The district has been counting on $124 million in union concessions and savings to help close a $304 million deficit. The current contract expires at the end of this month and negotiations are continuing.
The dispute over the $45 million state grant comes as Mayor Nutter and City Council wrestle over another piece of the $140 million package hashed out in Harrisburg last month to address the district's shortfall.
The state plan calls for the city to borrow $50 million against future collections of the city's extra 1 percent sales tax, which was to expire next June, and turn the money over to the schools.
Superintendent William R. Hite Jr. warned last week that unless he received assurances by Friday that the $50 million would be available, the district would postpone the scheduled Sept. 9 opening of schools, open just a few, or operate them on half-day schedules.
The $45 million grant is contingent on the education secretary's determining that the district has obtained sufficient reforms and concessions from the teachers' union.
Philadelphia legislators, led by State Sen. Anthony Hardy Williams, said at City Hall that Zogby could release the money now.
"Children do not negotiate contracts and should not be held hostage," said State Rep. Cherelle L. Parker, chair of the city's delegation in the House.
Legislators, along with Mayor Nutter and Council President Darrell L. Clarke, wrote in a letter to Corbett that many of the conditions have been met. They cited the closing of underused schools, overhauling low-performing ones, launching of a virtual school to give students a new learning opportunity, and savings from the district's blue-collar union.
Jay Costa of Allegheny County, the Senate's Democratic leader, supported the city delegation, noting that the administration had not made the $45 million contingent on labor concessions during budget negotiations.
"In the context of our discussions with the governor's top aides, there were no additional labor concessions discussed regarding the state grant," Costa said in a statement.
Mark Gleason, executive director of the nonprofit Philadelphia School Partnership, sided with Corbett and Zogby. He said the district had made needed improvements but added: "Until you implement reforms that relate to the teachers, you're just working on the edges."
Jerry Jordan, president of the 15,000-member teachers' union, reacted angrily to Zogby's remarks. "Parents of Philadelphia public-school children should be outraged that Harrisburg is holding their education for ransom in order to force reforms that will do nothing to improve education," Jordan said.
Zogby called on city officials to approve the extension of Philadelphia's extra 1 percent sales tax, which allows the city to borrow the $50 million against future collections.
"The time has come for the leaders in the city of Philadelphia to do their part," Zogby said.
Nutter has pushed Council to approve the extension, but Clarke has called that part of the state package "a bad deal" imposed on the city.
Under the plan, starting July 1, 2014, more than $140 million in anticipated annual sales-tax revenue would be distributed as follows: $120 million for schools, $15 million for four years to pay back the $50 million loan and interest, and the rest to the city pension system.
Clarke favors splitting the tax revenue between the schools and the pension system in future years.
Finance Director Rob Dubow compared the competing plans, noting that the state version now on the table would still provide the pension fund with $400 million over the next 10 years, assuming an annual 2.5 percent growth in the tax. Under that plan, the pension fund would be 80 percent funded by 2030.
"All that option requires to happen is approval by City Council, signature by the mayor," he said Tuesday.
Dubow said Clarke's plan to split the sales tax between schools and pensions would require state approval.
"Sure, more funding for the pensions is great, but it's also not in the legislation," he said. "Getting changes out of Harrisburg is not simple."
Clarke's split would provide $800 million to the pension system over 10 years, which Dubow said would result in the plan's being 80 percent funded in 2028. Clarke previously said his proposal would fully fund the pension system by 2027.
Clarke also has proposed that the city give the district an immediate $50 million in exchange for real estate and tax liens that could be sold later. Deputy Mayor Alan Greenberger said the real estate option would not provide the amount needed in the time allotted. He also said maintaining the vacant buildings would cost as much as $1.8 million a year.
Greenberger also said the city had been working with the district since March on a plan to sell shuttered schools. Only a handful of the 34 properties would draw the kind of interest to cover the $28 million in real estate sales the district has included in its five-year financial plan, he said.
Nutter and Clarke said they were still weighing their proposals.
"Friday is Friday," Nutter said of the impending deadline. "Today is Tuesday, and we still have a lot of work to do."
Contact Troy Graham at 215-854-2730 or email@example.com, or follow on Twitter @troyjgraham.
Inquirer staff writer Allison Steele contributed to this article.