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An agreement is near that would prevent teacher layoffs or salary reductions for the remainder of the school year while still advancing state money for a bailout of city schools, Maryland legislative leaders said yesterday.

“It’s my understanding they’ve reached an agreement that there will be no layoffs or pay cuts before the end of the school year,” said Senate President Thomas V. Mike Miller.

The status of teachers’ jobs has been a sticking point as city and state officials negotiate the terms of a new management structure for the deficit-ridden school system.

Gov. Robert L. Ehrlich Jr. has suggested immediate payroll cuts. City officials want to prevent teacher strikes or sickouts that could result if pay is reduced before the end of the school year. The mayor’s office says the school system’s labor costs can be reviewed during the summer when some teachers are expected to retire or leave for other jobs.

State Budget Secretary James C. “Chip” DiPaula Jr. indicated last night that short-term teacher protection would be part of the legislation Ehrlich submits to the General Assembly to create a temporary management team. “The governor hopes to avoid any classroom disruptions,” DiPaula said.

The new school system authority would oversee city schools and close a deficit of at least $58 million.

With Ehrlich’s school overhaul bill still not ready yesterday, Miller and House Speaker Michael E. Busch urged Mayor Martin O’Malley and the governor to negotiate a rapid end to their standoff.

Miller and Busch said the General Assembly should not consider a bill to revamp the school system’s management until Ehrlich and O’Malley agree on terms of the deal, such as how many members sit on an oversight panel and who appoints them.

“There are two elephants in the jungle, the mayor and the governor, and the little people are getting trampled underneath,” said Miller. “We want them to agree. And then we are going to do what they agree upon. We’re going to introduce a bill that they agree upon, and we are going to get it passed.”

O’Malley, through a spokesman, indicated that he hopes to reach an agreement.

“We shouldn’t let politics get in the way of a solution,” said spokesman Steve Kearney. “There’s no reason this can’t be resolved.”

With tensions mounting over the shape of an education rescue package, dozens of parents and community activists rallied yesterday at state Board of Education headquarters in Baltimore, where they were sharply critical of a possible state takeover of city schools.

Ehrlich said he is willing to hear out O’Malley, parents and others, but in the end will submit a plan that allays the concerns of lawmakers in other parts of the state who are reluctant to spend more on Baltimore schools.

“There have been listening sessions, but there’s no negotiations, because we’re the bank,” Ehrlich said.

With city schools facing both an accumulated deficit and a cash-flow crunch that could cause paychecks to bounce as early as next month, city and state leaders have been negotiating the terms of a $42 million loan package for more than a week.

Officials agreed Feb. 26 on the framework of a powerful new oversight authority for city schools. City leaders want a majority of a five-member panel to be city residents and hope to prevent teacher pay cuts during the current school year.

“I believe we have a deal where three of the five members are city residents,” O’Malley said at a televised forum last night.

Miller, Busch and fiscal leaders in the state House and Senate agreed yesterday that they do not want a messy floor debate on the city schools rescue plan. Such a debate runs the risk of producing a bill that Ehrlich would veto, Miller said, an unacceptable outcome.

“They trust the governor, the fiscal conservatives. But the social side trusts the mayor to do what’s right and not put the teachers out on the street,” Miller said. “If the bill gets gutted by the city delegation, or a committee in the Senate or the House, then the governor is going to veto the bill.”

Busch said Ehrlich and O’Malley must reach an agreement before the General Assembly takes up the plan. “There has to be consensus before you start moving a bill, so different factions can’t start playing one off the other,” Busch said.

Those statements alter the dynamic of a fiscal compromise. Before yesterday, Ehrlich had intended to introduce a bill that included many of the terms he wanted — ignoring some of the mayor’s desires. But by insisting on a rapid compromise, Miller has strengthened O’Malley’s hand, giving the mayor fresh energy to push for the city participation he says is needed in any bailout plan.

Miller had critical words for how O’Malley and Ehrlich have conducted negotiations to date.

“The governor stays in the room for five minutes and gets up and gets in front of the TV camera,” Miller said. “And the mayor, he says what was agreed upon wasn’t agreed upon. And so we get these messages, these 10-page missives the day after, saying, ‘This is what I’ll accept.’ Well, he doesn’t control the purse strings. The state of Maryland has the purse strings.”

Miller said the two sides are not far apart.

“It’s minor. It’s who serves on the committee, and how many are residents of Baltimore City,” Miller said. “It’s my understanding that the governor is willing to accede to a major portion of the mayor’s concerns.”

Del. Salima S. Marriott, chairwoman of the Baltimore delegation in the House, was open to the prospect of a compromise, but expressed some wariness.

“That’s good if they can do it,” she said, but added that conditions agreed to in Annapolis might not play well with parents, teachers and schoolchildren. “We have to answer to the people,” she said.

Last night, O’Malley, DiPaula, state Superintendent Nancy S. Grasmick and Bonnie S. Copeland, the city schools’ chief executive, participated in a town hall forum on WBAL-TV, answering audience questions about the financial crisis.

Yesterday afternoon, dozens of parents and community members protested outside the state Board of Education building in Baltimore, saying that Ehrlich’s focus on the school system’s bottom line amounts to “child endangerment.”

“Our children have a right, a constitutional right, to an adequate education. It is the law,” said Jacquiline Johnson, the grandmother of two students at Rognel Heights Elementary School. “When we fail to give our children an adequate education, we put them in danger. It is child endangerment.”

The protesters demanded that the state provide city schools with more funding — not a loan. Some wore T-shirts that read, “Save our children. Save our city. Save our schools,” and carried signs that said, “No state takeover.”

Demonstrators said former state Sen. Robert R. Neall should not be part of any plan to improve system finances, calling his short tenure as volunteer adviser to city school officials “partial and biased.”

Sun staff writers Lynn Anderson and Tanika White contributed to this article.

<!– ART CREDITGENE SWEENEY JR. : SUN STAFF

ART CREDIT–> <!– CUTLINE TEXTDozens demonstrate yesterday outside state Department of Education headquarters in Baltimore to protest a possible state takeover of city schools. "When we fail to give our children an adequate education, we put them in danger," one woman said.

CUTLINE TEXT–>