Stimulus Aid Yanks States' Spending Leash

Badly needed new cash requires levels of funding that may be hard to meet.

With state budgets tighter than ever as the second—and final—big pot of federal economic-stimulus money is about to fill their coffers, states are finding it harder than ever to keep up their end of the funding bargain.

States such as New Jersey continue to make midyear cuts in school funding, backing down from promises made in their initial applications for the $48.6 billion State Fiscal Stabilization Fund, the single biggest pool of education money in the American Recovery and Reinvestment Act passed last year by Congress.

And that means more and more states are finding it difficult to muster up enough cash to satisfy federal requirements that they spend as much on K-12 and higher education as they did in 2006 to receive...