School Finance

Friday News Roundup: Week of June 4-8

June 8, 2012

Michigan Senate finalizes 2013 budget, education outlays

Plaintiff school districts, state battle in Kansas school finance hearing

Schools take heavy hit in new Illinois budget

Missouri officials seek fix for school funding formula

Michigan Senate finalizes 2013 budget, education outlays
Michigan lawmakers voted this week to approve fiscal year 2013 K-12 and higher education budgets, the final piece of the state’s full budget. The legislature approved the budgets four days after the legislature’s voluntary deadline of June 1, which Sen. Roger Kahn, chairman of the Senate Appropriations Committee, said was still early enough to give school districts time to plan their own budgets for the upcoming 2013 school year. The budget provides $12.9 billion for public K-12 schools, an increase of 1.6 percent from fiscal year 2012 levels. That money includes an increase in the per-pupil base expenditure of $120 per student over 2012 amounts, up to $6,966 per student. Additionally, public universities will receive $1.4 billion in fiscal year 2013, and the state will spend another $294 million on community colleges. Those totals represent small hikes over current-year levels, but neither the K-12 nor the college and university increases are sufficiently large to make up for cuts to their budgets in fiscal year 2012. More here…

Plaintiff school districts, state battle in Kansas school finance hearing
Kansas is embroiled in a lawsuit over cuts to funding for K-12 schools in fiscal years 2008 through 2013. Fifty-four school districts have filed suit to recover that money, saying that the state has not provided the “suitable” amount of funding needed to educate students as required since a 2006 school finance lawsuit. After the 2006 case, the state legislature increased the base level per-pupil aid including annual adjustments. That funding should have reached $4,492 in fiscal year 2012. During the recession, though, lawmakers cut the base state funding for fiscal year 2012 to $3,780 per student. According to the districts’ attorneys, minority and inner-city students have been the most affected by the cuts. For its part, the state argues that declining academic performance is unrelated to the drop in funding, and says that the current per-pupil funding amount meets the definition of “suitable” financing for education. More here…

Schools take heavy hit in new Illinois budget
Under a fiscal year 2013 budget Illinois lawmakers approved last week, public K-12 schools will face a loss of $210 million in state funding next year, 3.1 percent below current fiscal year 2012 levels. On a per-pupil basis, the state will provide only 89 percent of the required $6,119 per-student base funding in fiscal year 2013, as compared to 95 percent in the current fiscal year. Additionally, the budget will cut 45 percent of funding for low-income students’ school lunches from 2012 levels, and early childhood education funding will decline by 7.6 percent. The early childhood cuts come on top of the loss of about 7,000 slots statewide for young children in fiscal year 2012. Postsecondary education will lose about $152 million, or 5.9 percent, from 2012 levels; $80 million of that will come from public universities. The legislature also cut the state need-based scholarship program for college students by 4 percent, and community colleges will also face a 4 percent cut from current-year levels. Governor Pat Quinn began the process of approving the final budget this week. More here…

Missouri officials seek fix for school funding formula
Officials in the Missouri Department of Elementary and Secondary Education are working to adjust the state’s school finance formula after a budget shortfall led to concerns that some districts would see major increases in funding in fiscal year 2013 while others would see significant drops from their fiscal year 2012 allocations. Lawmakers had hoped to revise the formula, but were unable to agree on a solution before adjourning in May. Though the “state adequacy target,” a base funding level per student, is currently set to increase from $6,131 in 2012 to $6,423 next year, the Department will hold it at fiscal year 2012 levels. However, state funds will be inadequate to reach that frozen funding level. As a result, the state will have to prorate the available funds to districts. If the state’s budget outlook brightens, eliminating the need to prorate the funds, the state will distribute the full $6,131 per student to districts. Any extra funds would go towards increasing the base per-pupil funding level. More here…

Friday News Roundup: Week of May 28-June 1

June 1, 2012

North Carolina House seeks to add millions to schools

New Hampshire education funding amendment deal reached

Rhode Island House committee approves $8.1 billion budget plan that boosts school aid

Louisiana Senate panel restores $340 million to state budget cut by House

North Carolina House seeks to add millions to schools
The North Carolina state House of Representatives this week released a fiscal year 2013 budget totaling $20.3 billion. The budget, designed by the Republican-controlled House, includes one-time $250 bonuses and an extra week of vacation for all teachers, but eliminates an existing $121 million reserve earmarked for teacher and state employee performance pay. Legislators did increase funding over 2012 levels, though, for local school districts, including $333 million meant to replace federal stimulus dollars that are set to expire in the current fiscal year. The House budget will also reduce the amount that schools are scheduled to return to the state in the 2013 school year from $503 million to $170 million. The bill includes no new taxes or revenue increases, in stark contrast to Democratic Governor Bev Perdue’s proposal that increased sales taxes by three-quarters of a cent. More here…

New Hampshire education funding amendment deal reached
New Hampshire lawmakers this week reached a deal with Governor John Lynch on a proposed constitutional amendment that would give authority over funding for public schools to the legislature. Since a 1997 state Supreme Court ruling, the state has provided all school districts with a set per-pupil base funding level from state general funds and state property taxes. Legislators, though, would prefer to annually determine the amount of aid distributed per pupil. The language of the amendment would allow the state to prioritize funding to economically disadvantaged districts, and would make it more difficult for stakeholders and advocates to challenge state education laws in court. Three-fifths of each chamber of the legislature must now approve the amendment; if passed, it will be placed on the ballot in November. Two-thirds of voters must vote for the amendment for it to become law. More here…

Rhode Island House committee approves $8.1 billion budget plan that boosts school aid
The Rhode Island state House Finance Committee voted this week to approve an $8.1 billion fiscal year 2013 budget. The budget is higher than the budget Governor Lincoln Chafee proposed earlier this year, which totaled $7.9 billion, and adds about $11 million to public schools over fiscal year 2012 levels. It does not, however, include Governor Chafee’s proposed tax on meals and beverages. Revenue from that plan would have been earmarked for public schools, but a $102.7 million surplus in fiscal year 2012 allowed the legislature to increase school aid without generating additional revenue. In addition, the legislature approved a plan to consolidate the state Department of Elementary and Secondary Education, the Board of Governors for Higher Education, and other state public school and college agencies into one single agency headed by a state education chancellor. More here…

Louisiana Senate panel restores $340 million to state budget cut by House
Louisiana’s Senate Finance Committee this week voted on a fiscal year 2013 budget that increases annual state spending by $340 million compared to an earlier version of the state budget passed by the House. The Senate budget would reverse about $70 million in House spending cuts to public colleges and universities and increases funding from fiscal year 2012 levels.  The Senate’s fiscal year 2013 budget is still about $100 million below Governor Jindal’s original proposal, but is closer to his proposed spending level than the House budget. The Finance Committee, in the same session, approved the transfer of $204.7 million from the state’s rainy day fund to help close a $220 million shortfall in the current fiscal year 2012 budget. The legislature is set to adjourn on June 4, so lawmakers are required to reconcile the differences in their budget bills before then. More here…

Briefly Noted: The Michigan legislature is set to miss its own June 1 deadline to complete the fiscal year 2013 budget due to a disagreement among Republicans over how to divide $36 million in university funding across colleges. The House and Senate have reached an agreement on funding for public K-12 schools, but continue to negotiate the higher education budget.

Friday News Roundup: Week of May 21-25

May 25, 2012

University of Wyoming reveals more than $15 million in budget cuts

Governor O’Malley signs Maryland tax increase legislation

Kansas tax cuts worry education advocates

New Jersey university planning costs hit $566,000

University of Wyoming reveals more than $15 million in budget cuts
This week, University of Wyoming president Tom Buchanan released a budget proposal that would reduce the state’s operating budget from current fiscal year 2012 levels by $15.7 million annually, beginning at the start of the new fiscal year in July 2013.  The proposal is a response to Governor Matt Mead’s order last month that all state agencies design budget cuts of 8 percent for 2013.  The order was written after forecasts suggested state revenue from natural gas would be lower than anticipated.  Under the University of Wyoming proposal, the school would cut 80 to 125 faculty and staff positions, cutting personnel costs by 3.5 percent.  Additionally, non-personnel spending would be cut by 14 percent in the form of smaller budgets for sports teams, equipment, and technology.  The specific programs that would experience cuts were not identified by the university’s president. More here…

Governor O’Malley signs Maryland tax increase
Maryland Governor Martin O’Malley this week approved two bills passed by the legislature in a special session that would collectively raise taxes by $260 million in fiscal year 2013 in a marathon signing-session that included almost 300 bills.  The bills would transfer some costs of teacher pensions from the state to counties.  In addition, the legislature voted to raise income taxes for the top 14 percent of income earners in the state.  The funds will be used to reverse more than $400 million in pending budget cuts to education and health programs, as well as local aid for municipalities.  The cuts were scheduled to take effect because lawmakers did not pass revenue legislation during the regular session, but during a special legislative session the cuts were averted.  Another bill the governor signed this week raised the age to which students are required to attend school from 16 to 17.  More here…

Kansas tax cuts worry education advocates
Kansas Governor Sam Brownback this week signed a tax reform bill that, according to projections, will leave the state with a $2 to $3 billion budget shortfall within five years, one third of the state’s general fund.  Public school funding consumes about half of the general fund, so education advocates are concerned about potential cuts to school districts.  A report from the state’s deputy commissioner of education Dale Dennis said that if $1 billion in cuts to K-12 schools were put in place, school districts could face substantial strains to their operating budgets, including $29.2 million for Topeka Unified School District. The cuts would be on top of major budget cuts that districts sustained during the recession. Although the governor’s office claims the report is inaccurate because it doesn’t account for his expectations for job growth as a result of the bill’s passage, lawmakers remain concerned.  The governor has suggested other measures – like negotiating with energy companies for lower utility rates – be enacted to fill the hole districts will face. More here…

New Jersey university planning costs hit $566,000
New Jersey Governor Chris Christie introduced a plan earlier this year to restructure several of the state’s largest public universities, including redesigning the University of Medicine and Dentistry of New Jersey and consolidating Rowan and Rutgers universities.  The proposal, introduced in January, has a July 1 deadline.  The governor’s office has required the campuses at the center of the proposal to cover the planning costs associated with the proposed change. The schools will pass on those costs to taxpayers and students through state subsidies and tuition hikes.  A records request reveals that, so far, the schools have spent $566,000 hiring consultants, lawyers, and accountants for the project.  Those figures also do not include the time spent by university staff on the project.  The governor’s office has not issued any public estimates of the cost of the mergers, but is continuing to push the July 1 deadline. More here…

Race to the Top Could Mean a Spotlight on Under-Served Students

May 23, 2012

U.S. Secretary of Education Arne Duncan yesterday released the draft of the Department’s proposed application requirements for the Race to the Top-District (RTT-D) grant competition. Congress provided nearly $550 million for Race to the Top in its fiscal year 2012 appropriations; the Department dedicated $133 million of that to another round of the Early Learning Challenge, and the remainder to the new district-level RTT-D. According to the draft application, the Department would award districts or consortia of districts grants ranging from $15 million to $25 million depending on the number of students served. The Department expects to award about 20 grants in total from the program’s nearly $400 million funding. Applicants can also earn extra points by pulling in funds from the private sector or foundations to supplement their federal grant. The Department hopes that the applications will produce high-quality, innovative plans to aid academically-disadvantaged students – and those students may turn out to be middle schoolers.

The district competition, in a departure from the original Race to the Top competition that awarded grants to entire states, focuses specifically on personalized learning. Applicants must propose plans to create personalized instructional environments for students, the only non-administrative requirement in the application.

The summary of the grant competition plan that the Department of Education released yesterday also specifies that, although they will need to demonstrate buy-in from local unions, districts cannot be held back by states’ unwillingness to participate in reform. (Forty-six states plus the District of Columbia submitted RTT state applications; several states have refused to participate on politics or principle.) Multiple districts have the opportunity to apply under one grant as a consortium, even crossing state lines; that will allow the districts to pool resources and create high-quality applications. The Department will also split the states into independent groups for scoring, so districts from states that won under prior Race to the Top rounds (and therefore potentially with more advanced reform systems) are not pitted against districts in states that didn’t win.

Perhaps most compelling, though, the Department’s application proposal states that applicants may structure their proposals to target students in a particular grade, subject, or school. Could this provision mean that the Race to the Top district-level grant competition will have an added focus for middle school students, a group that has demonstrated significant need for academic support?

Perhaps of all the research on the proven benefits of early education and the national focus on college- and career-readiness among high school students has inadvertently excluded the middle grades from the reform conversation. Meanwhile, 8th grade students have seen far fewer gains in their achievement scores on NAEP—the National Assessment of Education Progress—over the past decade than 4th graders have.  While the proportion of 4th graders scoring proficient and above has grown since 2000 by 16 and 5 percentage points in math and reading, respectively, the proportion of 8th graders scoring proficient has only grown by 9 points in math and 1 in reading. Overall, the 2011 test scores show that only 34 percent of 8th graders are proficient in reading, and 35 percent in math.

Those academic struggles translate to students’ frustration with school. One study found that in urban public schools, as many as 40 percent of students repeat 9th grade, and only 10 to 15 percent of those repeaters go on to graduate. Providing at-risk students with intensive academic interventions and comprehensive support in the middle grades could prevent them from entering high school underprepared, lessening the need for remedial learning courses that don’t earn credits towards graduation.  A 2007 report found that over a third of high school dropouts actually drop out in 9th grade, before they even make it to 10th grade.

The Department will likely allow applicants for the Race to the Top-District competition to select a specific age group for interventions. District leaders may instinctively elect to focus on high school students because applicants must set a target for high school graduation rates of the students served. But those districts may be better served by focusing on the (oft-neglected) middle grades, ultimately sending better-prepared students through the middle-school-to-high-school pipeline. Earlier interventions could prevent thousands of students from dropping out before they even have the opportunity to get their feet wet in high school.

Check back with Ed Money Watch as we track the RTT-D application and feedback process. For a view of how the RTT-D competition could affect early education, check out this post from our sister blog, Early Ed Watch.

Friday News Roundup: Week of May 14-18

May 18, 2012

North Carolina House GOP considers merit pay money for schools

Dispute over college tuition roils flagship Texas campus

Alabama education trust fund budget approved

Alaska Governor Sean Parnell vetoes $66 million from Alaska budget

North Carolina House GOP considers merit pay money for schools
North Carolina House Republicans voted in a closed-door meeting this week to reallocate some 2013 funds previously designated for merit pay raises for teachers and other state employees to support teacher salaries and general public K-12 education funding. With $258 million set to expire from the federal Education Jobs Fund, which supports teacher salaries, legislators are working to find replacement state funds and lessen the cuts. The fiscal year 2013 budget contains $121.1 million for the state’s merit pay program. Lawmakers plan to move some of these funds into general funding for K-12 schools to partially replace the Education Jobs Funds. Republican lawmakers have not specified how much funding they will transfer to K-12 schools, and the North Carolina Appropriations Subcommittee on Education is preparing its budget (to be released next week) without the extra infusion of funds. More here…

Dispute over college tuition roils flagship Texas campus
This month, the Board of Regents for the University of Texas system rejected a proposed 2013 tuition increase for in-state students, instead raising tuition for out-of-state students by about 2 percent to more than $33,000. UT-Austin president William Powers Jr. originally proposed the 2.6 percent in-state tuition increase, which would have brought the total cost for those students to over $10,000 a year.  The board vote is in line with Governor Rick Perry’s stated goal of holding in-state tuition costs down to no more than $10,000 through budget cuts. Powers has stated that the school will continue to provide a high-quality education, in spite of the tuition freeze. More here…

Alabama education trust fund budget approved
Alabama lawmakers this week approved a fiscal year 2013 education budget totaling $5.4 billion and sent it to Governor Robert Bentley for his signature. The 2013 budget would cut spending by about $208 million from fiscal year 2012 levels and eliminate about 200 faculty and staff positions in K-12 schools due to an anticipated decline in enrollment. Legislators also made some structural reforms in which they moved funding for several youth programs to the general fund, rather than the education trust fund. Additionally, the budget reduces the total education trust fund by about $190 million in 2013 from fiscal year 2012 levels because a law passed last year requires legislators to move any excess reserves in the fund to a separate reserves account. Nearly 70 percent of the fiscal year 2013 education budget is targeted to K-12 education, while about 27 percent will go to higher education. More here…

Alaska Governor Sean Parnell vetoes $66 million from Alaska budget
This week, Alaska Governor Sean Parnell vetoed more than $66 million in spending from the state’s fiscal year 2013 budget plan.  The governor had previously vetoed far more spending – more than $300 million in fiscal year 2010 and more than $400 million in 2011. Parnell said that the limited cuts in the 2013 budget reflected the legislature’s commitment to holding spending within the governor’s stated spending cap.  The vetoes this year were targeted in part to early childhood education; he cut $1.2 million from the statewide pre-K program and $2.8 million from a parent training program called Parents as Teachers. Still, according to the governor, the state will spend 38 percent more on young children in 2013 than it did in 2012 – almost $14 million total, half of which will come through the Head Start program. More here…

House's Sequester Alternative's Effect on Education Spending Still Unknown

May 17, 2012

The deadline for sequestration—the automatic, across-the-board spending cuts that were triggered last fall when the “supercommittee” failed to reach a deficit reduction agreement—is drawing near. It takes effect January 2013, part-way through fiscal year 2013. Experts and onlookers have been trying to figure out if and how lawmakers will cancel sequestration before that deadline. The Republican-led House of Representatives now has its answer.

First, a refresher on how Congress got here: As part of an agreement to increase the limit on the national debt last summer, legislators passed the Budget Control Act of 2011, which sets up a framework by which lawmakers are to enact policies to reduce future budget deficits. If they don’t, the law automatically cuts spending through sequestration and sets limits on future appropriations.

Much of the deficit reduction outlined in the law was supposed to come from a bipartisan bill drafted by a joint House-Senate committee, known as the “supercommittee.” Supercommittee members were never able to agree on a bill, triggering the sequestration and spending caps. Unless Congress and the president now agree to override them, the cuts and caps will proceed as outlined in the law. The sequester will automatically cut fiscal year 2013 appropriations by about $93 billion, of which $55 billion comes out of defense programs and $39 billion comes out of non-defense programs. Within those amounts, the cuts will be distributed evenly across all non-exempt programs. (Pell Grants are the only exempt education program.)

Last week, the House passed a bill that, if signed into law, would cancel the sequester that applies to fiscal year 2013 appropriations. The bill includes policies that would reduce spending across a range of non-education programs funded outside the appropriations process. House lawmakers say those cuts would take the place of the automatic spending cuts that would have come through sequestration.

Nevertheless, education programs—nearly all of which are funded through the annual appropriations process—have not yet escaped unscathed in the House-passed bill. The bill leaves in place a cap on total appropriations funding for fiscal year 2013 that the House adopted earlier this year. That cap is $1.028 trillion, $15 billion below the total appropriations level enacted for fiscal year 2012.

The lower spending cap does not guarantee that lawmakers will cut funding for any or all education programs when they finalize fiscal year 2013 appropriations funding (fiscal year 2013 starts October 1, 2012), but education programs will compete with other programs for funding within a smaller pie. Even if the House bill becomes law, Congress must still determine funding levels for education programs during the appropriations process. Thus there is no meaningful way to predict how the House appropriations limit would affect education programs. Moreover, Congress has actually increased total appropriations for Department of Education programs in recent years even when it has cut appropriation funding across all agencies in aggregate.

It should also be noted that the House-passed bill leaves sequestration in place for programs funded outside of the appropriations process, so-called mandatory programs. This won’t mean much for education programs, since almost all are funded through the appropriations process. Some funding for Pell Grants is mandatory, but it is exempt from sequestration by law. That leaves student loans. The sequester would cut funding for student loans by increasing the origination fee borrowers pay when they take out new loans. That increase is likely to be about a half a percentage point, meaning the fee on a $5,000 loan will cost an additional $25.

To be clear, the Senate isn’t likely to take up the House bill. And the Senate shows no signs of adopting an alternative to cancelling the pending sequester.

In other words, if and how Congress will cancel the sequester is still anyone’s guess. Despite the action in the House, a definitive answer isn’t likely until after November elections.

White House Summit on Financial Capability and Empowerment

May 16, 2012
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Last Thursday, The White House hosted the first ever Summit on Financial Capability and Empowerment.  Did you hear all about it?  Probably not – it somehow slipped the evening news. 

Friday News Roundup: Week of May 7-11

May 11, 2012

Pennsylvania Senate approves alternative to governor’s budget

Missouri legislature sends budget to governor

Kansas House rejects state employee raises, allocates funds for disabled

University of Minnesota regents take wary look at proposed pay, tuition increases

Pennsylvania Senate approves alternative to governor’s budget
The Pennsylvania Senate this week passed a fiscal year 2013 budget plan that restores many of the cuts laid out in Governor Tom Corbett’s proposed budget. The budget, which must be signed by the governor by July 1 according to state law, passed the Senate and moved to the House for approval. It assumes state tax revenue will exceed earlier projections by about $900 million in fiscal years 2012 and 2013 and uses that additional money to increase spending in fiscal year 2013 by about $500 million over the levels Corbett proposed. The increased spending would help to temper proposed cuts to public colleges and universities. It would also increase aid for low-income school districts by $50 million over Corbett’s request. Similarly, it would provide an additional $50 million for accountability block grants, which school districts frequently use to fund full-day kindergarten programs. More here…

Missouri legislature sends budget to governor
Missouri lawmakers voted this week to approve a budget for fiscal year 2013 totaling $24 billion. The budget, now awaiting Governor Jay Nixon’s approval before the start of the fiscal year on July 1, 2012 increases funding for higher education by $3 million from 2012 levels, split across 7 public universities. It also retains funding for one department at the University of Missouri-St. Louis that had been on the chopping block in negotiations earlier this week. The $3 million will be used to help balance funding disparities across the universities. Another bill passed this week diverts revenue earned through casino fees from early childhood education to veterans homes. Instead, funds for early childhood education will come from a settlement reached in a national tobacco lawsuit. Governor Nixon stated that he planned to look carefully at the budget over the next several weeks before signing it. More here…

Kansas House rejects state employee raises, allocates funds for disabled
The Kansas state House voted this week to move $50 million in fiscal year 2013 funding from the transportation department to public K-12 education. Under the funding plan proposed by the House, basic state aid to schools would increase in the 2013 school year by $37 per pupil over current-year levels; that provision will cost the state $25 million. An amendment to devote half of the $25 million to kindergarten-through-fourth-grade literacy efforts failed. Another $25 million taken from the Kansas Department of Transportation budget would provide supplementary property tax aid to school districts. In contrast, a Senate proposal would add $50 million for basic state aid to schools, or $74 per pupil more than the state paid out in fiscal year 2012, and $27 million for property tax funding. The Senate plan allocates the money from the state’s surplus, rather than moving it from another agency. The state legislative session is scheduled to end this week, but with numerous tasks still on its agenda, the legislature may extend the session. More here…

University of Minnesota regents take wary look at proposed pay, tuition increases
The University of Minnesota recently proposed a fiscal year 2013 budget that would increase faculty salaries by 2.5 percent, in-state undergraduate tuition by 3.5 percent, and total spending by 1.5 percent over fiscal year 2012 levels. The Board of Regents, though, is asking for more details on the proposed tuition hike before approving the plan. The tuition growth would raise the cost of attendance to $12,060 for in-state residents, not including fees, room, and board; additionally, out-of-state tuition would increase by 4 percent, up to $17,310. In total, the tuition increase would add $24.6 million to the university’s revenue next year. In addition to increasing salaries for staff and faculty, the extra spending would fund more merit scholarships, new hiring, and a new Center for Social Media at the university. State funding, meanwhile, has declined in recent years and will reach 1998 levels next year. When the university received a smaller cut to state funding than anticipated last year, it saved much of the money to apply to its fiscal year 2013 budget. More here…

Capped Variable Interest Rate Proposal Comes with a Hefty Price Tag

May 11, 2012

While Congress has debated extending the 3.4 percent interest rate on Subsidized Stafford loans issued this year to undergraduates, advocacy groups are gearing up for a debate on longer-term reforms. They know the odds don’t favor Congress adopting a one-year extension of the lower rate again next year. Besides, spending $6 billion to save college graduates $9 a month isn’t a great deal for borrowers or taxpayers. So it’s good that student aid advocates want a better plan. But they aren’t off to a great start. They are gathering support for an outrageously expensive proposal that turns a blind eye to far more worthy aid, like Pell Grants.

The student loan interest rate proposal that is dominating discussions among advocates and other stakeholders would provide borrowers with variable interest rates that would be capped at the current fixed rates of 6.8 percent on Stafford loans and 7.9 percent on PLUS loans for parents and graduate students.

The rate on all newly-issued federal loans would be adjusted annually based on interest rates on short-term (three month) U.S. Treasury debt, plus a markup of two to three percentage points to partially offset costs. Today, that would translate into an interest rate of about 3 percent. If short-term U.S. Treasury rates rise, the rate borrowers pay would too, though it would never exceed 6.8 percent. Such a proposal would represent a return to the policy of the 1990s and early 2000s, except the cap on the variable rate then was 8.25 percent.

This variable-rate-with-a-cap proposal would give borrowers a “heads-I-win, tails-you-lose” arrangement. If short-term rates stay low, borrowers benefit. If short-term rates rise, the loans convert to low, fixed rates and the borrower wins again. When short-term rates decline, the fixed-rate loan converts back to a variable rate, and the borrower wins again.

Applying Lessons Learned from SIG to RESPECT

May 9, 2012

This year, the president and the Department of Education (ED) have taken on a new challenge — re-imagining the teaching profession through the Recognizing Educational Success, Professional Excellence, and Collaborative Teaching (RESPECT) program. The White House rolled out RESPECT on February 15 of this year with the mission of transforming the teaching profession into a highly respected, effective, and well-paid career. Last week, ED released additional details about RESPECT, focusing on strategies to elevate teachers, which were developed after consulting teachers, school leaders, analysts, and policymakers.

The newly released details about RESPECT read like a manifesto, full of lofty ideas and aspirations that would, ideally, dramatically alter the teaching profession. Proposed strategies include:  reorganizing classrooms, schools, and the school year to allow for more flexibility in serving students; shared responsibility for student achievement between teachers and principals; an overhaul of teacher training programs; greater opportunities for professional advancement; teacher evaluations; and higher teacher and principal compensation.

To further this agenda, the White House has requested $5 billion from Congress. But instead of including the program in its ten year budget request, the administration proposed it outside of the regular 2012 appropriations. This would effectively mean that the spending would not have to be offset.

As proposed, ED would distribute the funds to states and consortia of school districts through a competitive grant process. Winning states and districts would be selected based on applications they submit proposing work based on the strategies outlined above.

While existing research supports these strategies, the real question is whether or not states have the capacity to tackle such a wide-reaching reform program amid budget cuts and personnel reductions. One need not look any further than the School Improvement Grant (SIG) program. As we discussed in a previous post, states distributed millions of dollars in SIG grants to districts to turnaround the lowest-performing 5 percent of schools. According to the Government Accountability Office, many states and districts ultimately lacked the capacity to successfully implement the required reforms. As a result, progress on school improvement has stalled while districts spend their time developing data systems or competing with other districts to re-staff their schools.

If states struggled to find the capacity to support their districts during SIG implementation, how will these same states build the capacity to re-envision the entire teaching profession, from training to evaluation to compensation? While crafting a competitive grant program that relies on states to shape the direction of the efforts and provide capacity provides states with greater control over education, it could  set up states to flounder or fail once again.

Both RESPECT and SIG have the potential to foster innovation and push bold reform agendas. But ED should consider the challenges that states have faced in implementing SIG grants, including the fact that capacity is not established overnight, regardless of available funds. Of course, RESPECT is far from a done deal – it seems unlikely that Congress will pony up $5 billion for a new education initiative during tough fiscal times.  But if RESPECT is implemented, the Obama administration should be wary of the limitations of state capacity. It is likely that the Department of Education will have to provide states and districts with significant support to ensure the funds are spent wisely and in a way that has a real impact on students.

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