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Montgomery County's dispute with the state Department of Education, which could cost the county millions in education funding, took center stage at an event Monday in North Bethesda.

More than 500 county and state leaders attended the annual breakfast organized by the Committee for Montgomery, a coalition of business, labor, education, civic and community groups.

The program featured speeches by federal, state and county officials, including Sen. Benjamin L. Cardin (D), U.S. Rep. Christopher Van Hollen Jr. (D-Dist. 8) of Kensington and U.S. Rep. Donna F. Edwards (D-Dist. 4) of Fort Washington.

Montgomery County Executive Isiah Leggett (D) spoke of "this stupid law called the maintenance of effort. It is well-intended, but has a consequence that is unbelievable."

The maintenance of effort law requires local governments to spend at least the same amount on schools from year to year.

Earlier this year, Montgomery, Prince George's and Wicomico counties applied to the state school board for waivers from the requirement for the current school year. The requests were denied by the board, which said the counties had failed to show that their financial burden was any more significant than that of the rest of the state.

"They say, ‘The reason we are not supporting this [waiver] is because, yes, you have a problem with your housing market in Montgomery County. But your housing market is not totally collapsed.' That's the standard on adjustment of maintenance of effort," Leggett told the audience. "Well, let me tell you, if our housing market is totally collapsed, we're going to need a maintenance of effort."

Montgomery County has supported K-12 education "probably more than other [jurisdiction] in the state of Maryland," Leggett said.

Montgomery's delegation to the General Assembly plans to introduce a local bill exempting the county from the $79.5 million maintenance of effort requirement for fiscal 2010, which ends June 30.

Failure to meet the funding requirement could subject the county to a fine of up to $46 million by the state school board.

"We're trying to find the amount of the fine so that they can start the process," Montgomery County schools Superintendent Jerry D. Weast said after Monday's breakfast.

Once the board imposes the fine, the county would "probably stop paying the bonds" that are part of a debt service plan for the school system to pay off a loan from the county government, Weast said.

Last week, Weast proposed a $2.26 billion operating budget for fiscal 2011 that relies on the $79.5 million loan approved by the county government. Without the money, he will be forced to cut 240 classroom teachers and 30 central office administrators and curtail textbook and materials purchases.

"The state Board of Education will do itself a huge disservice if it penalizes us for failing to spend money that was not needed by the school system," Montgomery County Council President Nancy M. Floreen told those in attendance.

"Montgomery County schools are the model system for the entire state in so many ways," said Floreen (D-At large) of Garrett Park. "If you penalize us for being a leader and doing the right thing, what does that say to every other school system?"

Lawmakers, including a state workgroup, have been considering how to rework the law, including the criteria for issuing a waiver, House Speaker Michael E. Busch said during his speech.

"So that'll be one of the undertakings that we take up during the General Assembly session," said Busch (D-Dist. 30) of Annapolis.

While the waiver process needs reform, lawmakers must consider the implications before waiving the funding requirement, said county school board President Patricia B. O'Neill (Dist. 3) of Bethesda.

"I think maintenance of effort is filled with good intent, to make sure that adequate funds are spent on public education," she said. "And we don't want to lose sight of that."

The fact that the county school board, County Council, Weast and Leggett all went to the state school board to request the one-time waiver could favor the county, if not in its fiscal 2010 waiver request, then in future requests, O'Neill said.

The workgroup considering the law recommended "that if there is solidarity in a county for a waiver, that should count for something," she said.

Leggett tied support for the waiver to a call for state support for education and for transportation, which he said are necessary in order for Montgomery County to remain the state's economic engine.

He also renewed calls for a gasoline tax increase and for the state to continue to cover teacher pension costs.

In recent years, state legislative leaders have threatened to shift pension costs to county governments, something Busch on Monday said would not happen in 2010.

"We need support from the state," Leggett said. "We demand it as a county, because what is good for Montgomery County is good for the state of Maryland. And we simply want to make good on that pledge."

Staff Writer Marcus Moore contributed to this report.