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School & District Management

$5 Billion Pot of Money Draws Plenty of Interest, Raises Some Eyebrows

By Alyson Klein — February 23, 2009 4 min read

One education advocate calls it “a golden opportunity,” while a think tank official has labeled it “the largest education slush fund in history.”

Either way, the $5 billion pot of federal money put at the disposal of U.S. Secretary of Education Arne Duncan to help state and local projects under the $787 billion economic-stimulus package is drawing attention far out of proportion to its size.

The fund—a relatively small slice of some $115 billion in education aid contained in the bill that President Barack Obama signed into law last week—is intended for grants to reward states and districts that improve their academic standards, assessments, and data systems and distribute their teacher talent more equitably.

Secretary Duncan already has a name for the program—the “Race to the Top” Fund—but the Department of Education still must work out exactly who will qualify for the grants, and how the department can best leverage this chunk of funding, which comes with few congressional strings.

U.S. Secretary of Education Arne Duncan listens to students while visiting an Advanced Placement government class at Wakefield High School in Arlington, Va., on Feb. 10.

“They have such a wonderful opportunity on their hands to encourage reform, a golden opportunity,” said Jack Jennings, the president of the Center on Education Policy, a research and advocacy organization in Washington. He recalled struggling to get $25 million for programs during his long career as an aide to Democrats on the House Education and Labor Committee.

He added that Mr. Duncan’s team is “not unduly restricted by congressional legislation—it’s like they got a big check, and it says a few words and that’s it.”

But Michael J. Petrilli, a vice president of the Thomas B. Fordham Institute, a think tank in Washington, sounded a cautionary note about the quick time frame for getting the fund moving—money is available for the fiscal year that starts Oct. 1. The Education Department will have to rely on promises from states that they will take certain steps to improve schools, rather than on actual outcomes, said Mr. Petrilli, who served in the department during President George W. Bush’s administration.

“The risk is that states will take the money and run,” he said. On his organization’s blog, Flypaper, he called the program “the largest education slush fund in history.”

Concept Was Incubating

Although the $5 billion incentive and innovation fund finally appeared as part of a broad stimulus package, the idea isn’t new. Back when he was in the U.S. Senate, Mr. Obama sponsored a bill calling for “innovation districts” that would have given increased resources to school districts that adopted promising practices.

And Rep. George Miller, D-Calif., the chairman of the House education committee, and a key author of the education provisions in the stimulus package, included a similar proposal in a 2007 draft No Child Left Behind Act re-authorization bill, which was never formally introduced.

The money for the new innovation and incentive fund finally emerged as part of a broader piece of the stimulus bill, the $53.6 billion state fiscal-stabilization fund. The bulk of that money is intended to help shore up state budgets and restore previous cuts to education funding, and would be spread out over fiscal years 2009 and 2010.

The $5 billion fund includes two components. One would be directed to states that have made strides on a number of “assurances” spelled out in the new law, such as improving teacher effectiveness and the equitable distribution of teachers, raising standards, and improving statewide data systems that track student academic progress.

In a second element, up to $650 million of the $5 billion fund can be distributed to school districts and to nonprofit organizations that have formed partnerships with districts or consortia of schools.

An Education Department adviser who spoke on the condition of anonymity suggested that the money may end up being split about evenly among districts and partnerships of schools and nonprofits.

The adviser said that with other competitive-grant programs, the department has directed states to draw down money in installments, as they make progress on different parts of their plans. He did not say explicitly that such a design would be used with the new program.

The legislation doesn’t spell out whether the funds must go to states that are making progress in all areas in a comprehensive way. But the Education Department adviser said that Mr. Duncan was likely to take a holistic approach to designing the program.

“I think Arne’s intent is to look for states that are pulling it all together,” the adviser said.

Monitoring Effectiveness

Bethany Little, the vice president for federal policy and advocacy at the Alliance for Excellent Education, based in Washington, suggested that the department require districts that receive money under the innovation fund to participate in a research and evaluation process to help determine which strategies and programs are most effective.

The department adviser said that such a requirement would likely to be a part of the program.

Mr. Petrilli of the Fordham Institute suggested that the department be careful in its grant process, particularly in awarding money to programs associated with people who have ties to the Obama campaign and transition team.

The adviser said the department would put processes in place to head off any potential appearance of conflicts of interest.

“It’s going to be very cleanly handled in a competitive fashion,” the adviser said of the fund.

States and districts are already evening the money in the $5 billion discretionary fund. New York City officials, for example, are considering applying for a grant to supplement the $20 million in local funds the city has dedicated to new bonuses for employees in schools that improve student achievement.

“We’ve very interested in that [bonus] program and would love to think about” expanding it, said Photeine Anagnostopoulos, the chief operating officer for the city’s education department.

Associate Editor David J. Hoff contributed to this story.
A version of this article appeared in the February 25, 2009 edition of Education Week as $5 Billion Pot of Money Draws Plenty of Interest, Raises Some Eyebrows


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