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The American Recovery and Reinvestment Act of 2009: Saving and Creating Jobs and Reforming Education

In a global economy where the most valuable skill you can sell is your knowledge, a good education is no longer just a pathway to opportunity— it is a pre-requisite. The countries that out-teach us today will out-compete us tomorrow.
—President Barack Obama, Feb. 24, 2009

The American Recovery and Reinvestment Act of 2009 (ARRA) provides approximately $100 billion for education, creating a historic opportunity to save hundreds of thousands of jobs, support states and school districts, and advance reforms and improvements that will create long-lasting results for our students and our nation including early learning, K-12, and post-secondary education. This document describes the principles and strategy that will guide the distribution and implementation of the ARRA funds appropriated to the U.S. Department of Education. Accompanying documents provide initial guidelines for three components of ARRA education funding: the State Fiscal Stabilization Fund (SFSF), Title I, Part A of the Elementary and Secondary Education Act (Title I), and the Individuals with Disabilities Education Act (IDEA), Part B. Separately, we will issue guidelines on other ARRA funds as they are developed. The Department will periodically provide updated information at

Principles: The overall goals of the ARRA are to stimulate the economy in the short term and invest in education and other essential public services to ensure the long-term economic health of our nation. The success of the education part of the ARRA will depend on the shared commitment and responsibility of students, parents, teachers, principals, superintendents, education boards, college presidents, state school chiefs, governors, local officials, and federal officials. Collectively, we must advance ARRA‘s short-term economic goals by investing quickly, and we must support ARRA’s long-term economic goals by investing wisely, using these funds to strengthen education, drive reforms, and improve results for students from early learning through post-secondary education. Four principles guide the distribution and use of ARRA funds:

  1. Spend funds quickly to save and create jobs. ARRA funds will be distributed quickly to states, local educational agencies and other entities in order to avert layoffs, create and save jobs and improve student achievement. States and LEAs in turn are urged to move rapidly to develop plans for using funds, consistent with the law’s reporting and accountability requirements, and to promptly begin spending funds to help drive the nation’s economic recovery.
  2. Improve student achievement through school improvement and reform. ARRA funds should be used to improve student achievement. In addition, the SFSF provides funds to close the achievement gap, help students from all backgrounds achieve high standards, and address four specific areas that are authorized under bipartisan education legislation – including the Elementary and Secondary Education Act and the America Competes Act of 2007:
    1. Making progress toward rigorous college- and career-ready standards and high-quality assessments that are valid and reliable for all students, including English language learners and students with disabilities;
    2. Establishing pre-K-to college and career data systems that track progress and foster continuous improvement;
    3. Making improvements in teacher effectiveness and in the equitable distribution of qualified teachers for all students, particularly students who are most in need;
    4. Providing intensive support and effective interventions for the lowest-performing schools.
  3. Ensure transparency, reporting and accountability. To prevent fraud and abuse, support the most effective uses of ARRA funds, and accurately measure and track results, recipients must publicly report on how funds are used. Due to the unprecedented scope and importance of this investment, ARRA funds are subject to additional and more rigorous reporting requirements than normally apply to grant recipients.
  4. Invest one-time ARRA funds thoughtfully to minimize the “funding cliff.” ARRA represents a historic infusion of funds that is expected to be temporary. Depending on the program, these funds are available for only two to three years. These funds should be invested in ways that do not result in unsustainable continuing commitments after the funding expires.

Categories of funds and schedule for distribution: Balancing the need for speedy investments and for rigorous accountability and transparency, the Department has designed the following approaches for distributing different categories of funds. Some funds will be distributed in stages to states on a formula basis and then distributed from states to local education agencies (LEAs) or institutions of higher education (IHEs) for use over the next two school years (2009–10 and 2010–11); some funds will be distributed all at once; some funds will be distributed through a competitive grant process.

The ARRA Pell grant and work study funding will be used for school year 2009–2010. These funds are available, pending disbursement, beginning July 1.

  • Pell Grants—$17.1 billion. This will increase the maximum Pell award for all eligible students from $4,850 to $5,350.
  • Work Study—$200 million.

The funds under the SFSF, Title I, Part A and IDEA, Part B will be available in two stages. Funds from these very large programs are to be delivered by formula from the Department to the states. The Department will release 50 percent of Title I, Part A and 50 percent of IDEA, Part B funds before the end of March 2009, without requiring new state applications. Streamlined, user-friendly applications for the initial 67 percent of the SFSF will be available to governors by the end of March, and funds will be made available by the Department within two weeks after receipt of an approvable application. For these three categories of funds, we expect to make available the remainder of the funds during the period July 1 to Sept. 30, 2009, conditioned on states providing additional information. The guidelines for securing these funds will be available on our Web site at

  • SFSF delivered to the state governors ($48.6 billion)
    • $39.8 billion is devoted to public early learning, K-12, and higher education. This amount must be distributed by formulae from the state to local education agencies and through a mechanism determined by the state to institutions of higher education.
    • $8.8 billion is allocated to governors for education (including school modernization), public safety, or other government services.
  • Title I, Part A ($10 billion) to State educational agencies.
  • IDEA, Part B ($11.7 billion) to State educational agencies.

A minimum of 50 percent of the funds for the following programs will also be available by the end of March as soon as guidelines are issued:

  • IDEA, Part C ($500 million).
  • Vocational Rehabilitation State Grants ($540 million).

For the following programs under $500 million, all of the formula funds will be available by the end of March:

  • Impact Aid Construction ($100 million: only 40 percent will be distributed by formula; 60 percent will be distributed through competitive grants at a later date).
  • Independent Living Services ($140 million: only $52.5 million will be distributed by formula; remaining $87.5 will be distributed by competitive grants at a later date).
  • Education for Homeless Youth ($70 million).

For the following programs, funds will be made available beginning in fall 2009, and will be conditioned upon receipt of further information that will be outlined in future guidance:

  • Title I School Improvement Grants ($3 billion).
  • Educational Technology State Grants ($650 million).

The following funds will be made available beginning in fall 2009, based on the quality of the applications submitted through a competitive grant process. Guidelines for these funds will be posted shortly:

  • Teacher Incentive Fund ($200 million).
  • Teacher Quality Enhancement ($100 million).
  • Statewide Data Systems ($250 million).

Under the $5 billion in SFSF reserved for the Secretary of Education to make competitive grants, the Department will conduct a national competition among states for a $4.35 billion state incentive “Race to the Top” fund to improve education quality and results statewide. The Race to the Top fund will help states drive substantial gains in student achievement by supporting states making dramatic progress on the four reform goals described above and effectively using other ARRA funds. $650 million of the $5 billion will be set aside in the “Invest in What Works and Innovation” fund and be available through a competition to districts and non-profit groups with a strong track record of results. Guidelines and applications for the competitive funds will be posted expeditiously. Race to the Top grants will be made in two rounds—fall 2009 and spring 2010).

In the coming months, the Department will also announce opportunities to compete for discretionary funds under non-ARRA programs. The priorities for these competitions will be aligned with the reform goals of the Race to the Top fund, and will recognize states and LEAs that optimize the use of the varied funding streams provided under ARRA. In addition, the Department will identify technical assistance resources to help states and localities effectively implement the most promising and evidence-based reforms using all relevant federal, state, and local resources. With federal funds available for R&D, the Department also hopes to work with schools to support rigorous testing of interventions that states and districts support with ARRA funds, to build the knowledge base about what works.

What must states do to receive SFSF, Title I, Part A and IDEA, Part B funds? States will receive initial Title I, Part A and IDEA, Part B funds under pre-existing applications. For the first round of state stabilization funds, governors must provide three things:

  • Assurances that they are advancing the four reforms described in the statute and complying with maintenance of effort requirements;
  • Baseline data on their current status in each of these areas; and
  • Basic information on how the funds will be used.

The Department intends to provide governors with a streamlined, user-friendly, initial SFSF application package.

For the second round of funds, state educational agencies (SEAs) must provide information regarding their ability to meet reporting requirements under the ARRA under Title I, Part A and IDEA, Part B. In the case of the SFSF, governors must provide plans outlining the state’s plans and progress in the four reform areas described above. As part of its application for the second part of the SFSF, a state must describe how the state and its LEAs plan to use SFSF and other funding in a fiscally prudent way that substantially improves teaching and learning. Governors and chief state school officers should work closely with other state and local officials in the state to develop effective data reporting systems and plans that will meet the assurances required by SFSF.

Conclusion: This distribution strategy balances the need for speed and economic stimulus with the need for aggressive and effective education improvement and reform in order to drive our nation’s long-term economic well-being. It provides significant resources quickly while giving states and local educational agencies time to carefully plan thoughtful use of funds. It seeks to align the use of the funds provided through SFSF, Title I, IDEA and state incentive grants, with the purposes of prudent investment under the ARRA and improving student achievement. Success will depend on the quality of leadership, judgment, coordination, and communication of all involved. It represents a historic opportunity to restore America’s global leadership in education.

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