Ed Money Watch

Earlier this month, the State Educational Technology Directors Association (SETDA) released a report, ARRA Investments in Technology, Innovation, and K-12 Reform. The report examines how states are using $650 million in Enhancing Education through Technology Program (EETT) funds provided by the American Recovery and Reinvestment Act of 2009 (ARRA). The authors found that states and school districts have been slow to spend the ARRA EETT funds because of uncertainty over the program’s future in 2011 and beyond.

EETT was authorized in 2002 under Title II, Part D of the Elementary and Secondary Education Act. Its purpose is to improve academic achievement through the use of technology in K-12 schools and to ensure that all students are technologically literate by the end of eighth grade. States and school districts can use funds to purchase technology and software to have in classrooms. They can also pay for professional development for teachers and school leaders to gain a better understanding of how to use student assessment data and other tools to hone teaching techniques.

Funds for the program are distributed to states based on their share of Title I funding. Under the original law, state education agencies can reserve up to 5 percent of EETT funds for administrative and technical assistance, and must distribute the rest to local education agencies (LEAs), half according to the Title I formula and half through a grant competition. However, guidance from the U.S. Department of Education (ED) in July 2009 – several months after the ARRA was passed – strongly encouraged states to use 100 percent of the ARRA EETT funds for competitive grants. Only 25 states were able to devote all ARRA EETT funds to a competitive grant process. The rest had already begun to distribute funds and were thus unable to change all their funds to competitive grants.

But the funding situation for EETT in 2011 and beyond is somewhat uncertain. In fiscal year 2009, Congress provided the EETT with $270 million in funding plus a one-time infusion of $650 million in federal stimulus funds through the ARRA that are available through the end of fiscal year 2011. In fiscal year 2010 the program received only $100 million in annual appropriations, and President Obama did not request funding for the program in his fiscal year 2011 budget request. Instead, the program would be folded in with other federal programs aimed at improving instruction and academic standards under a larger competitive grant program. While no information is available on how the House Appropriations Subcommittee on Labor, Health and Human Services, and Education would fund EETT in fiscal year 2011, the appropriations bill passed out of the Senate Subcommittee funds it at $100 million. With no omnibus spending bill approved in Congress for fiscal year 2011, states can’t be sure what to expect in the current fiscal year.

The SETDA report indicates that states had only drawn down 23 percent of ARRA EETT funds by the end of school year 2009-10, but notes that this does not account for funds that are in the process of being spent but have yet to be drawn down from ED accounts, so the true amount is likely higher. However, the report points out that many states intended to reserve these ARRA funds for the 2010-11 school year in anticipation of significantly reduced federal support for EETT.

With the future of federal support for EETT uncertain, states are encouraging LEAs to create sustainability plans that rely on sources other than the federal government for the future of their technology programs. LEAs are also finding one-time uses for the ARRA funds, including purchasing equipment and software, developing digital content, creating professional development programs for educators, and building a knowledge base for educational technology. These uses of funds do not require a sustained investment from states or the federal government.

The Continuing Resolution, a temporary spending bill passed by Congress in September to extend fiscal year 2010 funding levels into fiscal year 2011 in the absence of an approved appropriations bill, is set to expire on Friday. Save for a last minute reauthorization of the Elementary and Secondary Education Act in the next couple of weeks, it seems likely that Congress will fund EETT at $100 million for fiscal year 2011 – the same amount as in 2010. As EETT ARRA funds run out at the end of 2011, however, states and school districts will face a significant drop in funding, assuming the program continues to exist. With the long-term future of federal support for EETT in jeopardy, we’ll be interested to see how states and LEAs use their remaining ARRA EETT funds.

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.

Montana Governor’s Proposed Budget Includes Increase for Higher Education

South Carolina Legislators Consider Cutting 10 Days from the School Year

Outgoing Ohio Governor Worries that Race to the Top Funds Are in Jeopardy

Texas Schools No Longer Spared from Budget Cuts

Montana Governor’s Proposed Budget Includes Increase for Higher Education
Montana Governor Brian Schweitzer this week released his proposed budget for the 2012-13 fiscal biennium, which included an increase in aid for higher education. Members of the state Board of Regents for higher education were concerned that the absence of federal stimulus funds in the coming biennium would mean severe cuts in aid to colleges and universities, but Governor Schweitzer’s proposal would more than compensate for the lack of federal funds. Federal stimulus funds from the American Recovery and Reinvestment Act of 2009 accounted for $31 million in spending for higher education in Montana’s fiscal 2010-11 biennium, meaning the state would have to increase state funding by $31 million in 2012-13 to make up for the loss of these funds. Governor Schweitzer’s proposal would increase state aid for higher education by $39 million in 2012-13, $8 million more than needed to cover the gap left by the ARRA funds. The increase is intended to cover increasing enrollment and increasing costs due to inflation. More here…

South Carolina Legislators Consider Cutting 10 Days from the School Year
South Carolina legislators are considering cutting the school year by 10 days as they struggle to fill the state’s projected $1 billion budget shortfall in fiscal year 2011. The move would cut the school year from 180 days to 170 days, which would save an estimated $200 million. State Department of Education Spokesman Pete Pillow warned legislators that dramatically cutting the school year would ultimately hurt the state’s economy more than it would help. He warned that cutting 10 days of teacher and school staff pay would drive down their spending, and that parents would be stuck paying for 10 more days of child care. In addition, Pillow expressed concern that a short school year as it would negatively affect workforce preparation, driving businesses from the state. More here…

Outgoing Ohio Governor Worries that Race to the Top Funds Are in Jeopardy
Outgoing Ohio Governor Ted Strickland this week reached out to U.S. Education Secretary Arne Duncan to express concern about Ohio’s Race to the Top (RttT) funds. Governor Strickland is concerned that Ohio may lose its $400 million RttT grant if Governor-elect John Kasich scraps the evidence-based school-funding model that was part of the state’s RttT application. The school funding model was formulated based on months of research and hearings across the state, and uses research on what schools need to be successful to determine how much money each school district needs to provide those components. According to Governor Strickland, the formula was the centerpiece of the state’s RttT application, and without it Ohio’s score would likely fall below that of New Jersey, which scored three points below Ohio and did not receive a RttT grant. Governor-elect Kasich insists that the formula was only a small piece of the state’s plan and that the grant would not be jeopardized by scrapping it. More here…

Texas Schools No Longer Spared from Budget Cuts
Until now, Texas schools have felt little impact from the economic downturn. However, in the state’s 2012-13 fiscal biennium, that will almost certainly change. Lawmakers will begin work in January to fill a projected $24 billion shortfall in the 2012-13 budget. They warn that they see no way to reduce spending without affecting schools and are likely to cut $3 to $5 billion from the K-12 education budget. While grant programs for teacher incentive pay and prekindergarten programs are likely to be the first to go, state legislators have hinted that the $37 billion Foundation School Program – the state’s basic school funding mechanism – is also likely to see cuts. The K-12 education budget made up about 40 percent of the state’s overall budget in 2010-11, so lawmakers say it would be nearly impossible to trim the budget without affecting schools. More here…

This week, the National Education Association (NEA) added its voice to a group of organizations calling for relief from the regulations of the No Child Left Behind Act (NCLB), the most recent version of the Elementary and Secondary Education Act (ESEA). The NEA and other groups (like the American Association of School Administrators and the National School Boards Association) are calling on the U.S. Department of Education (ED) to ease regulations under the law, giving schools, districts, and states increased flexibility as they await reauthorization.

Citing increased financial pressure on school districts caused by the economic recession, the NEA letter suggests eight ways for ED to relax regulations without compromising the original intent of NCLB. Currently, these regulations place several restrictions on school districts such as requiring 100 percent of students to score proficient or above on NCLB tests by the 2013-14 school year or 100 percent of teachers in classrooms to be considered “highly qualified.” The fourth recommendation in their letter caught our eye. It suggests that ED “expedite the invitation and approval of valid and reliable growth models to measure changes in student performance.” This proposal would enable all states to use student growth models instead of achievement levels to determine whether their schools meet Adequate Yearly Progress (AYP).

Currently, states use assessments developed under NCLB guidelines to test students’ math and reading proficiency in each grade in a given year and determine AYP status. Under this model, a school does not reach AYP if a certain percentage of any subgroup of students does not score proficient or above in a specific grade or subject matter. Progress or growth does not currently factor in to AYP determinations. Many have argued that this system doesn’t adequately measure student achievement because it does not recognize gains in student learning, only whether or not a certain percentage of students have reached a somewhat arbitrary goal. Under a growth model system, AYP would be determined at least in part by growth in student learning throughout the year, allowing educators to measure the degree to which students have made achievement gains in that time span.

ED has already begun to invest in the development of growth models in the states. ED started an NCLB growth model pilot program in 2005. States that had showed progress under the original AYP system were eligible to apply to the pilot program, which would allow them to incorporate growth models into their AYP determinations. Eight states were approved to participate in the growth model pilot program in the first school year, and seven more states were added in subsequent school years for a total of 15 participating states. According to a 2010 ED report on the original eight states in the pilot program, the use of growth models in AYP determinations lead to more schools making AYP each year. The effect was especially great in high-poverty schools (about an 8 percent increase in the number of schools meeting AYP when growth models are used, versus 3 percent in low-poverty schools). According to the report, this could help states and school districts target efforts at schools where both proficiency and growth are low.

Additionally, growth models play a significant role in Race to the Top, a new $4.4 billion federal competitive grant program to encourage state reform efforts. One of the four areas of focus in the Race to the Top (RttT) grant competition was “building data systems that measure student growth and success, and inform teachers and principals about how they can improve instruction.” As a result, several states included plans to integrate student growth models into their teacher assessment systems in their winning applications. For example, Florida will use past research on value-added analysis and the expertise of a special committee to build a measure of student growth as part of its state assessment system. School districts in Florida that are participating in Race to the Top will integrate the student growth model into their teacher and principal assessment systems. Teachers will be able to access their own student growth data through a new data portal that will also be created through the Race to the Top grant.

Both the RttT and the NCLB growth model pilot program have laid a solid foundation for states to develop meaningful growth models. And the Obama Administration made clear in its “Blueprint for Education Reform” that a measure of student growth should be included in the reauthorization of ESEA. No doubt, growth models will play a significant role in educational assessment in the coming years, particularly as the research is more refined and states become more familiar and comfortable with using them. Until ESEA is reauthorized by Congress, however, adjustments to NCLB regulations will just tinker around the edges of a flawed piece of legislation. We hope Congress prioritizes tackling ESEA in the coming months so that growth models and other important reforms can be implemented soon.

The latest salvo has been fired in a long-running debate over the in-school interest benefits on federal student loans. Yesterday the National Commission on Fiscal Responsibility and Reform, a bipartisan panel President Obama created to identify policies that will improve the country’s fiscal situation, issued its draft proposal to shrink the deficit. The proposal includes eliminating the in-school interest benefit on federal student loans which would save $5 billion a year. This is one of over 50 suggestions that would achieve nearly $4 trillion in deficit reduction through 2020. The commission joins a wide range of stakeholders who have suggested that this benefit is just not good public policy.

At issue is a subsidy provided to a subset of students who take out federally-backed student loans, called Stafford loans. Remember, all federal student loans are subsidized. Undergraduate and graduate students from any income background can get loans with below-market interest rates and generous repayment plans – including deferrals, forbearances, interest-only and income based plans – courtesy of the government. But for undergraduates from lower income families and graduates students who have low incomes themselves, these loans also are interest free while they are enrolled in school. For the rest of students, their loans accrue interest every month when they are enrolled in school (albeit at the standard below-market rate), but it does not compound, and then is added to their loan principal when they leave school.

The upshot of the in-school interest rate benefit is that borrowers who qualify for it leave school with a lower loan balance. Practically speaking, these borrowers will make slightly lower monthly payments during 10 to 30 years of repayment.

So what’s not to like about this benefit? There must be something judging by the number of times and places policymakers and student aid experts have suggested getting rid of it.

The Congressional Budget Office (CBO) has made a habit of showing lawmakers in its biannual “Budget Options” publication how much the policy directed at graduate students costs. To be sure, the CBO doesn’t endorse or oppose any policies it puts in the publication, but the agency tends to gravitate toward well-founded and rational policy arguments when deciding which programs make the list. The proposal appears in the 2003, 2005, 2007, and 2009 editions.

In 2008, the College Board’s Rethinking Student Aid Study Group released a report on recommendations for reforming student aid that called for an end to the in-school interest benefit for both undergraduate and graduate students. Then in 2009, when Democrats on the House Education and Labor Committee released an initial draft of a major student aid bill, the Student Aid and Fiscal Responsibility Act, they too proposed an end to the in-school interest benefit for graduates students. Both the College Board and the House Democrats would have used the savings generated from ending the policy to boost other, more targeted federal student aid programs. Now the National Commission on Fiscal Responsibility and Reform report offers up the policy as part of its broader plan to reduce the deficit.

Most of these proposals point to the same shortcomings with the policy. First and foremost, the in-school interest subsidy is a back-end benefit that borrowers get slowly over the life of their loans – through slightly lower monthly payments. That means it’s not a “college access” program but a loan repayment program. The federal student loans already have lots of benefits built in to help students repay their loans that are more straightforward and obvious to borrowers, such as graduated repayment and income-based repayments plans. Why not roll the in-school interest benefit into boosting those other repayments plans?

Then there’s the issue of targeting the aid. Eligible undergraduate students generally are from lower income families. But it’s fair to ask why parental income should have any bearing on how much students should be required to pay each month on their loans 5, 10, or 20 years after leaving college. Or why graduate students, who by definition already have a college degree should get the interest subsidy. Moreover, loan subsidies that are based on a graduate student’s income while he or she is in school are a sad excuse for targeting aid to “needy students.”  A quirk in the formula used to calculate eligibility also lets students from higher income families get the benefit if they attend more expensive schools. Eligibility is not determined entirely by family income, but also by a family’s ability to cover tuition and other costs.

Nevertheless, the in-school interest subsidy lives on. College lobbyists and advocates for students generally oppose ending the benefit. And they were successful in getting House Democrats to drop the provision that would have ended the benefit for graduate students from the 2009 Student Aid and Fiscal Responsibility Act. But given the policy’s poor design and unclear purpose, it will always be low hanging fruit for both budget cutters and student aid reformers alike.