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Democratic House Speaker Michael Madigan sat down with his chief political nemesis Thursday night and decided it was time to act.

With the Chicago Public Schools facing a shutdown Monday, putting 411,000 children on the street, the powerful Southwest Sider offered Republican Gov. Jim Edgar a deal that neither could afford to refuse.

“My view was, when we reached this point with the threat of a closure of the schools, that everybody would be in the mood for compromise,” Madigan said.

“I looked over all of the issues that were on the table, worked through the relative importance of each for different people and came to the one way to work our way out of this: the tradeoff,” he said.

If Republicans would give in on their demand to eliminate the supernumerary teacher category, Madigan told Edgar, he would support a separate GOP demand to make it easier for individual schools to seek work-rule changes from unions beginning in 1995.

The result of that offer was a $378 million borrowing and reform deal for the Chicago schools, agreed upon Friday by Edgar and the state’s legislative leaders and scheduled to be considered by the full General Assembly on Sunday.

But the offer might never had come to fruition if Madigan had not realized that he could no longer simply say no to Republican demands for change in order to protect his ally, the Chicago Teachers Union.

“(The union) will acccept it because I am recommending that to them,” said Madigan, who relies not only on the teachers but all of organized labor for political support. “They don’t like it but they’re not going to stand in the way of passage.”

And Edgar, who last week announced his re-election bid, knew he had to compromise too-if only to avoid having his state’s largest school system shut down.

“Everyone was willing to give. Everyone was willing to work toward this agreement,” Edgar said.

Edgar and the House and Senate leadership acknowledged that before a federal appeals court dissolved a restraining order that was keeping the schools open, the chances of forcing an agreement were unlikely. As long as the classrooms were open, there was no pressure to make a deal.

Their compromise agreement includes Madigan’s acceding to a GOP demand that individual schools be allowed to seek work-rule changes different from the overall contract with a simple majority of the school’s bargaining unit, instead of a 63.5 percent vote. In exchange, Republicans gave up their push for the 1995 elimination of supernumeraries-veteran teachers whose specialities are no longer taught.

The budget would be balanced with $378 million in borrowing repaid by property taxes from the existing School Finance Authority levy, and with $32 million from two years’ worth of state Chapter 1 funds diverted from use for poor students.

Now it is up to rank-and-file legislators to decide whether the financial rescue plan that Edgar and top lawmakers signed onto Friday is worthy of support.

Republicans, with James “Pate” Philip of Wood Dale commanding their first Senate majority in 18 years, wanted to use the school crisis to force union concessions that Democratic lawmakers had blocked for years.

Yet if they had held out too long for those concessions while the schools were closed, their own governor could have been hurt. As long as the kids were locked out, the incumbent couldn’t sell himself as a leader concerned with education.

Now Republicans have to decide if the reforms the GOP won from Madigan are enough to warrant casting a vote to help Chicago.

“There’s a lot more that I would like from the Chicago school system than any discussions now will produce,” House GOP leader Lee Daniels of Elmhurst said as he prepared to sign onto the agreement.

“I’m willing to enter into a compromise to keep the children in school-with the warning and the caveat that the Chicago education community has to learn . . . it’s got an awful lot of work to do,” he said.

For Madigan, the decision to broker the deal was a recognition that if the schools shut down, voters probably would not side with the teachers union.

Rank-and-file Democrats still have to determine if the plan is in their best interests. Even if the unions can be placated, suburban and Downstate Democrats targeted for defeat by the GOP may not embrace a package that helps Chicago and Chicago only.

“It won’t be easy,” Madigan acknowledged. “But I think everybody understands . . . that we want schools to open on Monday.”

Even before voting on the package, every legislator knows that once the immediate school crisis is resolved, Chicago will be back to the legislature in two months to begin a push for legalized riverboat casinos.

Mayor Richard Daley has proposed the use of floating casino revenues to bolster school funding, including using gaming taxes to replace the property-tax revenue that fuels the current borrowing plan.

Edgar, in an interview scheduled to air on “The Reporters” at 9 a.m. Sunday on WMAQ-AM (670), acknowledged that “one of the stronger points” for Daley’s riverboat proposal is its attachment to school funding.

The Republican governor supports the concept of riverboats in Cook County, where they are now prohibited.

But Edgar said he has not agreed upon a plan with Daley and that he was not sure what would happen if “there’s ever really a serious push by the city,” given lawmakers who also want riverboat licenses issued for Rosemont, Arlington Heights, Waukegan and other areas across the state.