Since the publication more than a quarter century ago of the landmark report A Nation at Risk, political leaders and policy experts have argued that America’s competitive position is directly tied to education. Most recently, a study by McKinsey & Company found that U.S. gross domestic product could have been $1.3 trillion to $2.3 trillion (9 percent to 16 percent) higher in 2008, had the United States raised educational achievement to the levels attained in top-performing nations.[1] “To put these numbers in perspective,” the report points out, “in the current recession the U.S. economy will fall roughly $1 trillion short of its output potential.”

Now, President Barack Obama is seeking to use his economic stimulus package to leverage education reform. But his reform aspirations may be on a collision course with competing realities.

Because states and localities control most aspects of education, federal officials have struggled with how to translate a sense of national priority into concrete educational improvements. President Bill Clinton attempted to tie federal funds to state reforms, but the demands on states were never enforced. The No Child Left Behind (NCLB) law, enacted under President George W. Bush in 2002, leveraged federal dollars to spur reform of state education standards and testing, but large achievement gaps persist nevertheless between U.S. students and their peers in high-performing European and Asian countries.

The Obama administration is betting big money that education reform will be good for the economy, and that economic stimulus will be good for school reform. One-eighth of the American Recovery and Reinvestment Act funds — some $100 billion — is earmarked for education.

The largest line item is a “stabilization fund” that will be allocated to states. It comprises $39.8 billion in formula funds for state support to local districts and public higher education institutions, and a $5 billion competitive grant program for which states can apply.[2] One purpose is simply to stabilize the education sector and save teaching jobs. At the same time, however, the law asks that states invest in reforms that advance long-term educational goals.

To receive their first of two allocations from the $39.8 billion fund, states must provide baseline data and assure Washington that they will make progress in:

• Achieving equity in teacher distribution;
• Improving collection and use of data;
• Improving standards and assessments; and
• Supporting struggling schools.

To get the second round of funding, states will have to provide updated data regarding these four areas – though they need not demonstrate actual progress. Public airing of the data may prove embarrassing to laggard states, but the reform provisions carry no real “stick.” The carrot is the $5 billion in competitive grants, the bulk of which will be awarded to the states that make the most progress on the four sets of reforms.

This approach may help the president achieve both his economic and education goals. But three sets of tensions may get in the way.

Short-term spending vs. long-term investments

The first tension is between the fund’s dual goals of spending dollars quickly to save jobs, and investing in reforms that advance long-term goals.

Some states will find it challenging to gather the required data, which could delay their receipt of the formula funds. Others may be loath to release politically embarrassing statistics regarding, say, the percentage of teachers in the highest- and lowest-poverty schools who are highly qualified.

Given the lack of teeth in the reform provisions, however, it is far likelier that the goal of spending dollars quickly to plug budget holes will eclipse reform altogether in many of the hardest-hit states. Paradoxically, the neediest states — those having the hardest time making ends meet in their schools — may therefore be in the weakest position to compete for the $5 billion in incentive funds.

NCLB vs. the Recovery Act: conflicting incentives for standards and testing

A second tension is between the stimulus provisions pushing states to improve their standards and assessments, and countervailing incentives under NCLB, another major source of federal education aid. [3]

The stimulus law asks states to improve their assessments and to align their standards “with the knowledge and skills necessary for success” in credit-bearing postsecondary courses and in the workforce. [4]

Yet in important ways, NCLB works against those provisions. When it was enacted in 2002, NCLB required states to quickly implement grade-by-grade standards and annual testing. This sudden increase in demand for tests created an incentive for testing companies to cut corners. That’s resulted in a lot of what critics call “dumbing down” the tests.

NCLB also gives state and local education officials strong incentives to demonstrate increases in the percent of students scoring “proficient,” and in graduation rates. One of the easiest ways for states to make schools look good under NCLB is to set a low bar for proficiency.

Can states handle the Recovery Act’s countervailing pressures to improve tests and raise standards?

The stimulus provisions urging states to strengthen standards and tests give an early indication of the Department of Education’s likely direction in the years to come. When NCLB eventually comes up for reauthorization, it seems probable that the Obama administration will try to revise the aspects of the law that exert downward pressure on standards and lead to dumbed-down tests. Until then, however, the administration could consider easing up on NCLB requirements and sanctions for states that establish stronger standards and tests.

State goals vs. local priorities

A third tension is between the four quite specific reform goals, on the one hand, and the allowable uses of funds — which are very broad indeed — on the other.

Local educational agencies may use the stimulus funds they receive for any purpose allowed under existing federal education funding statutes — including No Child Left Behind, the federal special education law, and other laws — as well as for modernization, renovation, or repair of public school facilities. This sets up potential conflicts between the states, which stand to win competitive dollars if they demonstrate progress on the reform areas, and the localities, where the primary pressures are to save teachers’ jobs and compensate for declining property-tax revenues.

Given the economic pressures they face in the recession, the temptation for school districts will be to pay lip service to reform and use the new federal dollars merely to replace declining state and local revenues. So it remains to be seen whether the stimulus will succeed in driving meaningful education reform at the state and district levels.

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