Testing the System

The role of federal funding for public education

Public education is dominated by non-federal money. Ninety cents of every dollar comes from state or local sources, derived largely from property taxes. But what federal spending on education lacks in size it makes up for in considerable influence over education policy. While much of the Department of Education’s financial support for public schools merely shores up state-level resources, its newest and most controversial initiatives have centered on conditions-based aid.
The failing state of American education has been a public policy concern for decades. A 1983 report issued by the Reagan administration noted that although the United States has one of the world’s most expensive public education systems, it performs miserably compared with those of other countries. Only 20 percent of seventeen-year-olds, for example, could write persuasive essays; 40 percent had difficulty drawing conclusions from readings, and approximately 67 percent could not solve a multi-step mathematics problem.
Lackluster results like these solidified a political consensus for education reform in the 1980s and ’90s. The George W. Bush administration sought to boost academic performance with the passage of the No Child Left Behind Act, which introduced the now-standard concept of conditions-based aid: states had to improve their education systems in order to receive federal funding. In the last year, President Obama has elaborated on this framework with the 2010 Race to the Top grants, which offers $4.35 billion dependent on states’ conforming to federal reform guidelines. While conditions-based aid remains in its infancy, it appears to be an effective means of triggering education reforms at the state level.
Speak softly and carry a positive conditionality
During the 2009-2010 school year, approximately $1.1 trillion was spent on all levels of education: $152.8 billion—about 9 percent—was federally provided, an amount that makes up 10 percent of the federal discretionary budget (the part of the budget not allocated to mandatory programs like Social Security) and 2.9 percent of the entire federal budget.
Prior to the 1960s, federal intervention in education had been limited and sporadic. Consistent federal influence was introduced by the Elementary and Secondary Education Act of 1965, which was originally conceived as a way to improve educational performance by providing public schools with general aid, which could be used for any purpose. But since many congressmen were hesitant to shift responsibility for public education away from the states, they chose, as Professor Michael Kirst of Stanford University explained in an interview with the HPR, to “supplement—not supplant.” ESEA created a system of title grants that determined which schools would receive funding, the amounts they would receive, and how they could use the money. The grants were earmarked for specific uses, such as financial aid for low-income students, libraries, supplementary programs in the fine arts, and research and training programs.
Of the periodic ESEA reauthorizations that have occurred over the last four decades, No Child Left Behind in 2001, which established performance-based funding, was the most influential. Grants began to be distributed based on an individualized benchmark system called “Average Yearly Progress,” which measured educational quality according to students’ performance on standardized exams and attendance and graduation rates. States that met AYP standards received their share of federal funding, whereas underachieving states had to go without. Punishing underperforming schools by withholding funds, federal policymakers assumed, would incentivize success. Although the program has been criticized for how it evaluates data, results published in July 2005 reveal either improvement or no change in 43 states since NCLB’s enactment, a marked reduction of the socioeconomic achievement gap measured by standardized testing, and some of the highest test scores in the last four decades.
NCLB entailed approximately $41 billion of growth in federal education funding from 2001 to 2007, a substantial increase. But the root of its success was that rather than simply spending more money, it linked the same amount of money to a desired outcome: better students.
Breaking the piggy bank

NCLB’s shortcomings stem from its focus on creating losers, not winners. Because states could set their own standards for AYP, there was an incentive to set a low bar for improvement. As Professor Richard Halverson of the University of Wisconsin-Madison explained, “The big stumbling block of NCLB was no matter how much you punished schools for not achieving AYP, you still couldn’t properly incentivize them to move ahead.”
Race to the Top changed that. Beginning in 2010, the Obama administration began distributing $4.35 billion in education grants from last year’s stimulus bill to states based on specific educational criteria: instituting merit pay for teachers, closing the socioeconomic achievement gap, providing for charter schools and other innovative models, creating data systems for evaluating schools, and intervening in low-achieving schools. State progress is compared to a federal rubric to determine which states receive grants.
Although it may be too soon to judge the program’s effectiveness, Professor Halverson points out that RttT has incentivized reform in a way NCLB never did. Even states like New York, which are traditionally hostile to many of the criteria RttT demands, have altered their policies in hopes of winning the grant. New York has already doubled its number of charter schools and is reconsidering its opposition to merit-based pay for teachers; 26 other states, according to The New York Times, have followed a similar path. For New York, reform paid off: in late August, the DoE announced that New York had won one of the largest proportions of RttT grants.
Whether the program will benefit public education in the long run is another story. Kirst observes that it’s “a very open question” whether the steps RttT has achieved will be politically sustainable. For one thing, state governments and school systems are short on cash because of the recession, making them more willing than usual to undertake reforms in exchange for funding. Another shortcoming is that RttT awards funds based on a good-faith effort during a very brief period, meaning states may win the grant and then fail to follow through with long-run reforms.
Will reform for cash
Although President Obama has pushed for another $1.35 billion in 2011, there are doubts that this amount will trigger a continued response as the economy recovers, and the bureaucratic challenges of awarding grants to states that scramble to reform within a short period make a permanent program unlikely. To achieve lasting reform, policymakers must look to the open-ended ESEA reauthorization, on which Obama is already setting his sights as RttT comes to a close. While full details are yet to be released, the current program offers clues as to what the next reauthorization might include. According to the Obama administration, it will reward successful schools, invest in infrastructure, and create programs to increase student choice.
A reworked version of the familiar concept of using funds as leverage is the basic tenet of Race to the Top, and its effectiveness merits its inclusion in the reauthorization of ESEA.  What remains to be seen is whether the focus on competitive grants runs the risk of crowding out other methods of enhancing educational quality: voucher programs similar to D.C.’s former system, hybrid charter schools, and Internet-based technology. Gaps in infrastructure and accountability reflect the need to target funding rather than simply find ways to spend it, but only time will tell how well the federal government has learned this lesson.