Federal Stimulus Bill Unlikely to Improve Education

Published March 1, 2009

In February, President Barack Obama signed the American Recovery and Reinvestment Act of 2009. The $787 billion bill dedicates more than $100 billion for education over the next two years—a spending increase greater than the entire annual budget of the U.S. Department of Education in 2007.
The bill includes significant increases in federal spending on programs such as the federal Head Start and Early Head Start programs and creates a State Fiscal Stabilization Fund at a cost of $53.6 billion.

Some analysts worry the spending increases outlined in the bill will not improve economic growth or educational performance. Others warn the funding will not help states overcome their economic troubles, and that such measures could in fact harm states in the long run.

Deeper Holes

Edmund McMahon, director of the Empire Center for New York State Policy and a senior fellow at the Manhattan Institute for Policy Research, explained. “Given our very high overall level of spending [more than $13,000 per pupil, rivaled only by New Jersey], K-12 education should be able to absorb the modest 3 percent nominal cut our governor proposed,” he said.

“Instead, the stimulus bill will prop up school aid at an unsustainable level for two more years, during which [time] our financial condition, in particular, is unlikely to improve. In short, it just digs the hole deeper,” McMahon said.

The State Fiscal Stabilization Fund was of particular concern to McMahon.

“Title XIII—the so-called ‘State Fiscal Stabilization Fund’—is testimony to the power of the K-12 lobby in general and of teacher unions in particular,” McMahon noted.

Greater Flexibility

Some lawmakers would prefer to be given flexibility in how education dollars are spent. Such flexibility, they say, would help them get through fiscal hardships by allowing them to direct funding to best meet students’ needs. Lawmakers opposed to increased federal education spending have introduced alternative measures to provide that flexibility.

U.S. Rep. Pete Hoekstra (R-MI), for example, is promoting an effort to grant states greater flexibility through the State Temporary Economic Priority (STEP) Act. The bill would give states emergency flexibility in their use of federal dollars, permitting them to direct the money to their highest-needs areas when there have been two consecutive quarters of economic contraction nationally. During such times, states would be allowed to direct how certain transportation, education, and workforce grants are used.

“State leadership should be free of federal mandates when determining how to respond to a contracting economy,” Hoekstra said in a 2008 press release. “They should have the ability to direct resources to their most pressing needs to minimize the impact of slow economic growth.

“Leaders need the freedom to think creatively in times of economic distress,” Hoekstra continued. “Those closest to problems are best able to address them. The bill would allow states to take important steps toward economic recovery.”

Lindsey Burke ([email protected]) is a research assistant in domestic policy studies at The Heritage Foundation in Washington, DC.