SOC-Edu-0005 Stock iStockphoto/Carolina K. Smith, M.D.

Our organizations--the U.S. Chamber of Commerce, the Center for American Progress, and the American Enterprise Institute--don't agree on a lot of issues. We have different missions and philosophies. But when it comes to education, we are united in addressing a massive crisis that threatens to undermine the economic future of our nation.

Simply put, our education system needs to be reinvented. After decades of failed school reform, schools continue to graduate students who lack the skills and knowledge necessary to succeed in the modern workplace. The extent of the problem is staggering. Only one in three eighth-graders is proficient in reading. Even high school graduates lack adequate skills: more than a third of college freshmen require academic remediation.

Our organizations came together two years ago to address this crisis. In our first report, we graded the states on school performance. In our follow-up report, "Leaders and Laggards: A State-by-State Report Card on Educational Innovation," recently released, we turned our attention to the future, looking at what states are doing to prepare themselves for the challenges that lie ahead. In focusing on innovation our interest is in whether states are laying the groundwork that will foster the smart, performance-oriented problem-solving that our system so desperately needs.

There's no question that our education system requires deep, structural change. It is broken and ineffective, a relic of a time when auto factories formed the backbone of the economy and the Internet was the preserve of science fiction writers. Across the nation an inflexible school culture stifles improvement, forcing educators and parents to cope with systems that are rigid, bureaucratic and ill-equipped to compete for talent and leverage new technologies. According to our research, 90 percent of teachers say that routine duties and paperwork interfere with their teaching, and only one-third approve of how their schools are run.

Although states recognize the need for reform, many haven't done enough, particularly around school funding, as state finance systems have grown into a jumbled, chaotic patchwork of programs. We found that 23 states each had more than 40 different funding initiatives. These programs operate with little flexibility and transparency. Only about half of the states make basic finance data readily available on the Internet, making it difficult for watchdogs or the broader public to hold schools accountable.

But there is no silver bullet. Educational innovation does not mean blindly celebrating every nifty-sounding initiative. In many ways, there's been too much of that kind of innovation over the years--schools have too long confused the novel with the useful. Nor should school reinvention take place in a policy vacuum. While encouraging innovation, states should hold individuals responsible for outcomes as well as build capacity for new organizations and approaches.

Our goal is to encourage states to develop a flexible, performance-oriented culture that will help schools meet educational challenges, and a number of organizations have already devised promising approaches. Some are public school districts such as Long Beach Unified School District in California, while others are nontraditional providers, including charter school entrepreneurs such as Green Dot Public Schools.

But these marquee reformers are a drop in the 50 million-student ocean that is K-12 education, and the scale of the challenge requires that we not merely celebrate these successes but provide the tools and opportunities that will fuel such reinvention and reform across the country. States and localities must commit themselves to empowering schools and principals. Too often school leaders lack authority over key functions; we found that fewer than half of the principals in states such as Oklahoma report having a significant influence over teacher hiring.

States also need to develop more flexible funding policies while rewarding schools and educators for excellence. New funding approaches are not easy to create or implement. But we can no longer afford to treat school finances separately from outcomes, and reformers should look to promising pay-for-performance models such as Minnesota's Q Comp program, which gives teachers detailed evaluations while gauging their students' academic performance.

Many acknowledge that we need to rethink the nation's system of schooling, and the federal Race to the Top Fund has brought significant attention to innovation. But we have no illusions that this effort will be quick or easy. Indeed, perhaps the only thing that's clear is that the current system must be disrupted. Only then will educators and reformers have the chance to deliver the teaching and learning that our students need, and deserve.

Frederick M. Hess is a resident scholar and the director of education policy studies at AEI. Thomas J. Donohue is president and CEO of the U.S. Chamber of Commerce. John Podesta is president and CEO of the Center for American Progress.