system before resigning after the school board would not endorse a 5 percent teacher pay reduction.
"This is an opportunity to fix [city schools] for good. So, Bobby, don't screw it up." Ehrlich said referring to Neall.
State schools Superintendent Nancy S. Grasmick also could be on the authority.
Neither Grasmick nor Neall is a Baltimore resident, so the control authority could have only one city member, a troubling prospect for current school board members and some education advocates.
City schools chief Bonnie S. Copeland said she didn't expect to be on panel and hoped to continue as the chief executive officer.
The agreement would essentially dissolve the current nine-member school board, gutting the management structure put in place by the General Assembly seven years ago to reform the school system.
"Most of the things the governor wanted were agreed upon," said Comptroller William Donald Schaefer, who participated in the talks.
O'Malley favored a less extreme resolution offering a plan that avoided teacher pay cuts and layoffs until the summer break, but his proposal for a memorandum of understanding was quickly rejected during last night's session.
But the mayor said last night that he thought the arrangement was fair, and called it a "great compromise."
"We are going with the governor's plan," O'Malley said as he and Schaefer left the State House. A mayoral spokesman, Stephen Kearney, later described the comment as "light-hearted" and a reference to the former governor.
In an interview later, the mayor said that while the new board "would have the ability to enter into contracts" as the current board does, "I don't believe we should do away with the collective bargaining with the stroke of a pen."
Pay cuts for teachers or layoffs had not been decided, he said.
Even as state and city leaders negotiated a solution to the school crisis, federal investigators in Baltimore had begun interviews to see if there had been any misuse of school system funds.