Mayor Michael Bloomberg announced Wednesday morning that a deal has been reached to avoid the proposed teacher layoffs.

The mayor says the deal will avoid the 4,400 layoffs proposed in his executive budget by freezing the two percent raises planned over the next two years.

However, United Federation of Teachers President Michael Mulgrew says Bloomberg does not have the power to rescind the raises and that no agreement has been reached to freeze salaries.

"When contracts expire, we then negotiate them and sometimes that takes a process of years, and I'm hoping not to take years and we'll continue to do that," said Mulgrew. "I don't negotiate in public, and once again, the mayor can propose it but he can't impose it, and it's not something we've agreed to."

Schools Chancellor Joel Klein says the mayor does have the power, because both the teachers' and principal union's contracts have expired.

"The mayor faced a choice. We could put out a budget with $750 million, 4,400 layoffs, and start the process, or he could move to zero-zero," Klein said. "It's not a choice he was eager to make. We had to get our budgets to the school and given the two options that faced the mayor, I think it's clear that he made the tough, but right decision."

Klein added the department is still losing at least 2,000 teachers through attrition.

The schools budget was released Wednesday and principals are facing four percent cuts on top of eight percent cuts in the last two years. Principals say they have nothing left to cut.

Bloomberg's budget was constructed on the expectation the state will reduce its contribution for education. The state has yet to finalize its spending plan, which was due April 1.

The mayor says while this is not ideal, both he and the teachers' union head agreed to push Albany and Washington to restore education funding.