Dueling Objectives Mark Stimulus at Halfway Point

A year ago, the federal floodgates opened for aid to education, releasing a one-time surge of up to $100 billion in economic-stimulus money aimed at both stabilizing and transforming the nation’s public education system.

The results so far have been mixed, as weighed against the Obama administration’s twin goals for its unprecedented infusion of education funding under the American Recovery and Reinvestment Act.

From the outset, the stimulus program’s education piece—among the largest elements of the $787 billion package intended to jump-start a recession-battered economy—was to serve both an economic and a school improvement purpose.

By pouring money into the coffers of states and districts already suffering from cuts to K-12 schooling, the ARRA aimed to stanch the fiscal bleeding and let them concentrate on the business of educating students. A year later, it’s clear that the stimulus package averted tens of thousands of teacher layoffs nationwide, and mitigated deep cuts to school programs.

But as states scramble to comply with new federal demands in exchange for the new money—and rush to overhaul laws in the hope of winning even more through competitive grants—it remains to be seen whether the aid will produce lasting changes in K-12 policy, or if it is, in every sense, a one-shot deal.

“Ten years from now, are we going see this as short-term money that was all about the recession, or will it be viewed as a line in the sand in which everything afterwards is looking a little bit different? That’s really the big question,” said Andrew Smarick, who served in the U.S. Department of Education under President George W. Bush. As an adjunct fellow at the American Enterprise Institute in Washington, Mr. Smarick has been tracking and writing about the stimulus package.

Never before has so much money been pumped so fast into local school districts. The total is nearly double the amount of discretionary money for which the federal Education Department is usually responsible.

The biggest chunk of the stimulus money overall is through the $48.6 billion State Fiscal Stabilization Fund—dedicated to helping states make up for cuts forced by recession-driven deficits, with the bulk of the aid going to education. But the recovery act also is providing billions of dollars in new funding for economically disadvantaged students and those with disabilities, for teacher merit-pay programs, and for educational technology—along with $5 billion in competitive grants for states, districts, and nonprofit groups.

All of that money is being handed out in a two-year time frame, which ends in September. And with such largess comes a wave of new logistical and administrative challenges, from the federal level on down.

Stimulus Funds Budgeted by State

SOURCE: U.S. Department of Education

States and school districts have grappled with how to spend such significant amounts both quickly and efficiently, while abiding by the new federal rules—and accounting for every penny.

“It’s a lot of people doing things for the very first time, and it’s all very confusing,” said Michael Griffith, an education finance expert with the Denver-based Education Commission of the States. “And yet states are so desperate for the money.”

The Education Department faces its own hurdles in overseeing the massive disbursement of money and delivering on the Obama administration’s promises of unprecedented accountability.

And the program has hardly been insulated from criticism. For example, in crafting the stimulus law’s highest-profile initiative—the $4 billion in competitive grants to states and school districts known as the Race to the Top—the department has heard complaints that it’s being overly prescriptive, requiring its aspiring grantees to take a one-size-fits-all approach to improving education.

But Secretary of Education Arne Duncan defends his department’s overall approach, arguing that he’s leaving the detailed road map of reform up to states. Particularly with eventual Race to the Top winners, Mr. Duncan said, “what you want to do is build a team of these states ... to form a coalition pushing each other and working together. The goal is to change the country.”

Rival Priorities

Even with the different pots of money—each with its own specific aims—the Education Department has sought to harmonize the conflicting messages to state and district leaders: They must preserve school programs and save teacher and other staff jobs, while making fundamental changes that will improve student achievement.

To receive most of the education stimulus money, states have to agree to make progress in four key areas: implementing common academic standards and tests, improving data systems, turning around the lowest-performing schools, and improving the effectiveness and distribution of high-quality teachers, especially in high-poverty, high-minority schools.

Those so-called “four assurances” encapsulate the Education Department’s priorities, and they have come to form the policy template for everything from competitive guidelines for the smallest of discretionary grants to the Obama administration’s aims for a reauthorized Elementary and Secondary Education Act.

In a more immediate sense, however, the program was structured in a way intended to put big amounts of what essentially is emergency and supplemental aid in the hands of states and districts to help maintain the status quo.

Within the State Fiscal Stabilization Fund, for example, $39.8 billion is earmarked specifically for education, with governors given another $8.8 billion to use in education and other areas. That money, most observers agree, has been used to avert huge layoffs of teachers—though the magnitude of the job savings has been the subject of some politically charged debate.

The Education Department estimated that 300,000 educator jobs were saved during a three-month period that ended Dec. 31, based on stimulus reports filed in January. The $10 billion in additional money for Title I grants to states for disadvantaged students and the $11.3 billion in special education aid also likely helped contribute to that jobs-saved number.

Some members of Congress have suggested such claims are inflated. A report by the Government Accountability Office, the investigative arm of Congress, found the first round of stimulus reporting to be wanting. The reporting process has since been revised, for the Education Department and for other agencies.

Still, smaller—but significant—sources of new money are available to help districts adopt the four education reform strategies favored by the department, in some cases piggybacking on existing federal programs. There is $3 billion in Title I School Improvement Grants to help turn around struggling schools, for example, and $200 million for the Teacher Incentive Fund for districts to pursue merit-pay programs.

In a bid to nurture grassroots initiatives, there’s also the $650 million Investing in Innovation Fund, or i3, intended to encourage districts and nonprofit partners to try out promising new ideas. That’s not counting the $250 million for states to help build their data systems in ways that supporters say is needed for real reform.

Race to the Top

And then there’s what may be the stimulus program’s signature endeavor: the Race to the Top Fund.

That $4.35 billion education improvement initiative—$4 billion of it earmarked specifically for competitive grants to individual states—has sparked a furious dash by states to portray themselves as reform-oriented, including the passage of new laws to expand charter schools, link student and teacher data, and intervene in low-performing schools.

What’s now known as the Race to the Top stemmed from a rather vague part of the stimulus law that created incentive grants to reward states for making progress in the four assurances and “any other criteria” that the secretary of education deems appropriate. The awards are to be made at the secretary’s discretion.

With that, Congress handed the Obama administration significant leverage to get states to make changes in their K-12 school systems according to criteria favored by the administration.

Under the competition’s guidelines, states enhance their chances at winning the money by embracing aggressive action for low-performing schools (such as firing most of the staff) and allowing for unrestrained growth in charter schools, which are publicly funded but enjoy significant autonomy. To be competitive, states also must design teacher-evaluation systems that are tied to student performance, and join a consortium of states working on common academic standards and tests.

Scrambling for Advantage

Forty states and the District of Columbia put in bids for Race to the Top money in time for the Jan. 19 application deadline for the first round of awards—and many rushed to make changes that would boost their competitive chances.

On Jan. 4, for example, Michigan Gov. Jennifer Granholm signed into law a Race to the Top-linked package that will require teacher and administrator evaluations to be tied to student performance, lead to growth in charter schools, and raise the dropout age to 18.

“We will make student academic growth a key part of how we evaluate teachers, principals, and schools, and in the process, enable Michigan to successfully compete for federal Race to the Top funds,” Gov. Granholm, a Democrat, said in signing the legislation.

Last year, California removed a data “firewall” that prevented student-achievement data from being linked to individual teachers—a barrier that states could not have on their books if they wanted to be eligible for Race to the Top grants. And last month, the state went further, enacting a plan that gives parents more power in reforming persistently low-achieving schools.

In response to calls from Secretary Duncan and President Barack Obama to allow for the expansion of the charter school sector, states such as Delaware, Illinois, Louisiana, and Tennessee last year lifted their restrictions on the number of charter schools.

“What has surprised me is the amount of action in advance of Race to the Top,” said Andrew J. Rotherham, a co-founder of Education Sector, a think tank in Washington, and a former aide in the Clinton administration. “It’s not just the leader states [in education reform], but a lot of states realize the potential here, and it’s significant.”

Education policy experts representing different parts of the political spectrum seem to agree that one of the most surprising side effects of the recovery act has been such movement at the state level, due in large part to the prospect of Race to the Top grants.

“The fact that the law says nothing about getting states to change their education laws, and yet Secretary Duncan was able to leverage money to get states to change their laws—that’s a major story,” Mr. Smarick said.

Lasting Imprint?

But whether the Race to the Top and other stimulus programs in education will have lasting effects when the money runs out is open for debate.

“The Obama administration has the potential to make that window seem less narrow if they continue the ideals from Race to the Top and change how the federal government funds states and interacts with states—that you get money based on what you do and what you promise to do, and not just based on how much you got last year,” said Joe Williams, the executive director of Democrats for Education Reform, a New York City-based political action committee that supports policy measures such as charter schools and merit pay.

Of the four education improvement priorities in the stimulus law—the four assurances—the one widely seen as most likely to produce lasting change is the call for improved teacher effectiveness and the equitable distribution of teachers across all schools, high- and low-poverty.

The Education Department has made teacher and principal quality the single biggest reform category, worth the most points, in the Race to the Top competition. It is also embedding what it considers key principles of teacher quality—including that evaluations should be based at least in part on student achievement—in other stimulus categories, such as the State Fiscal Stabilization Fund and the school improvement grants for turning around low-performing schools.

But the stimulus program’s architecture has also ended up reinforcing what some critics say are flaws in the way existing federal aid to education is allocated around the country.

For example, a major chunk of the stimulus funding is being distributed through existing formulas. Rural school districts—which may have poverty rates comparable to those of urban districts—complain that the Title I formula penalizes them by rewarding districts with large numbers of high-poverty students.

The State Fiscal Stabilization Fund, meanwhile, was allocated on the basis of a state’s school-age and overall population, not the condition of the state’s budget. That meant that states such as North Dakota and Washington, which have faced relatively few budget woes, each still got a proportional share of money, as did California and Florida, which have had to grapple with big deficits.

“Districts used a lot of funds to buy supplies, and make sure the most-needed improvements in their facilities were done,” North Dakota state Superintendent Wayne G. Sanstead said of the experience in his state. “Those are one-time purchases, so I’m not sure how much impact they’ll have down the road.”

Facing the Cliff

Regardless of how the money was spent, the windfall in education aid from the federal government will start to run out for most states this year—a steep “funding cliff” that will force states to find other revenues or make cuts to deal with future shortfalls. That could be a tall order as the national economy still struggles to recover from what commentators have labeled the Great Recession. Making matters worse, state recoveries often lag behind the national trend.

With an end to all of the additional money funneled into Title I and special education programs, Michael A. Rebell of the Campaign for Educational Equity worries that the funding cliff poses an even bigger danger for disadvantaged students.

“Once this money runs out, [districts are] suddenly getting the rug pulled out from them, and there’s no way they can get back to those funding levels on their own,” said Mr. Rebell, the executive director of the campaign, a research and outreach organization based at Teachers College, Columbia University, in New York City. “The cliff is much deeper than we realized, and poor and minority kids will fall the farthest.”