Ed Money Watch

At Ed Money Watch, we discuss and analyze major issues affecting education funding. In our Friday News Roundup, we try to highlight interesting stories that might otherwise get overlooked. These stories emphasize how federal and state policy changes can affect local schools and districts.

$100 Million in Stimulus Funds at Risk in Tennessee

South Carolina Supreme Court Orders Governor to Apply for Stimulus Funds

Kentucky Educators Will Be Spared Major Cuts

Stimulus Funds are Slow to Reach Pennsylvania Schools

The Department of Education recently approved the State Fiscal Stabilization Fund (SFSF) applications of four more states - Iowa, Maryland, Kansas and Michigan - and Puerto Rico. These states join the 21 that have already begun to receive funds. As of May 29th, nearly $3.4 billion in SFSF monies have been disbursed to states. (Previous posts analyzing the applications of the first 21 states can be found here and here and here.)

These four additional states and one territory make up another $3.3 billion in Education Stabilization funds and $735 million in Government Services funds. Relative to most other states with approved applications, these states are expected to face relatively low 2009 budget deficits as a percent of total state spending. According to the Center for Budget and Policy Priorities, Michigan is expected to face the largest budget deficit- 6.5 percent - while Iowa will experience the smallest - 2.1 percent. Budget deficit information on Puerto Rico is not available.

Rewarding excellent teachers and swiftly removing bad ones is a relatively new concept in public education. Current labor union contracts and teacher salary schedules typically prevent differentiated compensation based on anything beyond years of experience and academic credentials. And the concept of "tenure" or "permanent status" for teachers makes quick removal nearly impossible. But a recent report by The New Teacher Project (TNTP), The Widget Effect, hopes to change that by encouraging states and school districts to dramatically improve teacher evaluations and link them to teacher pay, increased responsibilities, and dismissal.

The Widget Effect refers to how teachers are currently treated like identical inputs into education, rather than individuals with particular strengths, weaknesses, and skills. The authors claim this is due to the broken teacher evaluation system currently in place in most school districts. Teacher evaluations are infrequent and lack rigor. Principals often do not receive evaluation procedure training and rarely provide guidance and feedback to struggling teachers.

At Ed Money Watch, we discuss and analyze major issues affecting education funding. In our Friday News Roundup, we try to highlight interesting stories that might otherwise get overlooked. These stories emphasize how federal and state policy changes can affect local schools and districts.

North Carolina May Drop Some Standardized Tests

Some States May Base College Funding on Graduation Rates

Governor Schwarzenegger Threatens to Cut Need-Based Aid

National Center for Education Statistics Releases The Condition of Education

The Department of Education recently approved the State Fiscal Stabilization Fund (SFSF) applications of five more states - Idaho, Massachusetts, North Carolina, Virginia, and Washington. These states join the 16 that have already begun to receive funds. As of May 22nd, nearly $773 million in SFSF monies have been disbursed to states. (Previous posts analyzing the applications of the first 16 states can be found here and here.)

These five additional states make up another $4.0 billion in Education Stabilization funds and $886 million in Government Services funds. According to the Center for Budget and Policy Priorities, Massachusetts is expected to face the largest budget deficit as a percent of total state spending in fiscal year 2009 - 14.2 percent - while Virginia will experience the smallest - 6.7 percent.

In January, the Federal Education Budget Project published an issue brief on the student loan purchase programs put in place under the Ensuring Continued Access to Student Loans Act of 2008 (ECASLA). Given the new developments and new information released by the Obama Administration, it's a good time to catch up on the ECASLA programs.

When financial markets began to break down last year, Congress confronted the possibility that private lenders issuing federally-backed student loans (the Federal Family Education Loan Program, FFEL) might not be able to meet student demand. In response, Congress passed legislation (ECASLA) granting the U.S. Department of Education temporary authority to purchase FFEL loans. The new loan purchase authority helps ensure that FFEL lenders have access to adequate and affordable capital and can convert their loan assets into cash to fund new loans. ECASLA gives the Department of Education considerable discretion in designing and implementing loan purchase programs. Using this discretion, the Department designed and implemented four separate loan purchase arrangements: a put option; a short-term purchase program; a financing arrangement; and an asset-backed commercial paper support program. Each option involves different purchase arrangements and targets loans from different years. The ECASLA issue brief, which will be updated in the coming weeks, includes an explanation of each program. [A version of the issue brief updated June 1, 2009, is available here.]

Since January, new information has been made available about the ECASLA programs. In March, the Obama Administration reported the volume of loans each private lender made under each program. The reports show that eleven lenders exercised put options on FFEL loans issued during the 2008-09 academic year, selling $701 million in loans back to the Department of Education. Two lenders, Edamerica and Wachovia Education Finance, accounted for about 90 percent of that volume. Subsequently, the Office of Management and Budget (OMB) released estimates in May 2009 showing that $4.8 billion in 2008-09 loans ultimately will be put to the Department (about 8 percent of expected 2008-09 FFEL issuance).

At Ed Money Watch, we discuss and analyze major issues affecting education funding. In our Friday News Roundup, we try to highlight interesting stories that might otherwise get overlooked. These stories emphasize how federal and state policy changes can affect local schools and districts.

Report Released on Stimulus Funds and Reform

California Voters Reject Budget Proposals

Credit Card Bill Could Limit Student Access to Credit for College

California Community Colleges Plan to Slash Enrollment

Florida Lawmakers use Stimulus Aid to Avoid K-12 Budget Cuts

Yesterday U.S. Secretary of Education Arne Duncan testified before the House Education and Labor Committee on President Obama's fiscal year 2010 Education budget request. While little new information arose during the secretary's prepared testimony, a few interesting tidbits came up during the committee members' questions.

Throughout his testimony, Secretary Duncan reiterated the role that he thinks the Department of Education (ED) should play in improving public education. Specifically, he said that ED should be there to encourage states to "do the right thing" by students, not force them into compliance with certain requirements. Similarly, he stressed the importance of innovation at the state and local levels, rather than at the federal level. He believes that the best ideas come from schools and practitioners, not the federal government. Instead, the federal government should help incent states to allow for innovation and new ideas at the local level.

The Department of Education recently approved the State Fiscal Stabilization Fund applications of three more states - Indiana, Rhode Island, and Tennessee. These states join the 13 that have already begun to receive funds. As of May 15^th, nearly $565 million in SFSF monies have been disbursed to states. (A previous post analyzing the applications of the first 13 states can be found here.)

Indiana, Rhode Island, and Tennessee comprise an additional $1.7 billion in Education Stabilization funds and $386 million in Government Services funds. Of the three states, Rhode Island is expected to face the largest budget deficit as a percent of state spending - 11.4 percent - while Indiana is expected to face the smallest - 8.0 percent.

News reports suggest that some schools and school districts have started receiving at least the beginning of the $44 billion in stimulus funding made available on April 1^st. This money flows through three programs in particular - No Child Left Behind Title I Part A, Individuals with Disabilities Education Act (IDEA) Part B, and the State Fiscal Stabilization Fund (SFSF). While all 50 states and the District of Columbia have received at least 50 percent of their Title I and IDEA allocations, only the 13 states whose SFSF applications have been approved have received any of that available money. Below we discuss how some school districts have decided to use the funds.

As we've discussed previously, guidance states that the stimulus funds are to be used for two primary, and potentially conflicting, purposes. The first, saving and creating jobs, is an inherent goal of the stimulus bill particularly for states experiencing severe budget deficits. The second, supporting reforms to improve student academic achievement, will likely be sidelined in many districts as they work to keep their schools open and teachers in their classrooms. However, some districts have attempted to do both.