LOS ANGELES -- The Los Angeles Unified School District won another round in its battle to maintain teacher pay cuts when a state labor relations board declined Friday to grant a temporary injunction blocking the decreases.

The teachers' union, United Teachers of Los Angeles, argued that the district acted improperly in unilaterally imposing the pay cut this fall.

But California's Public Employment Relations Board ruled Friday that the union failed to show a reason for the injunction under state labor codes.

A California judge on Nov. 5 granted a temporary restraining order against the 12% pay reduction. But the judge lifted that order on Nov. 25, saying the jurisdiction over the case properly belonged to the employment relations board.

The failure by the union to block the pay cuts provided relief not only to the district, but also to municipal market participants who hold the district's certificates of participation and tax and revenue anticipation notes.

A ruling that rescinded the pay cuts would have thrown the district's budget out of balance by about $163 million this fiscal year. District officials said it would be difficult to close a gap of that magnitude so far into the fiscal year, which began July 1.

The superintendent of the Los Angeles County Office of Education also had threatened to intervene in the district's financial affairs if the pay cuts were blocked.

Rating agency officials are monitoring the situation closely, and Standard & Poor's Corp. has the district's lease obligations on CreditWatch with negative implications.

Standard & Poor's rates $217.2 million of the district's COPs either A-plus or provisional A-plus. Moody's Investors Service rates and COPs either A or conditional A, while Fitch Investors Service Inc. rates then A-plus.

In other developments last week, the district's teachers voted by a 78% approval margin to go on strike Feb. 22 if they cannot agree on a new contract with the district.

On Friday, the district and union also asked Assembly Speaker Willie Brown, D-San Francisco, to help mediate their dispute. Officials from both sides said that Brown's experience in negotiating complex finance issues might help break their deadlock.

Teachers have sought a guarantee from the district that their salaries will not be cut again next year. The latest district contract offer includes that provision, but it would apply only if state funding remains the same or increases next year.

The district has balked at providing an unqualified guarantee, largely because of uncertainty over how another expected state budget gap might affect school funding.

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