The cries from many Baltimore parents were loud and angry seven years ago: Don't let the state take control of our schools.

State schools Superintendent Nancy S. Grasmick recalls people confronting her, fearful they would lose influence over their children's education.

But former Mayor Kurt L. Schmoke remembers feeling that he had no choice but to relinquish substantial control given the "legal trench warfare" that was a result of lawsuits, including one filed by the American Civil Liberties Union and another by the city of Baltimore against the state, both demanding an increase in state funding for schools.

So out of legal and political necessity, a rare partnership was born that tried to strike a tricky balance: provide the city schools with more money from the state and independence from City Hall - without giving the state so much oversight authority that the new arrangement would be viewed as a takeover.

Today, with the school system facing a $58 million cumulative deficit and an additional cash flow emergency that requires loans from the state, city and a nonprofit foundation, the cries of dismay from parents are different.

Now, they wonder why the state or city didn't exercise more control long before a financial calamity threatened to bankrupt the school system.

A proposal to ease the imminent cash flow crisis will again trade money for control. In addition to $8 million loans from both the city and the Abell Foundation, the state will advance the schools $42 million, and Gov. Robert L. Ehrlich Jr. wants more accountability for tax dollars.

That sort of accountability was absent seven years ago. In retrospect, some who helped advance the 1997 legislation say potential problems were overlooked, and the system was ill-equipped to operate apart from the city's close control. While the reform of the city schools improved academic performance, the new structure helped create the current money crisis.

"The bottom line is that the partnership came about [in 1997] as an attempt to settle this multiple litigation," Schmoke said. "It wasn't as though we sat around and said what was the most wonderful structure."

At the time, the city school system was an agency of the city government and Schmoke exercised enough control over the school board that he was nearly free to choose the superintendent.

Under an agreement to settle the lawsuits, Schmoke gave up the power to control the schools in exchange for a $254 million infusion of state money over five years.

The settlement agreement required legislative approval, which was passed in 1997. What emerged was an independent school system, with a governing structure unlike almost any in the nation. The mayor and the governor jointly appoint the nine-member school board from a list that is screened by the State Board of Education.

"The thing that spawned the partnership was the abysmal performance of the schools," Grasmick said. The state has had much greater control and involvement over academics since the partnership began, she said.

In the past year, the state has made 3,000 visits to city schools to monitor academic progress. When city students had a poor showing on the Maryland State Assessments last year, Grasmick stepped in quickly to declare the entire system in "corrective action." That gave her the ability to order changes in instruction.

But the city-state partnership did not give her, or the mayor, similar control over the system's finances.

Authors of the partnership legislation envisioned a city school administration that would perform much like those in surrounding counties, Grasmick said. It was expected the city system would take care of its finances, write its payroll checks, and track students and employees by computer.

Still in its infancy in the 1999-2000 school year, the hybrid school system began to falter, overspending its budget that year by $33 million.

Several architects of the plan now say they may have underestimated how much help the system would need with the basics of finances and budgeting.

"I think we were overly optimistic about the split [from the city]," said Barbara A. Hoffman, a former legislator who helped get the bill passed.