Explanation of the State Fiscal Stabilization Fund
The American Recovery and Reinvestment Act of 2009 (ARRA) provides $53.6 billion for a State Fiscal Stabilization Fund. Out of this, the secretary of education must reserve $5 billion for "State Incentive Grants" and an Innovation Fund, leaving a total of $48.3 billion for grants to states.
Of this $48.3 billion, states must use 81.8 percent of their allocation to support elementary, secondary, and postsecondary education, and, as applicable, early childhood education. Within each state, the governor must distribute the money through existing funding formulas but first must use it to restore state K-12 funding to FY08 (or FY09) levels, whichever was higher.
Of the remaining 18.2 percent, the money is to be used for "public safety and other government services," which may include assistance for K-12 education or for the renovation and repair of public school facilities, but not new building construction.
At the district level, there are specific provisions related to the use of education funds, which can be used for
- Activities authorized under the ESEA, IDEA, the Adult and Family Literacy Act, or the Carl. D. Perkins Career and Technical Education Act (Perkins Act).
- The modernization and repair of school facilities, including renovations for green building systems.
To receive State Fiscal Stabilization Funds, states must stipulate if the money will be used to meet maintenance of effort requirements under the Elementary and Secondary Education Act (ESEA) and/or the Individuals with Disabilities Education Act (IDEA). In addition, states must meet several other requirements, including
- Maintenance of effort: Must maintain support for K-12 education and for public institutions of higher education at least at the level of support provided in FY2006.
- Achieving equity in teacher distribution: Must provide an assurance related to the equitable distribution of highly qualified teachers between high- and low-poverty schools.
- Improving collection and use of data: Must establish a longitudinal data system as described in the America COMPETES Act.
- Standards and assessments: Must enhance the quality of its state assessments, comply with requirements in the ESEA and IDEA related to the inclusion of children with disabilities and limited English proficient students in state assessments, and improve state academic content standards and student academic achievement standards consistent with the America COMPETES Act (i.e., 21st century skill standards).
- Supporting struggling schools: Must comply with NCLB school restructuring and corrective action mandates.
State Incentive Grants and Innovation Fund
The secretary is required to reserve $5 billion for Incentive Grants to states that have made "significant progress" in meeting the last four requirements listed above.
Also, the secretary, at his discretion, can use $650 million for an Innovation Fund to provide academic achievement awards to local education agencies (LEAs) or partnerships between a nonprofit organization and one or more LEAs or a consortium of schools that have
- Significantly "closed" the achievement gaps among students.
- Exceeded the state's annual measurable objectives for two or more consecutive years or demonstrated success in "significantly" increasing student achievement based on another measure.
- Made "significant improvement" in other areas (e.g., graduation rates, recruitment of high-quality teachers) that can be demonstrated with "meaningful" data.
- Demonstrated that they have established partnerships with the private sector and that the private sector is contributing matching funds to help bring "results to scale."