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Education Week on Federal Stimulus Funding Issues
EDUCATION WEEK October 19, 2009 - How Big Is the Stimulus Funding Cliff? $16.5 billion.

White House: Stimulus Saved 250,000 Education Jobs So Far

Stimulus Funding Cliff Is a Reality

Duncan to CA: Don't Count Your Race to the Top Funds Yet

EDUCATION WEEK October 19, 2009

How Big Is the Stimulus Funding Cliff?

$16.5 billion.

That's the amount of money that 36 states combined will need to find, somewhere, to get back to their 2008 K-12 funding levels after stimulus money runs out. That amounts to about 10 percent of these 36 states' combined budgets, according to my own calculations of figures presented in a White House report out yesterday on the impact of the stimulus package on education jobs.

This is the funding cliff that states and school districts have been warned about.

States will need to replace this money at a time when the national economy only now is showing glimmers of a recovery, and state tax collections are still tanking by record amounts. Of course, when it comes time for states to write their budgets for fiscal 2011 and beyond, they have the ability to move money around, or rob other programs to help fill in K-12 budget gaps. But will there be enough money to go around? Looking at the size of these gaps, probably not.

Some states have a bigger cliff than others. California wows with its sheer dollar amount. Its fiscal 2010 K-12 state spending is $32.9 billion, or 14 percent less than it was two years ago. ($5 billion in stimulus money filled in that gap.) But proportionately, other states are in just as bad, or worse, shape.

Oregon reduced state funding by half-a-billion dollars in fiscal 2010, or 16 percent below fiscal 2008 levels. Illinois reduced its state contribution to education this fiscal year by nearly $600 million, or 14 percent. Utah reduced its contribution by $300 million, or 13 percent, below 2008 levels. All of those holes were filled, or will be filled, with money from the State Fiscal Stabilization Fund, the largest single chunk of stimulus money available to states for education.

As state policymakers face frightening budget gaps, folks are getting desperate. In Kentucky, state legislators are considering raiding the "rainy day" funds of individual school districts, which includes money raised from local property taxes. That's unprecedented in the state--and maybe in the country.

A recent report by the Education Department's inspector general called attention to this problem, maintaining that the real effect of the State Fiscal Stabilization Fund was to reduce a state's own funding contribution to schools, rather than prod states to invest more in K-12 education. Even the IG, however, acknowledged this was allowable under the law.

In a White House press briefing yesterday, Domestic Policy Council Director Melody Barnes acknowledged the funding cliff. But she had no solution for those states that are quickly approaching a steep funding drop-off. Here's the relevant Q-and-A.

Q ... When this money, the federal dollars from the Reinvestment and Recovery Act, run out, will it then be up to the states to come up with the revenue to keep these jobs in operation?

MS. BARNES: That's something that we were quite cognizant of when we were putting the [stimulus law] together. We wanted to make sure that we were stimulating the economy, and at the same time, that we would be able to sustain the increases that were on track. I mean, all of this, remember, is to be put in the context of the economy starting to come back, for states to be able to support these jobs and to support the increases that have been put on the table. So the idea was to provide that shot, as I also mentioned, to start to provide and to incentivize the kinds of reforms that we wanted to see moving forward, but not to fall off a cliff when the two-year period was over.  

White House: Stimulus Saved 250,000 Education Jobs So Far

A new report out from the White House Domestic Policy Council estimates that the stimulus package has saved or created 250,000 education jobs so far—most of them probably teachers. (UPDATE: And a good chunk of them are from California. Gov. Arnold Schwarzenegger reported today that 62,204 of these education jobs, or nearly 25 percent of the estimated total, were saved or created in his state.)

The White House has the distinct advantage of being able to look at the first quarterly stimulus reports that states and other recipients of stimulus funds filed with the federal government before anyone else. The rest of us get to look at the reports when they're made public on Recovery.gov Oct. 30.

Even so, much of the 23-page report rehashes data from the already public applications states submitted to gain access to their stabilization funds—data that shows most states said they would use the money to backfill cuts they made, or were going to make, to K-12 education. The White House also drew on anecdotal reports from the media to highlight jobs that were saved in specific school districts. In a press release, the White House says that the stimulus package has enabled states to restore nearly all of their projected education budget shortfalls for fiscal 2009 and 2010. Of course, things are still projected to get much worse for states, based on latest tax collections data.

In the press release, Education Secretary Arne Duncan says: "Early feedback from states also tells us that many districts are using stimulus dollars in ways that will move us beyond the status quo."

Given that most of the money has so far been used to get state K-12 funding levels up to the status quo, it will be most interesting to see what states and school districts report spending their money on. (UPDATE 2: Read Andy Smarick's take on this issue, too.)

Stimulus Funding Cliff Is a Reality

A new report out by the Nelson A. Rockefeller Institute of Government makes it clear that states are still in big fiscal trouble, having experienced a record drop in sales tax for the second quarter in a row.

While the recession may be slowing, and the nation may even be recovering, clearly states are in this economic slowdown for the long haul. My co-blogger Alyson is working on a story about this for our next issue, and I'll link to it as soon as it's finished.

For education, this persistent bad economic news at the state level means that the stimulus-generated funding cliff that states and school districts have been warned about is not just a threat, but a reality.

States have had a tough time making do even with some $40 billion in state stabilization stimulus funds, as many states have used this money to backfill cuts and free up money to balance other parts of their budgets. In 2011, that money officially runs out, which will make balancing budgets--and maintaining K-12 funding levels -- extremely difficult.

This has implications for the competitive grant programs, such as Race to the Top, as well. Pushing through education reforms can take a lot of political will at the state level. But so does balancing budgets. Will there be enough political will to go around?

What's more, award money from Race to the Top may seem mighty tempting for a cash-strapped state. The $4 billion competitive fund isn't nearly as large as the state stabilization fund, and would likely amount to a few hundred millions of dollars for each winning state, but it's still valuable money for a financially strapped state. While states certainly will have to agree to make good on their Race to the Top promises, policymakers in states that win an award might be inclined to reduce education funding elsewhere in light of the extra money coming in from the U.S. Department of Education. After all, we're seeing a similar phenomenon now, with criticisms of how states are using state stabilization funds.

October 13, 2009

Duncan to CA: Don't Count Your Race to the Top Funds Yet

Just because California has removed its teacher-student data fire wall, thereby making itself eligible to compete for Race to the Top Fund grants, that doesn't mean the state is a shoe-in for the money.

In fact, it seems that Education Secretary Arne Duncan is trying to temper expectations by building a larger narrative that any changes prompted by Race to the Top also could put states in better position for other stimulus-related education grant competitions. After all, the Education Department realizes it can't give $4 billion in Race to the Top money to every state. (But, it's worth pointing out that California was often singled out by Duncan for having the firewall, and did act swiftly to get rid of it.)

"This is a piece of a much larger package," he said in a phone interview today, pointing to some $10 billion in discretionary funds under the stimulus program, such as the school-improvement grants, or the "i3" innovation grants.

And, in specifically speaking about California and other states that have made changes to put themselves in better position for Race to the Top, Duncan tried to downplay the motivation behind these changes: the money. "This money is going to be gone two to four years from now. This is a victory for schoolchildren," he said.

But for cash-strapped states, it is also about the money.

Earlier this year, when I traveled with Duncan in Florida, he said that one of the reasons he peeled off $350 million from the Race to the Top Fund to award to states for common assessments was to spread the stimulus love around -- to give states that may not be competitive for Race to the Top grants a shot at some stimulus prize money.

Clearly, Duncan & Crew are cognizant that states will need to be rewarded, one way or another, for their education-reform efforts. And he has a large portfolio of award money with which to work. Still, the department has successfully made Race to the Top the most prestigious education stimulus prize of them all.