Race to the Top – Just Another Case of Winner Take All?

Race To The Top (RTTT), an Obama administration funding initiative aimed at encouraging states to implement certain K-12 education reforms and implement innovations, has drawn some serious criticism on several fronts. Some of the complaints are related to the types of education policies that are favored, specifically promotion of charter schools and the closely related confrontation with teachers’ labor unions. These include:

1. Pre-occupation with advancing the growth of charter schools
2. Over reliance on school closure as a solution for failing schools
3. Intensification of the least attractive aspects of No Child Left Behind (NCLB)- the Bush administration education reform program

• over reliance on standardized test scores
• inadequate funds for the solutions prescribed

My attention focuses on faults found with the non-education aspects of the program: the rules of the funding competition itself.  An artfully diplomatic, yet selectively harsh critique with a long title has been issued by a coalition of civil rights organizations (Framework for Providing All Students an Opportunity to Learn through Reauthorization of the Elementary and Secondary Education Act: Lawyers Committee for Civil Rights under Law, National Association for the Advancement of Colored People (NAACP), NAACP Legal Defense and Educational Fund, Inc., National Council for Educating Black Children, National Urban League, Rainbow PUSH Coalition, Schott Foundation for Public Education). They point out that selection of grant winners using competitive grants rather than “conditional incentive grants’ ensures that there will be “loser” states as well as winners. Further, students are doubly punished if they live in states that “do not have the capacity or because they lack the political will” [to apply].

One question that immediately comes to mind: Are the states that have applied expending as much political capital on educational equity in their own state or are they in it for the money? In other words, if you are in a disadvantaged community, are you that much better off by being in an applying state over one that didn’t apply? Observers may want to examine the track record of the states that are front runners in the race. When it comes to dealing with those same constituents is your state very fair?

Another objection focuses specifically on the process of picking the contest winners. How are the winners selected from the pool of applicants? The Economic Policy Institute (EPI) published a report, Let’s do the Numbers, which details, in their opinion, the “arbitrary and unfair” Department of Education rubric used to assign scores to state applications. The report basically claims that the scheme gives the impression of clinical objectivity with its reliance on lots of numbers: a possible case of precision parading as accuracy.

First, to be fair, RTTT is part of an experiment and not a general education funding program. The RTTT fund  was carved out of the State Fiscal Stabilization Fund within the American Recovery and Reinvestment Act of 2009 (ARRA). As such it is a one- time appropriation. The rest of the Stabilization fund (about $50 billion) is distributed on a formula basis is intended to help states avoid drastic reductions in operations.

Unlike NCLB, RTTT is not a re-authorization of The Elementary and Secondary Education Act (ESEA), part of President Johnson’s Great Society aimed at solving educational needs of low income minority communities. It was originally passed in 1965 and has been re-authorized every five years since 1970.  

Using a competition to fund experimentation is different from using it as a basis for continuous funding of operations. The administration is fairly clear that it is using the RTTT fund to get states to make reforms and experimentation in a particular direction, and not to fund operations or major “turnarounds”

However, both the Framework and the EPI criticisms of competitive grants in general and their questionable selection criteria in particular focus a useful light on the problems that occur when a politically disadvantaged community has to rely on their state capital to compete on their behalf to participate in federal programs. Regardless of whether the state allocation is based on a competition or a formula, the local jurisdiction is dependent on the state to award “their fair share” and for the state to administer the funds effectively.

The increasing use of competitions to allocate federal funds is troubling for all the reasons already mentioned, but the formula grant alternative has many of the same flaws. The formulas that determine what share each state gets, or in some cases what share in turn goes to the local agency, have the aura of mathematical objectivity, but were developed in a political environment, sometimes without a lot of analytic justification. Then again, the proceeds that go to the state may be formula driven, but further distribution to local agency might be a different, possibly more politically risky arena for those seeking funds.

But this lack of equity that shows up in government domestic spending is not the exception, but the rule. How do federally and state funds get divided up among counties, cities, towns and school districts? Even the mass media hints at how famously complex the U.S. tax code is. Tax filers get a tiny window into the easiest tip of that iceberg around April 15. But government spending is the domain of specialists. Few elected officials and almost no journalists have a working knowledge.
Any funding system should be assessed in terms of efficiency (how much of the allocated funds deliver actual benefits to the intended recipients?), effectiveness (how much of the problem got solved?) and equity (do all members among the potential beneficiaries have a reasonably equal chance of access?). From the perspective of the city or county, the diversion from population-based federal revenue sharing to block grants, particularly competitive block grants, introduces the state as a complicating factor. We now had three parties, each wanting to reduce their own administrative costs while achieving program effectiveness,
a. The federal agency wants to reduce the cost of selecting recipients, while achieving a high rate of project completions. Equity and targeting the neediest candidate may become secondary.
b. States have similar objectives to the federal grantor plus having to deal with compliance with federal regulations.
c. From the city or county or school district perspective, the federal agency and the state achieve their goals by off loading certain transaction costs to them. For example, the state may attempt to reduce its cost of searching for deserving counties by requiring elaborate grant applications. The state gathers valuable information contained in the application, but the higher costs may eliminate certain jurisdictions from the competition. Financially stressed towns don’t have the idle resources to attend the grant preparation meetings, gather the data, write, deliver and follow up on the submitted application, especially when highly competitive translates into a low probability of winning. Even if the application is successful, the winner needs the resources to monitor projects, file status reports, and manage the incremental funding procedures. Since many grants don’t fully cover administrative costs, the winning city can actually lose money from their general funds on the deal. Some state agencies will know these circumstances and disfavor less well off cities in awarding the grants to reduce the rate of project incompletion. As a result, some of the jurisdictions that need the grant funding the most are least likely to get it. From the city or county’s viewpoint, the grant is neither efficient nor equitable. Only the cities and counties rich enough to absorb the transaction costs of entering the grant “lottery” and execute the project are likely to receive grants.
Complexity comes not just in the application for funds. The grants are spread across dozens of programs, sponsored by different departments with different application cycles and funding timelines. The major projects that we normally associate with public investments - roads, bridges, subsidized low income housing, cultural or educational enhancement programs - are multi-year projects, not just in their construction and execution but in planning, assembling finances and political support. Additionally, because the funding systems are so fragment among scores of programs, they are typically funded from several sources, sometimes private as well as public. The project may also require approval and cooperation at several levels of government and are typically run on budgets with little room for miscalculations involving costs or revenue. As a result, they are vulnerable to collapse from many sources.
One simple example, in the case of low income housing, there are more “points of failure” than other types of plans. There are few opportunities for renegotiation with partners if major variables change. For example, unlike for-profit real estate, the possibility of changing rent fee schedules is not available. That’s partly why so many projects get introduced and publicized, but never get finished.
Small temporary grant programs are easier to get through legislatures than big comprehensive ones and they look good on lawmakers’ resume. That’s why there are so many.

The lawmakers, bureaucrat specialists pretend that the complexity is a virtue suggesting that technical fussiness is a pre-requisite to fairness, but it functions just as much as a screen covering an often very unfair game. Think of it as “Three Card Monty” with your tax dollars. And guess what? We never get to deal.