The school system, which has a $58 million deficit and a separate $58 million cash-flow shortfall, would be insolvent and unable to meet its payroll by the end of the month without emergency loans, school officials have said.
Baltimore ceded partial control of city schools to the state in 1997. The latest state bailout would have relegated the city to "junior partner" status for the next two years, O'Malley said last week.
Under Mitchell's plan, the schools would continue to be operated under a city-state partnership, but the state would not gain authority, as it would have under the state plan, to break the teachers' contract after the end of the school year.
City financial officials scrambled yesterday to determine the effect of the loan on the city's bond rating, ultimately deciding that it would not be a problem.
The city loan would make a substantial dent in Baltimore's $56.2 million rainy day fund, leaving $14.2 million for an emergency. That is far less than financial experts who rate the city's bonds recommend keeping in reserve.
The city's bond rating would not be hurt because the schools would pay back $34 million of the loan within 90 days, Mitchell said, at the start of the new fiscal year July 1.
The remaining $8 million would be due in June 2006, the same as under the plan negotiated with the state.
Under Mitchell's plan, the schools would receive $42 million from the city and $8 million from the Abell Foundation, a total of $50 million. The state plan would have provided $58 million. But the city plan would provide enough money because the schools' financial problems are not as severe as was first thought, Mitchell said.
Miller had a different explanation. He said Abell had increased its loan to $16 million to cover the difference. That could not be confirmed last night.
The only vote against the plan was cast by Councilman Nicholas C. D'Adamo Jr., chairman of the city's Budget and Appropriations Committee and an Ehrlich appointee to a job with the state police. He said he doubts whether the schools would repay the loan.
"This could backfire," he said. "I hate to see us lose that" money.
Sun staff writers Tanika White and Howard Libit contributed to this article.