Baltimore rejects state bailout

3/16/04 -- In an abrupt about-face, Baltimore leaders have rejected a state bailout for the financially troubled city school system. The plan called for the district to receive a $42 million state loan and temporarily turn over control of city schools to a financial oversight panel.

Only days after Gov. Robert Ehrlich and Mayor Martin O'Malley hammered out an agreement to ensure solvency for the city's 91,000-student school system, the mayor and city council decided to change course and rescue the city schools with their own $42 million loan package.

"The mayor and city council, working with our finance director, just came to the decision that we can have more influence over accountability and fiscal management if we take more responsibility," says Baltimore Deputy Press Secretary Rick Abbruzzese. "No amount of money is worth giving up control of your school system.

The city's decision was a bold bid of independence following weeks of difficult negotiations with the state for help in resolving the school system's $58 million budget deficit and a separate cash-flow shortfall.

The governor and mayor had reached agreement to turn over control of the school system to a five-member fiscal oversight panel, and the governor was preparing to submit legislation to the state General Assembly.