Budget crisis forces states to spend creatively: Duncan

Reuters News
Posted: Mar 21, 2011 2:52 PM
Budget crisis forces states to spend creatively: Duncan

WASHINGTON (Reuters) - With some states taking a budget-cutting ax to public school funding, the U.S. education department on Thursday offered some guidance on finding and spending federal money flexibly -- but did not attach any dollars to the advice.

"In these challenging financial times -- what I call 'The New Normal' -- governments at every level face a critical need to cut spending where we can in order to invest where we must," Education Secretary Arne Duncan wrote to U.S. governors while offering "some options on the effective, efficient, and responsible use of resources in tight budget times."

The $821 billion economic stimulus plan passed in 2009 included the largest transfer of federal funds to states in U.S. history, with much of the money targeted toward healthcare and education.

The plan runs out this year and the states, which are only seeing a modest uptick in revenue as they still struggle with the fallout of the recession, are looking for places to cut to keep their budgets balanced.

One possible area is education. In order to receive stimulus funds, states had to maintain spending levels on education. Once the funds run out, they will be free to cut.

Duncan would like schools to avoid reducing the number of days when classes are in session, or the hours when students attend school, he told a conference call with reporters.

He was adamant newer teachers not be laid off simply because they were the last hired, a practice employed in many fields to cut payroll spending.

Instead, in his letter Duncan highlighted how states can combine funds from different federal programs and suggested "there are right ways and wrong ways to cut spending, and the most important guiding principle I can offer is to minimize the negative impact on students."

As the federal government seeks to slash its projected $1.6 trillion deficit and its debt, both Congress and President Barack Obama are working to pull back on spending.

That leaves the administration hamstrung in offering help to states that currently face a $175 billion total shortfall, a gap large enough that many economists have warned will drag on national economic growth.

In recent days Obama has issued guidance on how to maximize available federal funds and reassured states he will give them flexibility in spending on healthcare.

Meanwhile, Congress has yet to take up a new version of the sweeping bill authorizing education spending, known as No Child Left Behind, which has expired.

Duncan added that he spoke to Wisconsin Governor Scott Walker in the last few weeks about the controversy in the state over rescinding public workers' rights to join unions and collectively bargain their contracts.

"Collective bargaining can be a tool for reform, and a tool for student achievement," Duncan told reporters. "What I can't support is when those collective bargaining rights are stripped."

(Reporting by Lisa Lambert)