Gov. Arnold Schwarzenegger has cut a $2 billion deal with key education groups that would allow him to save the state money, increase per-pupil spending and potentially set the stage for school salary increases in a year of financial crisis.

Politically, the agreement also promises to pay big dividends, defusing the possibility of a bitter fight between Schwarzenegger and powerful groups -- including the California Teachers Association -- that oversee the schooling of 6 million children.

Schwarzenegger has scheduled a 1:15 p.m. press conference today at Sacramento's Sutter Middle School to announce the agreement, details of which were confirmed privately by multiple sources Wednesday.

Schwarzenegger also committed to education groups that he will support providing state funds to cover enrollment and cost-of-living increases -- money often used by districts to fund salary hikes -- for every year he remains governor, sources said.

Any deals between the governor and schools would be subject to legislative approval.

H.D. Palmer, a spokesman for the California Department of Finance, declined comment Wednesday except to say that Schwarzenegger is committed to providing a quality school system.

"The governor made it very clear during the campaign that he was not going to cut money for K-12 education, and you can expect the budget he submits to the Legislature Friday will follow through on that commitment," he said.

The heart of Schwarzenegger's new deal is a concession by state schools to forgo $2 billion of a $4 billion funding increase next year that they otherwise would have been entitled to under Proposition 98, the 1988 initiative that required that a certain percentage of state revenue go to K-14 education.

Without such a concession, education could be portrayed as a windfall winner in a year when the state faces a potential $15 billion budget shortfall and dire cuts are expected in major state programs.

By reaching out to Schwarzenegger, school groups could extract concessions and lay the groundwork for a positive relationship with a popular new governor without sacrificing any money they had in hand -- in fact, public schools and community colleges remain in line for a sizable funding hike.

Specifically, the pact would ensure that public education would receive a $200-per-pupil funding increase, even after enrollment growth for the state's 1,000 school districts is considered.

The new money for public education would include at least $1.57 billion in discretionary funds that could be used by school districts for salary increases or any educational program.

Schwarzenegger also has agreed that the state would pick up $105 million in pension fund increases that otherwise would have been the responsibility of school districts next year.

Under the plan, community colleges would receive at least $200 million in new revenue next year.

The deal amounts to a temporary exception to Proposition 98.

The $2 billion lost to schools next year would not be refunded, but the Proposition 98 base would return to its normal level in 2005-06, sources said.

The California Teachers Association, the state's most powerful education group, spearheaded the deal with Schwarzenegger, but nearly every other key education group now supports it.

"The CTA, as they often do, played a leading role in getting things to the point where people can take a look at it, but it's a deal between the governor and the education coalition," said Bob Wells, executive director of the Association of California School Administrators.

Jack O'Connell, state superintendent of public instruction, said he will take no position until the GOP governor releases his proposed budget Friday.

"I want to reserve judgment until I see the particulars," he said.

Sandra Jackson, a CTA spokeswoman, also declined to comment.

Assemblywoman Jackie Goldberg, D-Los Angeles, said she had not seen details of the pact. But she fears that cutting side deals with major special interest groups will leave less flexibility for funding health and social service programs, she said.

Goldberg, a former Los Angeles teacher, supports higher teacher salaries but said Schwarzenegger appears to be attempting to silence the "loudest voices by cutting a deal. ... It's a smart move, but I don't know that it's in the best interests of the most vulnerable Californians."

Mary Bergan, president of the California Federation of Teachers, said she had not taken a formal position on the pact, but, like Goldberg, she is concerned about its potential impact on other state programs and would prefer that California ease its budget crisis by increasing revenues.

Kevin Gordon, executive director of the California Association of School Business Officials, defended the agreement and said critics who characterize it as a $2 billion cut to education are wrong.

"That's terribly unfair, especially when I can't find one person in the education community who thought we'd ever see that full $4 billion next year in a fiscal crisis as deep as we're facing," he said.

Despite the new funding agreement, Schwarzenegger is likely to face opposition from some school officials over other education proposals, including a push to make it easier for campuses to contract for services with private businesses.