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Under the deal, the school system's 22,000 employees will not receive their cost-of-living increases, which were included in a three-year contract last year. Employees were scheduled to get a 5.3 percent cost-of-living increase in fiscal 2010, which begins July 1.

However, employees scheduled for a step increase — given to those not at the top of their pay grade — still will get the bump next year. The typical step increase is about 3 percent.

"This has been a daunting task for everyone in these challenging times," Merle Cuttitta, president of the union for school services workers, said in a statement. "All three unions of the Montgomery County Public School system were committed to avoiding layoffs, protecting health insurance and minimizing impacts to the instructional program for the students."

The three unions still have to ratify the deal with their respective memberships and the school board. Montgomery school leaders expect that to occur in January.

"It's a huge sacrifice," school board President Nancy Navarro (Dist. 5) of Silver Spring said Thursday morning. "Everybody is going to have to tighten up."

The unions and the school system will negotiate next year on a new salary schedule.

The agreement represents a drastic change from last year's budget discussions. In arguing for a $2.11 billion spending plan for fiscal 2009, school leaders pleaded with the County Council's Education Committee not to touch the planned pay raises for employees.

Ultimately, the school system scaled back its reform for middle schools and cut jobs from central office, but moved forward with the increases.

The cost-of-living increases were necessary to pacify employees who drove to work from other parts of the state, schools Superintendent Jerry D. Weast had said.

But given the latest budget forecasts, the system could not afford the raises. For instance, it would take $180 million for the system to maintain the services it offers. Of that, roughly $106 million would go toward salaries and benefits for employees.

"I know how difficult it is for employees to forgo their wage increases, especially in such uncertain times. But this is the reality we are facing," Weast said in a statement. "The unions have been exceptional partners in helping us manage the system through many years of prosperity, and now they are working side by side with us as we go through some painful downsizing."

Weast will present his recommended fiscal 2010 spending plan on Dec. 11.