Scrambling to fill a budget hole, the Mt. Diablo school board has decided to dip into money earmarked for teacher medical benefits.

During contract negotiations in fall, the district offered to start paying teachers' health insurance beginning in January and set aside $1.8 million to help cover the cost. Teachers are the only unionized workers in the district without district-paid medical insurance, which the teachers' union cites as a main reason for high turnover.

But contract talks stalled after the state budget fell into a tailspin this winter. And in a split vote Tuesday, the school board decided to take money for medical benefits off its list of expenditures for 2008-09, dimming hopes of settling a contract anytime soon.

"They say they're not withdrawing the offer, but then they're taking away the money," said Mike Noce, president of the Mt. Diablo Education Association, which represents 1,900 members. "It's kind of sending a mixed message."

The school district, like others around the state, is struggling to make ends meet as California stumbles through a major budget crisis. A recent Legislative Analyst's Office report estimated the state shortfall at $8 billion for 2008-09.

In January, Gov. Arnold Schwarzenegger proposed carving $4.5 billion out of the state education budget for that year. Based on the governor's plan, Contra Costa County public schools would lose approximately $65 million, according to the Contra Costa County Office of Education.

Mt. Diablo, the East Bay's second largest district at 35,500 students, must cut at least $14 million from its $300 million in costs. Job cuts began in December, and more than 100 positions have been eliminated.

On Tuesday, the board approved another $2.7 million in budget reductions. Some of the positions eliminated include a director of special education, a custodial manager, a curriculum specialist, two custodians and a typist at College Park High School.

But the bulk of the savings came from sacrificing dollars aimed at reviving district-paid medical benefits for teachers.

Mt. Diablo covers vision and dental insurance. But the union voted away paid coverage in favor of a pay raise about eight years ago.

In the past few years, bargaining centered on bringing them back.

The district's offer seemed to represent the closest the two sides have come to closing the deal. Now the $1.8 million has been, at least temporarily, taken off the table.

The move concerned board members Gary Eberhart and Paul Strange, who opposed the cost-cutting measure.

"I think it sends the wrong message to teachers," Strange said.

Board member Linda Mayo voted in favor of the reduction.

"I'm going to approve this because it means 32 teachers who will have a job," she said.

Shirley Dang covers education. Reach her at 925-977-8418 or sdang@bayareanewsgroup.com.

IF YOU GO

The Mt. Diablo school board could make more budget reductions at its next meeting, 7:30 p.m. Tuesday at the district's main office, 1936 Carlotta Drive, Concord.