The state Senate on Thursday approved legislation that would clear the way for California to compete in a $4.3 billion school funding competition from the Obama administration, but the state's chances of securing a slice of the money remained in limbo.

After late-night negotiations lasting several days, state Sen. Gloria Romero, D-Los Angeles, introduced new legislation Thursday that attempted to forge a compromise between the two houses on education reform. Divisions remained, however, and Romero said she would work through the holidays to complete a bill with broad support and which Gov. Arnold Schwarzenegger would sign.

Senate President Pro Tem Darrel Steinberg, D-Sacramento, urged Senators to support the package, despite a process he called "herky-jerky" that has pitted Democrats against one another and left many legislators torn between interest groups.

The bill passed the Senate on a bipartisan 21-7 vote.

The Senate Education Committee approved the bill earlier Thursday after a contentious 3-hour hearing in which fellow Democrats badgered her over details they said were missing, and interest groups complained the legislation was drafted too hastily.

The bill is California's latest attempt at making California eligible for the federal "Race to the Top" program, in which California could get up to $700 million for school reforms in a competition with other states.

An Assembly committee failed to pass Romero's previous legislation, which Schwarzenegger supported, after the powerful California Teachers Association and other groups lobbied against it. It instead passed legislation by Assemblywoman Julia Brownley, D-Santa Monica, which she revoked Thursday morning.

The proposed changes released Thursday retain several controversial elements, including allowing parents to petition to close or drastically revamp a badly failing school and allowing them to transfer children out of a failing school to another district.

School districts have serious concerns about how that would work and whether they would end up bearing the cost of taking on new students. Education groups that advocate on behalf of minority children worry that without strong language preventing it, school districts could reject poor or special needs students who would cost more to educate.

The legislation also would spell out consequences for identifying and intervening in around 180 chronically failing California schools, Steinberg said.