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Duncan (Gently) Threatens Pennsylvania Over Stimulus Funds


The AP's Libby Quaid has an interesting story about how Education Secretary Arne Duncan has put in writing a threat we've heard before: that if states play shell games with the economic-stimulus money intended to help stabilize their budgets, they may be at a competitive disadvantage when it comes time to award the $5 billion in competitive stimulus grants under his control. Pennsylvania is considering cutting K-12 education, using stimulus money to fill in the resulting gap, while leaving its "rainy day" fund largely intact. Read Duncan's letter here. And listen to him talk about the larger issue in this interview with EdWeek from March.

But Duncan's threat to Pennsylvania policymakers may turn out to be an empty one. Here's why:

Does Duncan—who readily admits in his stump speeches that Washington does not have all of the answers—know better than the budget experts in individual states? Sometimes, depleting a rainy day fund is a bad idea. For example, bond-rating agencies look at a state's savings in awarding bond ratings--a healthy rainy day fund usually means a better bond rating. A higher bond rating lowers borrowing costs for states, which can save money for other things.

Second, a lot of states are talking about or doing what Pennsylvania is talking about doing. Texas is another notable example. Applications approved so far show most states are using their State Fiscal Stabilization Fund money to backfill cuts. And if you look at the latest fiscal report from the associations representing the nation's governors and state budget officers (advance to page 52 of the PDF), you'll see that many states are projecting that they'll end fiscal 2010 with money still in their "budget stabilization" or rainy day funds. Many of these same states have cut K-12 education. That's a lot of states to potentially take out of the running. Will Duncan and Team Stimulus be able to distinguish which states really, really needed to cut education versus those that didn't?

Note in Duncan's letter that states will be asked about (and not necessarily judged on) how they used their stabilization fund money. And, he says a state may be "negatively impacted" by such decisions. What's more, it's important to remember that the stimulus law, as approved by Congress, contains loopholes that allow states to move money around—and potentially away from—intended purposes.


I read Sec. Duncan's letter to PA Gov Rendell (thanks for the link!) and I must admit I am confused.

I thought the federal Education Stabilization funds could, and in fact should be used by states to offset budget cuts by towns and public school districts impacted by the recession.

From this letter it appears that the Secretary is saying "No - you should use the state's rainy day funds first" thereby negatively impacting states' fiscal conditions when the stimulus was intended to help aid the states' fiscal conditions.

Please don't make me start quoting Gerald Bracey's latest post - but I think the Secretary needs to decide which side of himself he's on.

His confusion is not helping children.

There are a few issues of interest here. First, why and frankly how, does the federal Secretary of Education have the right to insert himself into clearly a state issue of budget-making? You both mention some of the reasons above.

Secondly, look at the name of the fund being used... it's the "State Fiscal Stabilization Fund!"

The federal DOE warned states about ensuring smart uses for the money, specifically telling them to watch out for a "funding cliff" when the federal money ends; smartly, some states feel the Rainy Day money woul dbe used to dampen the fall from the cliff... does anyone really think the economy will have improved 150 percent intwo years to make up for all the losses?

Furthermore, Duncan, for some reason inserted himself into a state budget fight which has absolutely no backing in law.

Once the federal stabilizaton money gets to a state... it is the state's funds to decide what and how to fund... that was the point of it to begin with... to minimize or eliminate the need to raise taxes in this lousy climate.

The budget plan he is trashing ensured an average increase in funding of 11 percent to PA's 500 districts, minimum increase of 3.1 percent.

Lastly, does anyone really think a state's two senators and congressional delegation would allow Duncan to deny their state the money because a lame duck governor is trying for a last gasp?

I think not. I think other states will agree... Duncan is on shaky ground, is this the type of fight President Obama really wants?

At waht point will government just let teachers teach again?

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