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Education's Shot in the Arm

The federal stimulus plan will provide a healthy jolt to struggling districts.

The federal stimulus package provides badly needed aid to school districts, allowing them to avoid massive staff and teacher layoffs and injecting them with a healthy dose of funds for many programs ranging from technology to renovation work.

The additional dollars won’t be enough, however, to make school districts whole in those states struggling with large deficits, educators and education experts say. And although district administrators can spend the money on salaries or ongoing programs, experts are cautioning them to avoid doing so, as this is one-time funding that must be spent over the next two school years.

The stimulus provides vital aid to districts to raise student achievement—especially the funds heading to schools with large numbers of disadvantaged students, according to Daniel A. Domenech, executive director of the American Association of School Administrators. “We have consistently said that poverty is the major factor in terms of student achievement,” Domenech says. “This is the federal government putting its money where its mouth is and giving us the opportunity to make a difference.”

Because this is one-time money, districts will need to devote stimulus funds to nonrecurring items—such as equipment, technology, supplies, training, textbooks and school modernization—and reserve any money for salaries toward critical personnel, he says.

The American Recovery and Reinvestment Act (ARRA), which President Barack Obama signed on Feb. 17, provides about $100 billion to education, including $10 billion in Title I money, $12.2 billion for special education, and up to $53.6 billion in “state stabilization funds” to help offset states’ education budget cuts.

The Breakdown

Here’s a breakdown of items in the plan, according to the U.S. Department of Education:

? $10 billion in Title I funds. Districts receiving a portion of that must earmark 85 percent of those funds by Sept. 30, 2010, and the rest by the same date in 2011. The DOE provided states half of the Title I funding last month, with the remaining portion contingent on a state application explaining how they will meet certain record-keeping and reporting requirements. Districts that receive Title I stimulus funds must report to their states a school-by-school listing of per-pupil expenditures.

? $3 billion for Title I school improvement grants, to be made available to states, which will provide the money to schools needing improvement under No Child Left Behind.

? $400 million for preschoolers and $500 million for infants and toddlers under the special education stimulus funding, allocated under the Individuals with Disabilities in Education Act. Districts must earmark all such special education funding by Sept. 30, 2011.

? $53.6 billion in “state stabilization funds” that the law provides to states to help them shore up their budgets. Of that, nearly $40 billion is earmarked for K12 and higher education.

? $650 million for educational technology grants to states under the Enhancing Education Through Technology program. Half of the money will be competitive and the other half distributed under Title I formulas, says Hilary Goldmann, director of government affairs for the International Society for Technology in Education. The grants will provide vital money for classroom technology, she says. “It’s critical for districts and for states,” she says.

"It's critical for districts and for states." -Hilary Goldmann, director of government affairs, International Society for Technology in Education

? $70 million for the education of homeless youth and children, and $250 million for improved statewide data systems.

? $200 million for the Teacher Incentive Fund, which encourages districts to set up alternative teacher compensation systems such as merit and performance pay, according to Mary Kusler, assistant director of advocacy and policy for AASA.

? $89 billion in federal Medicaid assistant payments to states, Kusler says. That is important because states are responsible under Medicaid for providing matching funds that can crowd out education dollars in state budgets, she says. The infusion of Medicaid should ease the fiscal pressure on states, she says.

In addition, the package calls for other welcome perks:

? It extends a moratorium on a regulation that would take away districts’ ability to receive Medicaid funding for their administrative and transportation costs for special education students, Kusler says. She believes that the extension of the moratorium from April 1 to June 30 is significant, because she expects the Obama administration will reverse the policy and allow districts to resume Medicaid claims on such costs.

? Social Security recipients will get a $250 check under the plan, Kusler says. However, in about 16 states, public employees don’t pay into Social Security, meaning that those retirees won’t get the $250 check. The stimulus plan will allow those public retirees to get a $250 federal tax credit in 2009 instead, she says.

? In addition to permitting stabilization funds to be used for school modernization, repair and renovation, the stimulus bill provides nearly $25 billion to two bond programs that will reduce districts’ borrowing costs, some of which can be used for new construction, according to the National Clearinghouse for Educational Facilities (NCEF).

Stabilizing the States

States must use the nearly $40 billion in stabilization funds earmarked for education to restore education funding in fiscal years 2009, 2010 and 2011. Funding must be restored to the level states saw in the fiscal years 2008 or 2009, whichever is greater, DOE says.

Those restoration funds must be run through the states’ primary elementary and secondary education funding formulas.

If states have any money left over of the $40 billion after restoring funding levels, they must allocate the remaining money according to Title I formulas, though those funds don’t come with Title I restrictions, according to Michael Griffith, senior school finance analyst for the Education Commission of the States. And districts sharing a portion of the nearly $40 billion must earmark the funds by Sept. 30, 2011.

"This is the federal government putting its money where its mouth is and giving us the opportunity to make a difference." -Daniel A. Domenech, executive director, American Association of School Administrators

In addition to the nearly $40 billion for K12 and higher ed, the stabilization fund includes $8.2 billion for “high priority” needs, which could include education but also could encompass public safety or other government services—meaning that education will have to compete with other priorities, such as law enforcement, for those dollars.

Also included in the stabilization fund is $5 billion for two new, competitive grant programs. Of that, up to $650 million is for the “Invest in What Works and Innovation” fund, which will provide competitive awards for districts and nonprofit organizations that have made significant gains in closing achievement gaps.

The remaining portion, or $4.35 billion, is for new “Race to the Top” grants for states. That money will be given to states that can show progress in increasing teacher effectiveness, improving data colcollection systems, strengthening academic standards, enhancing assessments for students with disabilities and English learners, supporting the lowest-performing schools, and other criteria, according to DOE information.

Some Will Benefit, Some Won’t

To qualify for receiving that nearly $40 billion in stabilization funds earmarked for education, states must show they have maintained their education budgets at least at the level they had in 2005-2006. This could pose a problem for hard-hit states such as Florida, which has cut education in the last couple of years, says Jim Warford, executive director of the Florida Association of School Administrators. States like Florida will have to request that the DOE waive the 2005-2006 requirement.

Facing a possible 15 percent state budget cut next fiscal year, Florida districts desperately need the money, Warford says. But he cautions that even with the stimulus, Florida districts are still facing cuts. “The size of the budget hole in Florida is such that even if we got all the money and we had no strings attached, it will not solve our problems,” he says.

For example, the Hillsborough County (Fla.) Public Schools, which serves the Tampa area, is looking at a possible $196 million cut in state funding next fiscal year, says spokeswoman Linda Cobbe. The 192,000-student district expects to receive $83 million in Title I and special education funds from the stimulus. The district plans to spend the stimulus money on nonrecurring items such as technology, Cobbe says. “It will help us, but it’s not going to solve our problems,” she says.

In California—another hard-hit state—the stimulus will probably provide only about half of the $11.6 billion in education funding cuts included in a recently approved state budget deal, says Jack O’Connell, state superintendent of public instruction. “It’s just not going to add up,” he says.

For other states, though, the stimulus may be enough to stave off state cuts to education—for now. New York Gov. David Paterson in December had proposed $700 million in education cuts for the next fiscal year’s budget. The stimulus money should eliminate the need for that reduction, says David Albert, director of communications and research at the New York State School Boards Association.

Capital Projects

State building authorities and districts were disappointed by the final stimulus legislation, which stripped out $14 billion dedicated to school modernization, renovation and repair. States and districts can use state stabilization funds for those purposes, but those projects will have to compete with other priorities, says Judy Marks, associate director of the NCEF. “They are going to have to compete for all those competing interests, including the states that are filling in gaps for teacher salaries and other existing educational programs,” she says.

But the law does fund for 2009 and 2010 two types of bond programs that reduce districts’ borrowing costs by providing bondholders tax credits in lieu of interest.

The stimulus plan allows state and local governments to issue up to $22 billion in newly created “qualified school construction bonds” for new construction, rehabilitation and repair of a public school facility, or the acquisition of land for such facilities, according to NCEF.

"It's just not going to add up." -Jack O'Connell, superintendent of public instruction, state of California

The law also increases by $2.8 billion funding for existing federal Qualified Zone Academy Bond programs, which can be used to rehabilitate and repair public school facilities, invest in new equipment and technology, train teachers, and develop new course materials. Such bonds can be issued only by a district that is located in a federally defined Empowerment Zone or Enterprise Community—designations given to certain impoverished urban and rural areas. Alternatively, the district may qualify for the QZAB program if it has at least 35 percent of its students eligible for the free or reduced-price school lunch program, according to NCEF.

The federal government also will provide $100 million in “Impact Aid” program construction funds, which will be for repairing and modernizing school facilities in districts with a high percentage of students on tribal lands and military bases, says Jenny House, president of RedRock Reports, which is a company of experts in grant funding.

In the End

Although there are benefits and drawbacks in ARRA, the overall message for districts is that this is a one-time lifeline. Administrators need to be careful about spending the money on salaries or ongoing programs, says John Musso, executive director of the Association for School Business Officials International. “My caution is that you have to have an exit plan,” Musso says. “This money is going to end.”

Domenech says that the stimulus money represents a big opportunity for districts to raise student achievement. “Use it,” he advises, “and use it well.”

Kevin Butler is a contributing writer for District Administration.