Schools at the edge of the stimulus cliff

Last year’s $787 billion stimulus included $100 billion for education meant to cushion state and school district budgets. As anticipated, state and local revenues haven’t rebounded and federal funds will be spent at the end of the school year. An analysis done by Rutgers University shows the “largest-ever federal infusion of education money” will leave states in the same boat as last year, forced to choose some mix of tax hikes and spending cuts.

When faced with unpalatable options states may find they are open to innovation: allowing more competition through charter schools and vouchers to bring down public school spending.

Interestingly, there is a mix of opposition to the next federal infusion of $4 billion in “Race to the Top Funds” (RTTT).

Some teachers’ unions oppose RTTT because funds require states institute more charter schools and “pay for performance” requirements. Texas Governor Rick Perry rejects Race to the Top for different reasons. Federal money (whatever its intent) means more federal rules, higher costs, and less state and local autonomy to set education policy. Texas likes its state education standards and the state would be penalized for not adopting the federal rules that come with accepting RTTT grants.

For RTTT to be an improvement over the top-down standards of No Child Left Behind, funds must not prop up the status quo, but be used to foster real competition and variety in the provision of education.

(2/9/10 Update: For more on the subject of education and competition see our recent Mercatus on Policy with Jerrod Anderson and Johan van der Walt.)