Just hours before Governor Andrew Cuomo's imposed deadline, a deal was reached Thursday between the state Department of Education and the teachers' union to create a new statewide teacher evaluation system.

The agreement was announced at a press conference in Albany.

Cuomo gave both sides until Thursday to reach an agreement and had threatened to impose his own evaluation system as part of the year's budget amendments.

“It would not have been possible to get to this day without the governor's extraordinary leadership,” said State Education Commissioner John King.

For over a year, state officials and the teachers union have been in court, fighting over how much student test scores can count in the new teacher evaluation systems that had been passed into law in May 2010.

Under the deal, up to 40 percent of a teacher's rating can be based on test score figures. However, each school district will be able to decide between several different options on how to use that test score data.

"This is a major step forward to actually increase the performance of the education system," said Cuomo. "Teachers who were doing well should be rewarded. Teachers who need assistance should get the assistance. We should identify the strategies that are working in the classroom and schools all across the state, so we know what to replicate. And we will now have an evaluation system which will bring us further down the road to an actual performance-base system."

U.S. Secretary of Education Arne Duncan said the state is also not at risk of losing $700 million in federal funds, now that the new teacher evaluation system has been adopted.

"We talk a lot about 'tough-minded collaboration,' and what you saw here was folks working together. I think many people predicted it wouldn't work out, couldn't happen, but this is union and management working together to get the right point," said Duncan.

Each of the state's 700 individual school districts, including New York City, now have until January 17 to agree on their own rating systems based on the new statewide standards or face losing hundreds of millions of dollars in school aid.

Meanwhile, Cuomo announced an additional deal was reached between the city and its own teachers union.

The two had been deadlocked on how teachers can appeal poor ratings.

"We are hoping now that this appeal process, which is a fair appeal process, which includes third-party, independent evaluation of teacher's ratings, which includes a process where we can deal with issues of harassment. I am hoping now that the mayor of New York City understands that to do real education reform, it's about helping schools get better, and not about closing schools," said United Federation of Teachers President Michael Mulgrew.

Mayor Michael Bloomberg, who was not in Albany for the announcement, told reporters at City Hall he is satisfied with the outcome of the negotiations.

"What we've agreed to will improve accountability in the classroom. It will help provide our teachers with the tools they need to help our kids fulfill their potential," said Bloomberg.

Teachers will have four potential ratings: ineffective, developing, effective and highly effective. However, there are still a lot of details to be worked out by the city and the UFT on how exactly principals will determine those ratings.

The mayor added the agreement on teacher evaluations will not affect the decision to close or phase out underperforming schools across the city.

The new teacher evaluation system should be in place across the state by January 2013. In the meantime, there are still a lot of details to be worked out by the city and the UFT.