Asumag 157 Stimulus Building 201003
Asumag 157 Stimulus Building 201003
Asumag 157 Stimulus Building 201003
Asumag 157 Stimulus Building 201003
Asumag 157 Stimulus Building 201003

Stimulus Response

March 1, 2010
Federal funds have helped schools and universities stay afloat, but states' education budgets remain in woeful shape.

If you're a “glass half-full” person, you may look at last year's federal stimulus package as a godsend for schools and universities: Billions of dollars in funding have enabled education institutions to save hundreds of thousands of jobs and many programs considered critical to providing students with high-quality instruction, and have subsidized building projects that otherwise might not have gotten off the ground.

A “glass half-empty” person looking at the same picture may wonder why, after the federal government dug itself deeper into debt to bring the finances of schools and universities closer to solid standing, the fiscal health of many education institutions remains precarious, and the threat of layoffs and shuttered facilities looms large.

Both views have validity: Stimulus funds unquestionably have helped many schools keep going through tough times, but for many institutions, the tough times aren't going away anytime soon. That is why, a little more than a year after Congress passed the American Recovery and Reinvestment Act and began allocating billions of dollars in aid across the nation, the so-called stimulus package gets a grade of “incomplete” on its key assignment: Putting a sickly economy back on the road to good health.

For education administrators, the scenario is too familiar. Any increase in funding is appreciated, but there always is a question of how long it will last, and inevitably it proves to be not enough to meet the ever-growing demands being placed on schools and universities.

Follow the money

The U.S. Education Department says the funding provided to schools and universities through the Recovery Act “played a significant role in stabilizing the nation's economy and in staving off a major fiscal crisis in 2009.”

The stimulus package allocated about $100 billion for education; about $69 billion of that was disbursed in 2009. The bulk of that went not to new programs or projects, but to replenish state coffers depleted by the economic downturn. The education department says more than $40 billion of the stimulus funding has been used to make up for state education shortfalls in fiscal 2009 and 2010.

Other large recipients of stimulus funds: $12 billion for Individuals with Disabilities Education Act programs; $10 billion for Title I programs; and $8.7 billion for student financial assistance.

Recovery Act funding “helped save or create an estimated 400,000 jobs, including 325,000 education jobs,” the education department says.

Some of the stimulus money is earmarked for programs designed to step up the drive toward education reform. The Race to the Top Fund has drawn the most attention, in part because its $4.35 billion represents the largest-ever amount of federal discretionary funding for education reform. States will compete for Race to the Top grants, and the education department will award them to proposals that offer reforms in four areas: adopting standards and assessments that prepare students to succeed in college and the workplace; building data systems that measure student growth and success, and inform teachers and principals about how they can improve instruction; recruiting, developing, rewarding and retaining effective teachers and principals; and turning around low-achieving schools.

Another incentive for pursuing education reforms is the Investing in Innovation Fund. The $650 million initiative has been established to support local efforts to start or expand research-based innovative programs that help close the achievement gap and improve outcomes for students.

The grants have three categories. Scale-up grants will focus on programs and practices with the potential to reach hundreds of thousands of students and that have strong evidence that they will have a significant effect on improving student achievement. Validation grants will go to programs that have good evidence of their impact and are ready to expand. Development grants will go to support new practices that need further study.

Reviving projects

No one can say with certainty how education institutions would have fared in the absence of the stimulus package, but it's not a stretch to say that the aid provided in the Recovery Act has enabled schools and universities to carry out projects and programs that would have been abandoned otherwise.

That is the case in the Maryville (Tenn.) district. For years, school officials had been working on plans to build an intermediate school for grades 4 to 6 to alleviate crowding in its elementary facilities. Work had begun on the construction site for Coulter Grove Intermediate School in fall 2008, but then the U.S. economy began its freefall.

The city of Maryville had planned to sell bonds to pay for the school construction, but in November 2008, city officials cancelled the financing plan after it determined it could not sell the bonds in such a poor climate.

The project was put on hold for the foreseeable future. Rather than abandon the project and the work already completed, Maryville decided to carry out a “mothball” plan to protect the grading, the completed building pad, utility installations and other site upgrades.

That's where the project stood until September 2009, when Maryville learned it would be able to use Qualified School Construction Bonds (QSCBs) to borrow the funds needed to build Coulter Grove. The Recovery Act authorized the federal government to issue $22 billion in QSCBs to subsidize school construction. The program provides tax credits to cover borrowing costs, so school systems can in effect sell their bonds and pay no interest.

Maryville applied to the state of Tennessee for authority to use the bonds. The state's School Bond Authority approved Maryville's request: initially the district received $20 million in bonding authority; subsequently it was reduced to $18.75 million because of the city's declining revenues.

With funding in place, district officials began the transition from mothball status to construction. Officials returned to the site in February to break ground again on Coulter Grove Intermediate. If the project stays on schedule, construction should be completed in October 2011.

In most cases, the effect of QSCBs is not as dramatic, but hundreds of school facility projects across the nation are moving forward at less cost because of the program, and in many states, districts have encountered strong competition for the bonds.

In California, $582 million in QSCBs was earmarked for the state's 11 largest districts; other districts could apply for a share of the remaining $700 million in bonds. The California Department of Education received more than 230 applications that had bond requests of more than $3.7 billion.

The state held a lottery to determine who would receive the funding and allocated the $700 million to 43 districts or county offices of education.

Another Recovery Act program available to higher-education institutions, as well as K-12 systems and other public facilities, is the Build America Bonds initiative. State or local government entities issue the bonds, and the federal government provides a subsidy amounting to about 35 percent of the interest costs.

In 2009, the University of Missouri system issued about $256 million in Build America Bonds to help pay for facility projects at the system's Columbia, Rolla, St. Louis and Kansas City campuses. Among the projects benefiting from the bonds: a $62 million power plant renovation in Columbia; construction of a $36.8 million student union in Kansas City; and renovation of a $13 million residence hall in Rolla.

The Build America Bonds program was scheduled to be available through the end of 2010, but the Obama administration has proposed making the program permanent.

Tapped out?

States have been able to make it to 2010 with the help of the stimulus funding. But the Recovery Act has provided funding for only two years, and as budget planners look at what's in store for education funding in 2011, the picture is grim.

They call it a “funding cliff,” and when the stimulus program reaches the end, schools and universities fear they will go over the edge and send their finances into precipitous declines.

Data from the National Education Association projects that in a worst-case scenario, states will come up $38.6 billion short of delivering the same amount of financial support for K-12 schools in fiscal 2011 as they did in 2008 or 2009. When higher-education funding is factored into the equation, the worst-case shortfall for 2011 exceeds $50 billion.

Guidelines from the U.S. Education Department from March 2009 warn states and school systems explicitly about the “funding cliff” and that the stimulus funds were short-term cash infusions.

“Depending on the program, these funds are available for only two to three years,” the department said. “These funds should be invested in ways that do not result in unsustainable continuing commitments after the funding expires.”

Unless the economy begins to recover more quickly or more funding is forthcoming from the federal government, schools and universities will be facing painful budget decisions for 2010-11.

Other sources for stimulus funds

Funding from agencies other than the U.S. Education Department is subsidizing facility projects on university campuses.

In January, the U.S. Commerce Department's National Institute of Standards and Technology awarded $123 million in grants to help pay for construction of science research facilities on 11 college campuses. Among the recipients:

  • The University of Pittsburgh was awarded $15 million to help build 13 state-of-the-art experimental physics laboratories in the Department of Physics and Astronomy.

  • Nova Southeastern University in Fort Lauderdale, Fla., was awarded $15 million to help pay for construction of the Center of Excellence for Coral Reef Ecosystem Science research facility.

  • The University of Maine is receiving $12.4 million to help pay for construction of the Advanced Nanocomposites in Renewable Energy Laboratory.

  • The University of Kansas in Lawrence was awarded $12.3 million to help pay for construction of the Measurement, Materials and Sustainable Environment Center, a 34,600-square-foot laboratory incorporating the latest in green technologies and research space for interdisciplinary engineering projects.

Kennedy, staff writer, can be reached at [email protected].

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Follow-up stimulus

Many members of Congress who feel the 2009 stimulus package hasn't done enough to jump-start the economy are supporting another federal injection of funds.

The House of Representatives approved the “Jobs for Main Street Act” in December 2009. In February, the Senate was considering a smaller jobs bill with less funding earmarked for education.

The House bill would create a $23 billion Education Jobs Fund that would go to school districts or public colleges and universities to support creating or preserving about 250,000 jobs over the next two years. It also includes $4.1 billion in federal grants to subsidize the cost of school construction, rehabilitation or repair.

The Senate bill would allocate $2.3 billion to expand the Build America Bonds program, which education institutions can use to subsidize interest costs for construction projects.

Education advocates urged Congress to provide help for schools.

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