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The city won’t strike a deal on new teacher evaluations just to get millions of dollars in federal funding, Chancellor Dennis Walcott said last week.

The city and teachers union are supposed to settle on new teacher evaluations by the end of the school year. An agreement would bring the city into compliance with state law and also enable it to receive millions of federal dollars that have policy strings attached to them.

Earlier this month, a New York Daily News editorial said Walcott “has committed to surrender $60 million in federal school improvement grants unless he and the teachers union have agreed by the end of the year on a pilot system for evaluating teacher performance.” The newspaper, which praised Walcott’s tough-on-unions sentiment, did not report the chancellor’s exact words in its news or editorial pages.

Last week, Walcott told me that the editorial accurately paraphrased a comment he made. Coming to an agreement that satisfies both parties is so important, he said, that he does not want the federal funds to force his hand prematurely.

“I’m not going to be hampered by money being the sole force of what a decision will be,” Walcott said. “So at the end of the day if we have to return money, I will be willing to do that. I’m not going to be beholden to money as determining a decision.”

Last summer, as a federal deadline loomed, the city and UFT struck a last-minute, limited agreement on teacher evaluations at 33 low-performing schools, enabling the schools to receive millions of dollars to fund “restart” or “transformation” improvement processes.

Now, with much more money on the line and negotiations between the city and UFT souring, those schools remain the only ones eligible to receive Race to the Top funds according to state rules. DOE officials say the about 100 other city schools meet other eligibility requirements.

Walcott’s suggestion that the city might miss out on some of the Race to the Top funds it was promised raise a possibility that some supporters of the Obama Administration’s carrot-and-stick approach to effecting education policy changes at the state level have warned from the start: States and districts that don’t keep their Race to the Top promises could be penalized.

“The U.S. Department of Education has said it will stop dispersing money to states that are not complying with their Race to the Top plans,” said Charles Barone, director of policy research at Democrats for Education Reform. “They haven’t done that yet, but it seems New York is a top candidate.”

Promised reforms face an added execution challenge in New York, which requiring districts to negotiate evaluation deals at the local level, according to Sandi Jacobs, vice president of the National Council on Teacher Quality, a group that advocates for changes in schools’ human capital policies.

“Other states have been much more direct in saying that this is the system,” Jacobs said, referring to statewide systems set out by other Race to the Top winners.

Barone said the state is right to insist on only distributing Race the to Top funding to schools that have new teacher evaluations in place, even though that policy severely limits the pool of eligible schools. But he said the policy could set the state up to lose out.

New York “won the money for than a year ago, and if all they have to show in the entire city of New York is 30 schools, then it seems that they might not be able to deliver on their promise and are reneging on the agreement they made with the feds,” Barone said.

With the deadline to hammer out local teacher evaluation deals still more than half a year away, there’s more than enough time for the city and union to come to an agreement. Walcott said the city is far from giving up on the prospect.

“I’m an eternal optimist, and I believe we will be able to reach some kind of agreement around teacher evaluations and where we’re going,” he said.