PHOENIX (Reuters) – Court proceedings against accused Tucson shooter Jared Loughner are set to move to a U.S. federal court in Tucson, after the prosecution and defense reached agreement, court documents showed on Friday

Prosecutor Wallace Kleindienst and Loughner's attorney Judy Clarke agreed proceedings should "be held in the Tucson Division, without waiving the right of either party to raise motions or objections to venue in the future," according to documents filed in U.S. District Court in Phoenix.

Loughner, a 22-year old college dropout, pleaded not guilty in the Phoenix court on Monday to federal charges of attempting to assassinate U.S. Representative Gabrielle Giffords and attempting to murder two of her staff members.

He is accused of opening fire on Giffords and a crowd of bystanders outside a grocery store on January 8, killing six people, including a federal judge, and wounding 13. Giffords was shot in the head but survived.

The agreement between the two sides would still have to be formally approved by Judge Larry Burns, the San Diego federal justice who is hearing the case, the U.S. Attorney's Office said on Friday.

In a motion filed last Sunday, prosecutors sought to shift any future proceedings against Loughner to Tucson, citing the principle that defendants stand trial in the jurisdiction where their alleged crimes took place.

Prosecutors also argued that the 19 people struck by gunfire in the rampage, and the "vast majority" of witnesses to the shooting, all lived in the Tucson area.

At the hearing on Monday, Burns set March 9 as the next court date in the federal case.

Clarke had said she did not object to moving the proceedings to Tucson but sought clarification on where Loughner would be housed.

Last Friday, Giffords was transferred to a rehabilitation facility in Houston, Texas, following life-saving surgery and intensive care at the University Medical Center in Tucson in the days after the shooting.

Judge Burns was appointed to the case after Roll's colleagues on the Arizona federal bench recused themselves.

Loughner could face up to life in prison if convicted of trying to kill the lawmaker and the other two attempted murder charges carry a maximum sentence of 20 years.

(Reporting by David Schwartz; Writing by Tim Gaynor; Editing by Jerry Norton)

WASHINGTON (Reuters) – New Pentagon rules allowing gays to serve openly in the military prohibit separate bathroom facilities based on sexual orientation and say that not all benefits will be extended to same sex dependents.

The Pentagon issued new guidelines on Friday as a first step to ending the "Don't Ask, Don't Tell" policy that forces gays to keep their preferences secret in order to serve in the military.

Congress repealed the policy last month but gave the military an unspecified amount of time to prepare the sweeping change. President Barack Obama said in his State of the Union address this week that the change would be enforced this year.

The new guidelines ask the military top brass for precise plans within a week to implement the policy.

It says that while some benefits such as choosing the beneficiaries of life insurance and death gratuities are a matter of individual preference of service personnel, federal laws such as the Defense of Marriage Act mean certain benefits that go to married couples will not apply to same-sex partnerships.

"Strong, engaged and informed leadership will be required at every level to implement the repeal of (Don't Ask, Don't Tell) properly, effectively, and in a deliberate and careful manner," Secretary of Defense Robert Gates said in the guidelines.

"This is not, however, a change that should be done incrementally," he said.

The memo sets out principles to mold the new policy, focusing on respect and eliminating any discrimination that might be directly based on sexual orientation.

Despite the Congressional repeal, there has been push back from leadership in the military and Gates himself has stressed that change will take a while.

"It is therefore important that our men and women in uniform understand that while today's historic vote means that this policy will change, the implementation and certification process will take an additional period of time," Gates said after the policy was repealed last month.

Marine Corps Commandant James Amos had said that implementing the change could cost lives because of the impact on discipline and unit cohesiveness.

More than 13,500 people were discharged from the military under the "Don't Ask, Don't Tell" policy since 1993.

Even after the repeal of the policy by Congress, gay rights groups have continued to press legal challenges because they fear the Pentagon will be slow to implement the new policy.

(Reporting by Wendell Marsh; Editing by Greg McCune)

NEW YORK (Reuters) – New York City might have to lay off 15,000 teachers if the state, grappling with a $10 billion deficit, cuts the city's education budget by $1 billion, Mayor Michael Bloomberg said on Friday.

The city has around 75,000 teachers and Bloomberg is already planning to lay off around 6,000 to help deal with New York City's deficit for the next fiscal year. In December, the budget director predicted the city's budget gap could rise to $4.4 billion, depending on state cuts.

Like many cities, towns and states, New York is struggling with the end of the federal stimulus program. The city is losing $800 million. This is why Bloomberg was already preparing to lay off so many teachers.

"The scuttlebutt is -- I don't know if it's true or not -- is that the education budget will be cut statewide and New York City's share of that would be a $1 billion cut," Bloomberg, an independent, told WOR radio.

The teacher layoffs could be higher, depending on what New York state Governor Andrew Cuomo announces when he unveils his budget plan on Tuesday. Cuts are expected to play a major role because the Democrat has vowed not to increase taxes.

A Cuomo spokesman was not available to comment on reductions in education aid or other cutbacks, including the possibility the state will lay off 10,000 to 15,000 workers, shutter some prisons, and slash Medicaid, the state-federal health plan for the poor, by $2.1 billion.

(Reporting by Joan Gralla; Editing by Andrew Hay)