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Financial Implications for NCLB Waiver States on 'High-Risk' Status

For the three high-risk states placed on "high-risk status" last week, losing their No Child Left Behind Act waiver is probably the ultimate penalty.

But it's not the only penalty that U.S. Department of Education has at its disposal.

In the press call last week announcing that Kansas, Oregon, and Washington are on "high-risk status" for teacher-evaluation woes linked to their waivers, federal officials said there could be some financial penalties, which could lead up to the ultimate loss of the waiver. (That's if the states fail to get back on track.)

Officials didn't elaborate as to what these financial penalties could be, so I followed up to get more specifics. Importantly, it doesn't seem as if the federal Education Department would take any money away from the Title I funds that go directly to benefit students. Instead, the Education Department might look at withholding administrative funds for states—a much smaller pot of money—as a lesser penalty than full revocation of a waiver. Or, in the case of these three states that are in trouble over teacher-evaluation plans, the department could consider, for example, withholding a part of Title I funding that's used on teacher-related programs.

Officials told me: "In general, the department has a range of enforcement options that it can employ if [a state] does not implement ESEA flexibility in accordance with its approved request, which includes withholding state administrative funds...and withholding programmatic funds. With respect to noncompliance while on high-risk status, the department would likely take increasingly significant actions in combination with, or in place of, high risk.

"If [a state] cannot come into compliance while under 'high-risk' status, the department would consider whether other enforcement actions would be appropriate. For example, the department might decide to withhold a portion of the [state's] Title I, Part A administrative funds if the area of noncompliance concerns requirements with respect to standards and assessments...We also, for example, might decide to terminate ESEA flexibility and the [state] would revert to complying with NCLB."

Withholding any Title I funds would be a rare step for the department. In the few times the department has penalized states by withholding money, it's been by withholding administrative funds (and not programmatic funds). For example, in 2005, the Education Department fined Texas $444,000, or about 4 percent of its Title I administrative funding, over the state's failure to notify students of the right to transfer out of persistently low-performing schools under NCLB.

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