* Officials and teachers in Chicago are giving students in the nation's third-largest school system a hard lesson in the politics of urban education. So hard, in fact, it might drive the youths from their desks.

After weeks of bitter negotiations, the teachers' union and Board of Education failed to agree by press time yesterday on a contract for the new school year. If the deadlock continues and a federal court does not extend a temporary order keeping the schools open, the city's 411,000 public school students will be shut out of their classrooms.

The union has offered at least $45 million in concessions, far from enough to satisfy a board running a school system $300 million in the red.

The impasse hampers efforts by Chicago educators to press on with one of the most most sweeping overhauls in public education this century. Since 1989, the city has sought to shift power over schools from city administrators to parents. It has formed governing boards dominated by parents in each of the city's 551 schools.

The decentralization program has elicited conflicting reviews and intensified a debate over how to reform a school system that former Education Secretary William Bennett in 1987 called the ``worst in the nation.''

Mr. Bennett on Monday once again rebuked Chicago educators, while calling for an even more severe shake-up of the school system. He endorsed a proposal in which the city would give parents vouchers enabling them to pay for their child's tuition at the public or private school of their choice.

The barbs by the Reagan-era official provoked fierce indignation among Chicago educators who support decentralization.

``In order to promote the voucher program, Bennett feels he has to step on somebody's head. For him, like before, that somebody is Chicago,'' says Joan Jeter Slay, associate director of Designs for Change, a pro-decentralization group.

Bennett's critics say the decentralization program knitting parents, principals, and city officials together at each school has already transformed many inner city schools.

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