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Education policy maven Rick Hess of the American Enterprise Institute think tank offers straight talk on matters of policy, politics, research, and reform. Read more from this blog.

Education Funding Opinion

Breaking News: The 77 Percent Effect

By Rick Hess — February 25, 2010 2 min read
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Cynics like me have worried that the Department of Education’s Race to the Top (RTT) program has, in a time of fiscal crisis, distracted attention from addressing unsustainable state budgets. Such cynicism has been deemed unfashionable by administration allies, cash-starved state and local officials keen to stay in the Department of Education’s good graces, and editorial writers eager to say nice things about our earnest Secretary of Education.

Much of this enthusiasm has been driven by the fact that RTT has (in theory) changed the way the federal government and the states do business. We are shifting from a model driven by aid formulas and towards one focused on transformation and performance--or so I’ve been told. I’ve been assured that this shift is already evident in state thinking, most visibly in their RTT applications.

Being a huge fan of using federal dollars to support transformative state and local efforts, I was eager to verify these happy reports. Have states indeed ditched the usual calculations based on bodies and budgetary health to machine-tool their ask amounts around their reform agendas? After gorging on $100 billion in formula-driven stimulus aid last year, did states succeed at crafting reform-centric budgets?

Well, you be the judge. My colleague Daniel Lautzenheiser and I ran some numbers on this. Turns out we can figure out almost everything we need to know about how much RTT funding a state asked for if we look at only two things, neither of them related to the state’s RTT application. The first is state student enrollment, and the second is the size of a state’s reported 2010 budget shortfall. Together, enrollment and the state fiscal situation allow us to predict with 77% accuracy how much money a given state requested in their RTT application (for the researchers out there, that’s an “r-squared” of .77 running a simple two-variable regression that incorporated all the states applying for RTT).

The simple correlation between student enrollment and the size of the RTT ask was an eye-popping .83 (a 1.00 would mean the numbers marched in perfect lockstep). This suggests that, whatever the ins and outs of their actual proposed reforms, state requests were largely a product of head counts. Even more interesting, the correlation between the 2010 budget shortfall and the (seemingly unrelated) RTT ask was a cool .63.

Missouri, looking at a $770 million budget shortfall, happened to request $743 million. Nebraska, trying to make up a $150 million shortfall, put together a proposal that seeks $123 million. Then there are the big states which, bleeding cash, wildly disregarded ED’s guidelines for budget requests on how much they should seek. California, eyeballing a staggering shortfall in the tens of billions, asked for $1 billion. New York, wrestling with a shortfall of more than $15 billion, asked for $831 million. It’ll be interesting to see how edu-reformers in states like California or New York aim to keep their plans from being swept under by the tides of red ink.

Are these results cause to wonder what all that bustling, all those big consultant bills, and all that late-night grant-writing amounted to? Or are they a normal and unexceptional state of affairs? And, if it’s the latter (because these are just applications, after all), will the same pattern be more troubling if it’s reflected in the awards? Would be interested to hear what you think.

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