Baltimore officials said last night that they were close to reaching an agreement with the Abell Foundation to help end the city school system's financial crisis without substantial layoffs or steep pay cuts.
Under a deal that officials said was nearly complete, the Abell Foundation - and possibly other philanthropies - would lend the system $8 million, ending weeks of turmoil amid allegations of fiscal mismanagement that has left the system with a $58 million deficit.
The Abell money would be added to another $8 million loan the mayor offered to the schools last week from the city's rainy day fund. The $16 million would erase a portion of the deficit by the end of the fiscal year in June and allow the system to operate without a cash flow problem.
Details of the loan are complicated, but a city administration source said it would do more than simply get the school system through its immediate financial problems. Negotiations on the agreement will continue today, just as representatives from the governor's office were scheduled to work with city school officials on a solution that would have included state funding.
It was not clear last night what might happen today if both the governor and the mayor offered new solutions.
"Clearly, this doesn't solve all the problems that this deficit causes," said Sean R. Malone, the city's interim labor commissioner. "But it is the first step toward clearing the hurdles down the road."
"We don't want to have another week like last week, and the mayor is putting all of his time and effort into resolving this as quickly as possible," said Steve Kearney, a spokesman for Mayor Martin O'Malley. "Right now, we're trying to do that through an agreement with the foundations."
O'Malley and city schools chief Bonnie S. Copeland had been meeting with Robert C. Embry Jr., director of the Abell Foundation, since Wednesday in an attempt to reach a deal before school unions voted Thursday to reject a 3.5 percent pay cut. Officials said they closed in on an agreement late yesterday after several hours of negotiations.
Embry did not return telephone calls last night.
The Abell Foundation, based in Baltimore and established a half-century ago by descendants of Arunah S. Abell, founder of The Sun, is one of the largest foundations in the state. It reported assets of $187.6 million at the end of 2002, the last year for which figures were immediately available. It approved $9 million in grants that year.
The foundation has provided grants and other support to the city schools for many years. Embry is a former chairman of the city and state school boards.
Before news of the negotiations with the foundations broke yesterday, city officials said they would announce tomorrow whether they would lay off employees or force them to take a steep pay cut.
The nine-member city school board met for two hours yesterday in executive session. Afterward, board members took part in informal talks with state and city officials, weighing potential solutions to the fiscal problem.
School board members will meet again privately at 8:30 tomorrow morning at the system's North Avenue headquarters.
Discussions are expected to continue today, including a 3 p.m. conference call among officials of Gov. Robert L. Ehrlich Jr.'s administration, Copeland and state schools Superintendent Nancy S. Grasmick.
Community members also met yesterday to discuss the system's financial problems.
About 100 parents and activists gathered at Union Baptist Church in West Baltimore for two hours to talk about plans of action, including protests at city and state school board meetings.
"I've gotten tired of hearing, 'Where are the parents in the process?'" said Michael Hamilton, president of the Baltimore City Council of PTAs. "We will do whatever it takes to protect our children and ensure their education."
Last week, Copeland was hoping that members of the system's employee unions would accept a last-minute compromise from the city that would have required teachers and other workers to take a temporary 3.5 percent pay cut in exchange for monetary help from the city.
But three of the unions - including the largest, the Baltimore Teachers Union - resoundingly rejected the deal, saying they would not be held responsible for a $58 million budget deficit they didn't create.
That has left Copeland, board members, and city and state officials scrambling to find other ways to save $16 million this year. Officials say that amount is necessary for the system to balance this year's budget and pay off a portion of its deficit.
Copeland has said that without financial help from outside the system, she may have to force employees to take a 6.8 percent pay cut through the end of the school year or lay off up to 1,200 employees, most of them teachers.
Copeland declined to comment after yesterday's board meeting, saying only that she and board members consulted with their attorneys about "what we're going to do about the $16 million."
An Ehrlich spokesman said yesterday that the governor's office would not have any further information until after today's conference call.
Many at yesterday's parent meeting said they supported the teachers' vote to reject pay cuts.
"You can't blame the teachers for this, and it's unfair to ask them to make the biggest sacrifice," said Dennis Moulden, head of the PTA at Roland Park Elementary-Middle School. "We have to stand behind them."
Others at the meeting complained that city and state leaders have not received enough blame for the school system's problems.
"It's awfully strange no one is looking at the state's role in this," Hamilton said.
Hamilton presented a letter with demands that he said the council plans to deliver to Ehrlich tomorrow. The letter asks for state and federal criminal investigations into the system's finances, a five- to 10-year audit of the system's budget, an audit of the system's employment practices, and more parent involvement on an independent panel that Grasmick created to investigate the budget crisis.
Meanwhile yesterday, U.S. Attorney Thomas M. DiBiagio urged anyone with information that indicates criminal wrongdoing in the crisis to call his office.
Speaking on WBAL-AM yesterday morning, DiBiagio said he would be interested to hear any information about possible kickbacks, bribes, no-show jobs or theft that contributed to the system's deficit. "They should know if they do come forward, we're going to do something about it," DiBiagio said.
Hamilton said he would also ask Grasmick to allow city students to skip the Maryland School Assessment exams Feb. 25 and 26 because the distraction of the financial crisis has left students unprepared. He said that if Grasmick does not agree, the council might recommend that parents keep their children home on testing days.
Kevin Slayton, chairman of the city's Parent Community Advisory Board, said a coalition of parent and community groups will demand the resignations of the six most veteran school board members tomorrow. Many parents applauded his announcement.
"The goal of our coalition is to simply demand that the board members who have been at the watch ... give up their seats," Slayton said later in a news release. "Their lack of oversight, we feel, can be linked to not only the current state of emergency between the teachers and the administration, but also to the student achievement gaps that smother the progress of urban school districts."
Another reason board members should go, they say, is that parents have been left out of the efforts to confront the budget problems.
"We're the clients in this process, and we really haven't been represented well at all," said David Waldo, a parent at Roland Park.
Sun staff writer Childs Walker and the Associated Press contributed to this article.