The General Assembly's budget leaders agreed Monday to accept Gov. Larry Hogan's offer of $28 million to help the Baltimore school system and others around the state where enrollment has declined, abandoning a proposal to bail out the districts without his assistance.
The apparent resolution would help the city school system close a $130 million budget shortfall in exchange for submitting to new state auditing requirements. Other jurisdictions would receive money to help close smaller budget gaps. The deal came as a Senate and House conference committee wrapped up negotiations on the state's $43.5 billion budget for next year.
"We're very close. I'm loving life," said Del. Maggie McIntosh, the Baltimore Democrat who led negotiations for the House of Delegates.
McIntosh had previously proposed freeing money for Baltimore and 10 other school systems by reducing their required contributions to their employee pension plans. She said in an interview Monday that although her "Plan B" would allow lawmakers to aid schools without the governor's assistance, she decided it was prudent to accept his help.
City school officials announced in January that a $130 million shortfall could force 1,000 employee layoffs — including teachers — and lead to larger class sizes.
The state's additional $23.7 million contribution to Baltimore's school system would roughly match the city government's promise to give schools about $22 million more. Both contributions were envisioned in a deal reached by the Pugh administration and state legislators in which the city and state would together provide Baltimore schools with an extra $60 million a year for three years.
Additional money to reach that goal is contingent on legislation that would change how a state formula counts student enrollment, officials said. That measure, which has passed the House and is pending in a Senate committee, would help some districts with declining enrollment by counting students in full-day pre-K as part of their total.
In a statement, Baltimore schools CEO Sonja Santelises said the new state money was a "major component of the state and city's plan to contribute $60 million toward closing the district's anticipated budget gap." A schools spokeswoman did not respond to a request for comment on how the money would affect the system's budget decisions.
School officials have said they plan to slim this year's shortfall by $30 million by making cuts to the central office and using reserve funds. Even with additional state and city funding, Santelises has said principals would have to make budget cuts for their schools, but far less than previously feared.
Lawmakers also agreed to give city schools an additional $7.5 million to pay for students' rides on Maryland Transit Administration buses next year. Other legislation would require all future rides to be free for students who stay late for extracurricular activities.
The final version of the state budget will be considered Tuesday by both houses of the legislature.
Hogan spokesman Doug Mayer said "the governor was very happy with the budget, and was very happy to see a positive conclusion for the city schools."
Baltimore Mayor Catherine Pugh is expected to release her first city budget proposal on Wednesday. The mayor has said she is looking to redirect $5.5 million from the Police Department budget toward the school system. Other money would come from unspent snow removal and rainy day funds.
Meanwhile, City Council President Bernard C. "Jack" Young is seeking to cut $10 million from the Police Department budget and send that money to schools.
Pugh released a statement Monday thanking Hogan and McIntosh for their efforts.
"All parties involved recognize the importance of prioritizing our children's access to a quality education and partnering with schools CEO Dr. Sonja Santelises to give her the tools and resources to help our children thrive," Pugh said.
The mayor, a Democrat, said she looks forward to working with a commission that is now examining the state's education funding formula "so we can ensure a sustainable solution to the school system's funding difficulties."
To secure the extra state money, the legislature's negotiators tentatively agreed to accept Hogan's proposed accountability measures.
Sen. Bill Ferguson, a Baltimore Democrat on the Senate's conference team, said the plan involves "a lot of oversight and reporting" to make sure money is well spent by the Baltimore school system.
"How do we build confidence that there is not mismanagement, but structural problems?" he said.
Ferguson said the deal would require an outside, independent auditor to review the city school system's finances, both to watch how money is spent and accurately project how much needs to be spent in the future. Reports would be issued quarterly, along with special reports about future expenses.
The outside auditing would continue for three years, when the legislature is scheduled to revamp how it spends money on education statewide.
Currently, the Baltimore school system is subject to auditing requirements imposed by the state in 1997. The school system hires an accounting firm each year to do an audit, and the state education department makes an annual report to the General Assembly about the school system's academic and financial status.
Mayer said the new accountability measures were "important to every person involved in this conversation."
The proposed agreement would also require that charter schools receive an equitable share of the new money, a provision that Hogan sought.
The full House and Senate still must approve the deal.
Marietta English, president of the Baltimore Teachers Union, said she was pleased that the governor and lawmakers came together to provide money to the school system.
"We're going to continue to work with them, the district and the mayor to save as many jobs as possible," she said.
The governor and lawmakers also agreed to provide money for 10 other school districts where student enrollment has declined: Carroll County ($1.6 million), Allegany County ($793,000), Garrett County ($456,000), Somerset County ($455,000), Harford County ($356,000), Calvert County ($240,000), Kent County ($215,000), Cecil County ($190,000), Talbot County ($133,000) and Queen Anne's County ($22,000).
Carroll County Public Schools Superintendent Stephen Guthrie said the $1.6 million in state money "would go a long way to close our budget gap" of $3.9 million. He said much of the new money would go toward teacher salaries.
In Harford County, education leaders said much more money is needed to close that school system's projected $17 million budget gap.
Sandra Monaco, president of the Harford County Council of PTAs, expressed frustration that more than $23 million would go to help Baltimore schools while surrounding districts would get so little in comparison.
"It breaks my heart that we have so many school systems needing money," she said.
As part of the deal on school funding, lawmakers agreed last week to a modified version of Hogan's proposed tax credits for manufacturers who locate in economically disadvantaged areas of the state.
The governor proposed 100 percent income and property tax credits for new manufacturers, as well as relief from corporate filing fees. Instead, qualifying manufacturers would receive a 5.75 percent credit on salary payments to employees.
Baltimore Sun Media Group reporters Emily Chappell and David Anderson contributed to this article.