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Education Funding

As Education’s Funding Cliff Nears, Anxieties Rise

By Alyson Klein — February 05, 2010 10 min read
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It’s a warning that’s etched in the mind of every state and local education policymaker: Beware the funding cliff.

States and school districts are already bracing for the budget crunch that is almost certain to hit when the up to $100 billion in education aid made available under the American Recovery and Reinvestment Act runs out starting later this year.

Aware that the fiscal picture in most states will likely remain bleak for the next few years, state and local leaders are trying to pinpoint new revenue sources for education, and are seeking ways to trim spending to blunt the impact of the stimulus aid’s end—the so-called “funding cliff.”

Since much of the funding under the economic-stimulus measure enacted by Congress a year ago was used to fill budget holes at the local level, many students, teachers, and administrators may not have been aware of just how much of a difference the money made in classrooms, said Jack Jennings, the president of the Center on Education Policy. His research organization, based in Washington, has been tracking the stimulus funds.

But educators are almost certain to feel the pinch once the money runs out.

Schools and the Stimulus:
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The Impact So Far
Multiple Stimulus Aid Streams Flow to Ed Tech
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Spec. Ed., Title I Aid Casts Long Stimulus Shadow
Stimulus Reflects Push for Teacher Effectiveness
Schools Stuck at Bottom Target of $3 Billion Push
Aid Lets Hard-Hit State Keep Programs Aloft
Fiscal Stability Allows for Long View on Stimulus
The Road Ahead
As Education’s Funding Cliff Nears, Anxieties Rise
Race to Top Sets Stage for ESEA Reauthorization
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“As the money goes away, it’s going to be a pretty rude awakening, because states are not going to be back to fiscal health,” said Mr. Jennings, a former longtime education aide to congressional Democrats. “The financial crisis will continue.”

Meanwhile, in Congress, lawmakers are already crafting spending bills aimed at helping states and districts weather the coming fiscal storm. It isn’t clear, though, whether Congress will be able to pass legislation that includes substantial new funding for education.

And it is also unclear what the continuing fiscal squeeze will mean for the education redesign goals at the heart of the recovery act’s school initiatives.

While some $70 billion in money aimed at helping schools avoid layoffs and programmatic cuts had already been awarded to states as of late January, the bulk of the federal funds aimed at transforming education policy over the long haul have yet to be allocated.

That money includes a number of closely watched competitive grants, particularly $4 billion in the Race to the Top program, which seeks to reward states that make strides toward certain education redesign goals, and the $650 million Investing in Innovation, or i3, program, which would encourage districts to work with one another and nonprofit groups on school improvement projects.

Filling Holes

The ARRA, approved by Congress last February, included the $48.6 billion State Fiscal Stabilization Fund aimed at helping states put their budgets back on a firmer footing after the severe blow dealt by the recession. States were directed to use the money first to backfill any cuts to K-12 or higher education, then distribute the rest to districts.

But once that money is no longer flowing, 36 states will have to fill a collective gap of at least $16.5 billion to return to fiscal 2008 state spending levels for K-12 education, according to an Education Week analysis performed late last year.

Advocates for school districts in cash-strapped states are telling their state legislators to proceed cautiously when it comes to K-12 education—or the consequences could be dire.

“I see nothing off the table when it comes to this legislative session,” said Wayne Blanton, the executive director of the Florida School Boards Association. “If we cannot obtain other funding, districts may have to ask for a shorter school day or a shorter school year. That will not be popular, but there’s no other way to keep the doors open.”

Some Democrats in Congress are aiming to give states and school districts a second infusion of cash to help retain jobs and programs, while steering clear of calling such aid a second stimulus.

In December, the U.S. House of Representatives, on a close vote, approved a $154 billion bill aimed at spurring the still-sluggish economy. The bill included some resources to help school districts, many of which are still contemplating deep cuts. (The Senate is expected to introduce its own jobs legislation in the coming months; as of mid-January, the package was still in flux.)

The House measure would seek to minimize the funding cliff by creating a $23 billion Education Jobs Fund. Districts and states could use the money to cover the cost of pay and benefits for teachers and other employees. The aid could also be used for services related to school modernization, renovation, and repair.

The measure also includes an additional $4.1 billion for school construction bonds. The 2009 stimulus law had $22 billion for such bonds, spread over two years. Districts have generally been eager to make use of the program.

But the House legislation faces significant political hurdles, as lawmakers have become increasingly wary of bills with large price tags—and President Barack Obama has proposed freezing top-line levels for most domestic, nonmilitary discretionary spending.

If Congress doesn’t agree to provide some more relief for states soon, the political window may close, Mr. Jennings said, given that any controversial legislation is likely to get mired in the 2010 congressional elections. And the next Congress is almost certain to include more Republicans, he said.

‘Life Support’

But other analysts worry that the potential jobs package could prevent states and districts from taking a hard look at how they are spending their money and consider long-term structural changes—a criticism also leveled against the ARRA.

The second spending jolt “may be more like life support for an otherwise unsustainable and bulky system that’s going to remain fiscally very challenged even as the economy” improves, said Chester E. Finn Jr., the president of the Thomas B. Fordham Institute, a Washington think tank. “I don’t think federal money, especially of the bailout kind, is a good thing. It just defers the need for decisionmaking.”

Before the stimulus, he said, the federal share of K-12 education spending was about 9 percent. But with the recovery money, it went up temporarily to about 15 percent, which will be seen by advocates for school districts as “the new normal,” said Mr. Finn, who was an assistant U.S. secretary of education during the Reagan administration.

The stimulus program is going to “create an intense pressure to keep jacking up” existing programs, such as special education and Title I aid for disadvantaged students, he said.

Meanwhile, deadlines still loom for the $4 billion in competitive grants under the Race to the Top program. Forty states and the District of Columbia threw their hats in the ring for the first-round application deadline of Jan. 19. The U.S. Department of Education plans to announce the winners of the first round of grants in April, and provide feedback to states that applied for grants but didn’t get them.

There will be “plenty of money” still available in the second round of funding, Joanne Weiss, the department’s Race to the Top director, told state education officials at a seminar on the program held late last year. Applications for round two are due June 1. The winners of those grants will be announced in September.

President Obama has proposed extending the Race to the Top program beyond this year by including $1.35 billion for it in his fiscal year 2011 budget proposal. And he would like to open up the competition to school districts.

But it’s too early to predict whether Congress will go along with that strategy.

Once the grant competitions are over, it will be clear which states and districts are the winners—and which are the losers, said Joel Packer, the executive director of the Committee for Education Funding, a lobbying coalition in Washington.

If federal lawmakers aren’t happy with the way the grant programs are administered and structured, they may say, “Hey wait, are we giving too much power to the secretary of education?” Mr. Packer said.

Transforming K-12

Later this year, the Education Department plans to begin accepting applications for the $650 million i3 Fund, which seeks to reward schools districts for coming up with cutting-edge ideas to improve student achievement, especially among at-risk students. Nonprofit organizations working with districts or consortia of public schools are also eligible for the grants. The money will be awarded by Sept. 30.

In draft guidance on the program in October, the department divided the i3 grants into three funding streams. Programs that have already shown substantial success are eligible for the largest grants, up to $50 million each. Programs that can show moderate evidence of success could receive grants of up to $30 million, and grants of up to $5 million would be available to programs that can demonstrate “reasonable research-based findings or theories.”

Meanwhile, of the $4.35 billion total in the Race to the Top Fund, the department is reserving a $350 million slice for a program aimed at encouraging states to adopt student assessments that are more rigorous and uniform than the current tests.

That aid could capitalize on the momentum toward common standards spurred by the Council of Chief State School Officers and the National Governors Association. So far, 48 states have signed on to the Common Core State Standards Initiative led by the two groups and have pledged to start working for higher, widely accepted standards in core subjects.

The federal rules and deadlines for the assessment grants are still being worked out. For now, the Education Department is seeking broad public input on the program.

And while the Race to the Top competition is drawing much of the national attention, education advocates say a second pot of money made available under the stimulus law—$3 billion in new funding for Title I School Improvement Grants—could also have a big impact on how states and districts approach poorly performing schools.

The final regulations adopted in December for the school improvement grants call for districts to employ one of four strategies for intervening in struggling schools. They range from closing down a school and sending its students elsewhere to a strategy that combines a revamped instructional system, extended learning time, and new governing flexibility. Virtually all the possible options call for the removal of the school’s principal. States had to apply for the grants by Feb. 8.

The recovery act also included $250 million to help states bolster longitudinal-data systems, which allow the tracking of student progress over time. The applications for those grants were due late last fall, and the money is to be given out later this year.

The ARRA also provided $200 million for Teacher Incentive Fund grants, which help districts create pay-for-performance programs. The program got an additional $400 million in fiscal year 2010. The Education Department has not yet released regulations or a specified a timeline for the fund.

Lasting Changes?

It’s too early to know whether the stimulus-financed grant initiatives will result in lasting changes to education.

So far, the Education Department has gotten a lot of mileage out of the Race to the Top program without writing a single check, said Charles Barone, the director of federal relations for Democrats for Education Reform, a political action committee based in New York City that raises money for Democrats who embrace policies such as charter schools and merit pay. States have reworked their laws in areas including data systems, teacher compensation, and charter schools to get an edge in the competition, he pointed out.

But the hard work is yet to come, Mr. Barone cautioned.

“They’ve gone a long way with the bully pulpit,” he said of Obama administration officials, “but awarding grants and enforcing provisions of law is different from dangling a carrot out. There’s a much different strategy; it’s much more difficult politically.”

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Coverage of the American Recovery and Reinvestment Act is supported in part by grants from the William and Flora Hewlett Foundation, at www.hewlett.org, and the Charles Stewart Mott Foundation, at www.mott.org.
A version of this article appeared in the February 10, 2010 edition of Education Week as As Endgame Approaches, Anxieties Rise


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