$75 Billion in Noncompetitive Formula Grants Failed to Drive Reform. Can $5 Billion in Competitive Grants Now Do the Job?
AEI Education Stimulus Watch: Special Report #2

Media inquiries: Véronique Rodman
202.862.4870 (vrodman@aei.org)

FOR IMMEDIATE RELEASE: September 9, 2009

In February 2009, Secretary of Education Arne Duncan hailed the American Recovery and Reinvestment Act (ARRA) funds allocated to the Department of Education as a "historic opportunity to create jobs and advance education reform." Seven months later, it seems unlikely that ARRA's $75 billion in formula-based grants has advanced education reform.

In this second report of the AEI Education Stimulus Watch (ESW) series, AEI adjunct fellow Andy Smarick continues to examine whether this unparalleled federal investment in schooling is yielding innovation and improvement or merely subsidizing the status quo. In particular, Smarick takes a look at three areas in which the ARRA legislation provides opportunities for reform: the $75 billion in noncompetitive formula-based funds, the $5 billion in competitive grants, and their potential influence on state education policies.

While the primary aim of the ARRA was admittedly to stabilize the economy by saving or creating jobs, the administration also hoped that the $75 billion in education provisions would be used toward reform. Despite the enormous financial commitment of the federal government, however, these funds have not fully covered the education deficits accrued by states and districts, which has left little room for reform-minded spending. In a July report to Congress, the Government Accountability Office reported that states and districts, presented with the option of filling existing budget holes or advancing reforms, were choosing to address their "more pressing" fiscal needs.

Despite the disappointment with the first $75 billion, education reformers may find hope in the $5 billion of competitive grants to be distributed this fall through the $4.35 billion Race to the Top funds and the $650 million Innovation Fund. Secretary Duncan implied recently that grants will be provided only to states whose proposals show a commitment to improve teacher quality, expand the use of data, toughen standards and assessments, and assist struggling schools and other administration priorities like charter schools. Because Duncan will require states to show a reform-friendly environment--by, for instance, lifting limits on the number of charter schools allowed in school districts, linking teacher performance evaluations to student test results, and showing a willingness to adopt national standards--there is now hope for substantial change in education policies at the state level.

However, Smarick also points out that just as ARRA language, local politics, and economic conditions inhibited the reform capabilities of "recovery-first funds," the federal government's limited ability to dictate education practices and outcomes on the ground may ultimately inhibit the impact of "reform-first funds." Though the administration has sided with reformers in spirit, equally important questions remain: What kind of reforms will states propose in their applications? How faithfully will states implement agreed-upon reform plans? How much improvement will these reforms generate? The answers to these questions, which are out of the federal government's control, will have an enormous bearing on whether the ARRA contributes to K-12 reform and improvement.

In addition to the quarterly ESW reports, Andy Smarick tracks ARRA spending on The American's Enterprise Blog at http://blog.american.com. Please contact Jenna Schuette at jenna.schuette@aei.org if you wish to be added to the ESW mailing list.

Andy Smarick is an adjunct fellow at the American Enterprise Institute and a distinguished visiting fellow at the Thomas B. Fordham Institute. From 2008 to 2009, he was deputy assistant secretary for planning, evaluation, and policy development at the U.S. Department of Education. Smarick also served on the White House's domestic policy council from 2007 to 2008, working primarily on K-12 and higher education issues. He is currently working on a book about rebuilding America's urban public school systems.

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