Governor Andrew Cuomo is moving forward on his plan to resolve the battle over a new teacher evaluation system.
The governor will submit legislation this week giving the city and the United Federation of Teachers until September 17 to make a deal.
Failure to meet the deadline would allow the state Education Department to impose their own system on the city.
Schools already lost $250 million over the lack of an agreement on teacher evaluations.
A second round of funds is at stake if a deal is not struck by the deadline, which Schools Chancellor Dennis Walcott on Monday said the city cannot afford.
"If we lose an additional $250 million, give or take a couple mil here and there, that will hurt our schools and hurt the system in New York City," said Walcott. "At the same time, I can't sacrifice our principles - and I mean principles - not to lead the school but our core principles as far as bad policy is concerned. There's a line there, and we have to make sure we achieve the line of having good policy in place that benefits our teachers which will benefit our students in the long run. We're not just doing it to get the money in."
The city's teachers union has said they prefer a negotiated settlement, but would support the governor's action if necessary.