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A flurry of pre-dawn bargaining Saturday between the Board of Education and the Chicago Teachers Union edged the 19-day school strike closer to settlement.

Both sides seemed encouraged by the amount of progress in the negotiations, with board spokesman Robert Saigh saying, ”I`ve never seen a quicker pace,” and CTU President Jacqueline Vaughn saying: ”We`ve made a significant drop from what our members expected to get . . . We`re too close to have a breakdown now.”

By 5 a.m., the distance between the two sides could be measured as 1 percent in pay, one restored strike day and class-size reduction.

The action began Friday afternoon when the board, in response to a request from a coalition of 42 community groups, offered a $47.5 million package that would give teachers a 3 percent pay raise and restore wages for 19 strike days. Those concessions would be funded by cutting about 1,800 jobs and certain school programs.

That offer was formally rejected shortly before midnight by the union, which came back with a counterproposal for a 4.5 percent pay increase, reduction of class size by two pupils a class and restoration of 20 strike days, including Labor Day.

The counterproposal was immediately rejected by the board and a new offer was made by union representatives. The new offer, at 2:15 a.m. Saturday, saw the union reduce its wage demands to 4 percent with a 5 percent increase in the second year of the contract, ”counting on funding received by the board from the legislature,” Saigh said. The union continued the demand for reduction in class size.

”The board position is unchanged,” Saigh said. ”The board stands by its strike settlement offer.”

Saigh, however, refused to call the board`s offer ”final.” Instead, he said, ”We call it our best offer.”

Saigh did concede that the board would be willing to submit the issue of the extra restored strike to arbitration. He added that educational reform issues, which have been under discussion during the negotiations, could be resolved after a strike settlement through the use of committees.

The movement in the strike resulted from the willingness of School Supt. Manford Byrd Jr. and board members to sacrifice both jobs and programs to finance pay increasess.

”This is hardly the way to operate a great urban school system, whose students are particularly needy and deserving of every opportunity for a quality education,” school board President Frank Gardner said.

Byrd said: ”These proposals go counter to everything I am trying to accomplish as general superintendent, and in more than 30 years of service to the Chicago public schools. But the Chicago Teachers Union can no longer be permitted to hold the children of this city as hostages.”

Though Byrd outlined some cuts in general terms, he listed nine areas that would be affected by any strike settlement terms.

Special education, guidance services, security staffs and assistant-principal positions would be among those items slashed, he said.

Extra teachers for magnet schools-the crown jewel of the school system-would be eliminated, he said.

But unlike other strike settlements worked out in other years in the office of the mayor of Chicago, the momentum for settlement of this strike grew out of a demand by the coalition of the community and civic

organizations.

It began during a five-hour meeting Wednesday between community and political leaders-including some close allies of Mayor Harold Washington-who fashioned what they expected could be a compromise.

Among the leaders were James Compton, president of the Chicago Urban League; Rev. Willie Barrow, national executive director of Operation PUSH; and Ald. Dorothy Tillman (3d). All have many years of experience in activist causes, including education.

At the time of that meeting, the union was demanding a two-year contract with an 8 percent raise the first year and 5 percent the second. The board was offering 1.125 percent the first year and 1 percent the second.

”What the board was offering (in terms of pay) was too little,” said Leon M. Finney Jr., president and executive director of The Woodlawn Organization and a coalition spokesman. ”It was an insult kind of offer, like a pay cut. The offer needed to be large enough so teachers could accept it with dignity.”

Finney said the coalition thought the demand for a two-year contract was impractical because ”we couldn`t forecast what the General Assembly might do” in voting for state school aid in its next session.

The coalition settled on 3 percent but wanted that coupled with the demand that school must resume Monday.

Finney said the coalition would insist on a full 180-day school year because children have lost so much class time. This would require a complex rescheduling to restore most days lost by the strike.

But a key part to the strategy, Finney said, was that ”no demand without an implied threat to enforce it was worth anything.”

The coalition was to tell the school board ”to get the children back into school by Monday-or else.”

Finney said no elaboration was needed for the ”or else.” But he explained it meant that if school does not resume by Monday, the coalition would use the tactics of the 1960s civil-rights movement.

Though he refused to expand on that threat, one likely scenario called for the coalition to use its muscle to organize quickly and see that thousands of children would be at the school doors Monday trying to get in, illustrating a school system unable to function.

Finney and 10 other coalition representatives met with Byrd on Thursday. The superintendent neither accepted nor rejected the 3 percent recommendation, but he promised to report the coalition`s position to the school board.

According to Finney, Byrd brought up other negotiating issues, but the coalition refused to consider them, wanting to focus on the pay raise and full school year.

Then the coalition group met with Vaughn, the teachers union president, and the union`s negotiating team. It was a ”heated meeting,” Finney said, with the union initially reacting coldly to the 3 percent suggestion.

Finney said he realized the coalition had not mentioned a full school year, meaning restoration of the three unpaid days off. When he did, he reported, a union official said, ”That sounds interesting.”

The union wanted to discuss other demands on the bargaining table, and Finney said: ”They gave us a packet of stuff. We didn`t want to deal on that.” He said he wanted to keep a proposed settlement simple: a pay increase and a full school year.

When Finney asked Vaughn if she would accept the package, if offered, he said that she replied, ”If they put a legitimate offer on the bargaining table, we will consider it.”

With hopes buoyed, the coalition finally called on board members. According to Finney, after considerable ”haggling” over the 3 percent raise suggestion and operating a full school year, Gardner and other board members said they would try to do it.

After Finney and his group left, board members, Byrd and other school officials worked through Thursday night and into Friday morning for 12 hours to work out $47.5 million in budget cuts to free up funds for the raise and the full school year.

The board, having accepted the coalition`s demands, held a special Friday afternoon meeting in which Gardner and Byrd detailed the pain of developing $47.5 million in budget cuts to pay for the proposed raise and restoring a full school year.