Bloomberg announced the plan Friday night at a news conference, The New York Times reported. It was worked out in hours of negotiation between the city Education Department, the City Council and the United Federation of Teachers.
About 1,000 municipal workers, many of them in healthcare, will be laid off, officials said. The budget also keeps 20 fire companies open and may prevent some cuts in day-care services and library hours.
"This is a budget that will keep our city strong, but it is also a budget that faces fiscal reality," Bloomberg said.
The mayor had called for the layoff of 4,100 teachers. The agreement includes an increase in the number of teachers likely to be lost to attrition from 2,000 to 2,600, a one-year suspension of sabbaticals and the use of teachers with no permanent assignment as substitutes.
"New Yorkers can rest easy tonight knowing that our children will still have great teachers," Council President Christine Quinn said.
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