THE STATE-CITY partnership that has run Philadelphia's public schools for nearly six years is stronger than ever, Gov. Rendell and Mayor Street said yesterday while announcing they had found a way to close the school district's nagging budget gap.

New state and city money totaling just over $150 million, coupled with school-district budget cuts, would all but erase the deficit that once stood at nearly $200 million, the officials said.

"Part of our concern is to let people know that the city and the commonwealth are never going to let the children of this city down," Street said.

Said Rendell: "Ensuring the fiscal stability of our public schools is a critical step toward making certain all children in Pennsylvania receive a quality education in an environment that is conducive to learning."

Though most of the new funding - and what it will be spent on - had been announced over the last several months, the officials for the first time identified where the final deficit-closing dollars were expected to come from.

That would be from the city's "aggressive" tax-delinquent-collection program, which Street announced last week.

The stepped-up collections are expected to generate $42 million for the schools this year. Half of that money would go toward closing the deficit and the other half toward re-establishing a fund balance for the cash-strapped district, Street said.

The mayor said that with roughly $800 million in uncollected taxes on the streets, he was confident the amount earmarked for schools could easily be harvested.

"I think the numbers are modest," he said. "I think the collections could be much greater than that."

Street and Rendell stressed that the deficit-closing plan is contingent on the School Reform Commission approving $35 million in budget reductions that have been proposed by interim schools chief Tom Brady.

The reform commission will formally review Brady's list at today's public meeting and is expected to take action during the Sept. 19 meeting. Among the proposed trims are $8 million from the budgets of disciplinary schools and $2 million by instituting a hiring freeze of non-school-based personnel.

Sandra Dungee Glenn, who today is scheduled to become the reform commission's new chairwoman, indicated during the news conference that she was on board with the Rendell-Street plan.

Glenn said the proposed $35 million, along with the $63 million that already has been cut from the budget, "will not have a negative impact on our academic reforms. That's a very important part of this."

Last month Brady said that he would need to find an additional $19.9 million in savings to retire the deficit. With the anticipated tax-collection money those cuts don't have to be made, but likely will be, said state Budget Secretary Michael Masch.

"The city and the state have asked the school-district management and the School Reform Commission members to continue to work to identify at least another $20 million in expenditure reductions, if they can, without hurting educational reform," Masch said.

In another development, Rendell endorsed the idea of the school district creating a new position of managing director to oversee finances and non-education operations.

He spoke highly of Masch being considered for such a job, but ruled him out as a possible permanent district chief executive officer.

"Whether it's Mike Masch or somebody else, I think having a managing director and having a superintendent who's much freer to drive the education process probably works well for this district, or any large district," Rendell said. "We're all looking at that and whether Mike wants to do this. . . . It's a discussion we'll have in the future."

Masch, a former reform-commission member whom Rendell tapped to lead the state's intervention into the school district's budget woes, said talk of him changing jobs was premature.

"At some point I'd want to come back to Philadelphia.

" I'm a Philadelphian and I'd like to do something worthwhile in public service here, but all of this is premature." *