New York City stands to lose up to $450 million in funding as tense negotiations between the city and teachers union fell apart on an evaluation plan before a midnight deadline.

The announcement came early Thursday afternoon from United Federation of Teachers President Michael Mulgrew, who said Mayor Michael Bloomberg "blew the deal up in the early hours today." Failure to come to a deal will cost the city $250 in state aid, and possibly an additional $200 million in federal grants if the two sides continue to stall.

"The intransigence of the Bloomberg administration on key issues has made it impossible to reach agreement on a new teacher evaluation system," Mulgrew said in a statement. "It is particularly painful to make this announcement because last night our negotiators had reached agreement… despite the involvement of state officials we could not put it back together"

Schools Chancellor Dennis Walcott, however, told The Wall Street Journal that negotiations lasted until 3 a.m. Thursday morning without a deal. New York City Michael Bloomberg said in a news conference Thursday that the UFT "unilaterally walked away from our negotiations."

A 2010 law tied to the federal Race to the Top program requires the state's 691 districts to negotiate new teacher evaluation systems with their teachers unions that factors in student progress on standardized exams. At the time, New York won nearly $700 million from the Obama administration under RTTT to implement education reform efforts, including replacing old evaluation systems. All but four districts -- including New York City, the nation's largest -- had submitted their plans by Wednesday.

New York Governor Andrew Cuomo has refused to extend the deadline for submissions.

"The remaining districts have until midnight tonight to [submit plans] or they will forfeit the increase in education aid they have been counting on and both parties will have failed the children they serve," Cuomo said in a statement Thursday, according to WKBW.

The loss in state funding would force the city to cut its budget and freeze hiring in a district that operates on a $19.7 billion budget for 75,000 teachers and 1.1 million students. Still, State Education Commissioner John B. King, Jr. said in a statement Thursday that while the current outcome is "discouraging," Bloomberg and Mulgrew still have time.

"We want to get to ‘yes,'" King said. "We’ve been working with UFT and the City for several days. We’ve provided technical assistance. We’ve provided answers and options from approved plans. We have a detailed perspective on what each side is proposing. I’m confident that if the Mayor and Mr. Mulgrew act quickly, we can review a plan in time to meet the deadline."

The city and UFT disagree on a number of issues, including how a poorly performing teacher should be dismissed and how low-scoring students should be assisted. Union leaders also sought to double the number of arbitration hearings for teachers appealing poor ratings, which Bloomberg said Thursday would only further lengthen an already multi-step process. The UFT also wanted the evaluation agreement to sunset in 2015, which would "sabotage the entire agreement," Bloomberg said, because the process to remove ineffective teachers takes two years.

"The whole thing would be a joke." Bloomberg said. "The saddest part is our students will pay the cost. I can't tell you how much this pains me to see this happen."

The union and city have long carried a tense relationship, as Bloomberg's school reform efforts have faced staunch union opposition. And prospects of a deal are grim as negotiations have deteriorated in recent weeks -- the city accuses teachers of extortion, while teachers claim Bloomberg of "going after" them.

A new evaluation plan would scrap the former "satisfactory," "unsatisfactory" ratings, instead rating teachers as highly effective, effective, developing or ineffective, 20 percent of which is based on student growth on test scores. Other measures like classroom observations comprise the remaining portions, and educators receiving ineffective ratings for two consecutive years could face termination.

A new plan, launched as a pilot across 20 New York City schools in 2011, found that 18 percent were scored at the lowest tier of the four-category scale -- a far cry from the just 2 percent of teachers usually considered ineffective under the former evaluation model. Student performance on tests was weighted at 40 percent of the teacher's score at the time.

“The money is important. But what’s just as important is that educators have an evaluation plan that gives them the feedback they need to improve their practice and help their students learn more," King said in his Thursday statement. "The goal is to make sure every student graduates with the knowledge and skills necessary to succeed in college and careers. Approved evaluation plans will go a long way toward helping us meet that goal.”

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