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DeVos Seeks to Align Education Grants With Trump-Backed Economic Initiative

By Andrew Ujifusa — July 29, 2019 5 min read
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U.S. Secretary of Education Betsy DeVos wants to put a priority on competitive grants that square with the Trump administration’s initiative to improve economic opportunities in distressed areas.

In the Federal Register, which is where the U.S. government publishes agency rules and public notices, DeVos’ proposed priority is to “align the Department of Education’s ... discretionary grant investments with the Administration’s Opportunity Zones initiative, which aims to spur economic development and job creation in distressed communities.”

Perhaps the best-known program to get funding through discretionary grants is the Expanding Opportunity Through Quality Charter Schools Program, which gets $440 million and supports new charters as well as those seeking to expand. In fact, the department announced at the start of this month in a rule that a priority for distributing these charter school grants will be to fund charters that are in Opportunity Zones, which provide tax breaks to investors in exchange for long-term investment in identified areas. (More on that below.) However, that grant priority attached to charters impacts a slice of the overall federal charter grant program related to developers.

But the department’s proposed rule, published on Monday, could broaden the extent to which these competitive federal grants are tied to the zones. It’s possible federal grants to magnet schools, arts education, and programs like TRIO and GEAR UP that help bridge gaps between K-12 and higher education could also prioritize Opportunity Zone investments in the future.

Although discretionary grants cover a broad range of money handed out by the Education Department, DeVos’ team has already attached a priority for Opportunity Zones to grants for GEAR UP state grants, Teacher Quality Partnership grants, and several other programs.

And in general, there’s some hope these Opportunity Zones could strengthen schools by bolstering and diversifying the services available to students in struggling communities.

Remember: The big-ticket education funding programs, such as Title I services for disadvantaged students and special education state grants, rely on formulas and not competitive-grant applications. So those funding streams wouldn’t be affected by this new grant priority.

Opportunity Zones were created through changes to federal tax law passed by Congress and signed into law by President Donald Trump in 2017. Those who invest in various projects in these zones and (crucially) keep them there for several years can defer capital gains taxes. Those who maintain their zone investments for at least a decade see the greatest benefits. Last year, 8,700 such zones were announced.

We reached out to the department for further comment on this plan, and we’ll update this post if we hear back. There’s a 30-day window for the public to submit comments on the administration’s proposal after the notice has been published. The Education Department is far from alone here: Other federal agencies are prioritizing or preferencing Opportunity Zone investments in different ways.

“Incentivizing investment in low-income communities fosters economic revitalization and job creation and promotes sustainable economic growth across the nation,” the Trump administration said in a fact sheet about the zones.

‘Direct Education Benefits’

Supporters of Opportunity Zones, and the investments they’re attracting through the Opportunity Fund, say that they’re reshaping how people view economic development and long-term community growth. Others who are more critical of the concept, however, say it’s not clear the money always goes where it should, and that a small share of the zones could gobble up most of the investor cash.

As of last fall, there were more than 13,500 elementary and secondary schools in the Opportunity Zones, and 72 percent of the zones have at least one elementary or secondary school in them, according to a report from the 21st Century Schools Fund and the Center for Cities and Schools at the University of California, Berkeley. Perhaps most importantly, the center reports that schools in these zones have 71 percent of their students classified as low-income.

Public schools, including charter schools, could partner with private enterprises for faculties funding made available through the zones—this arrangement could extend to schools’ participation in mixed-use developments and partnerships with things like health centers and libraries, according to a piece by John Bailey published this month in the journal Education Next. But investments driven by the zones are already supporting things like a career-technical education center in Kentucky and a workforce training program in Indiana, said Bailey, a visiting fellow at the American Enterprise Institute, a Washington think that supports free markets.

In a separate interview, Bailey said zones could also alleviate what the Center for American Progress last year called “child-care deserts.” Their additional potential to attract things like neighborhood grocery stores and additional housing stock, he said, could also help address the out-of-school factors that are often at the center of discussions about how to improve educational systems. But so far, he said, education hasn’t been well-represented in discussions about how to best use these investments.

“We in education have just so siloed ourselves from these broader economic and development conversations, we’re potentially missing our generation’s largest economic development program,” Bailey said in an interview. “Even if a school never takes in one cent of Opportunity Fund investments, there’s all sorts of ways [for communities] to leverage Opportunity Funds to build out grocery stores, food options, stable housing. ... There’s a lot of those types of investments that have direct education benefits.”

Fun fact: Sen. Tim Scott, R-S.C., a big supporter of Opportunity Zones, is also the Senate chairman of the Congressional Caucus on Education Innovation and Opportunity, formerly known as the Congressional School Choice Caucus.

Not everyone is enamored with the idea.

As Rachel Cohen wrote in CityLab earlier this year, some researchers say similar programs in the past that were also based on tax breaks did not pan out. There’s concern that even as communities in Opportunity Zones benefit, nearby communities are negatively impacted. A 2002 study at the W.E. Upjohn Institute for Employment Research concluded that previous enterprise zones “appear to constitute a chaotic and unplanned industrial policy. Furthermore, these incentives usually cause losses to the public purse.”

And Cohen identified another potential problem, as expressed by Timothy Weaver, an urban policy and politics professor at the Rockefeller College of Public Affairs & Policy at the University at Albany: “These policies almost inevitably result in tax giveaways for investment that would have occurred anyway.”

Photo: U.S. Secretary of Education Betsy DeVos (Evan Vucci/Associated Press)