The pact would have given Jackson until June 2013 to resolve special education problems that have lingered for years. But it required the local system to give up substantial control over special education to the state, and board members rejected it 4-3 Monday.
Special education problems have lingered in Mississippi's second-largest school district, and disability advocates sued the state earlier this year, saying the Department of Education is obliged under federal law to address problems.
The state recently enhanced penalties for districts losing accreditation, but the Jackson case began earlier. Officials have said Jackson would face relatively mild penalties beyond embarrassment.