Feds Urge States to Start Spending School Money

States are getting a reminder from the federal government: Make plans quickly to spend more than $2 billion in education money or be ready to lose it.

The Education Department (search) has found that all the states, the District of Columbia and eight territories have high cash balances left from 2002, including money meant for poor children, disabled students and limited-English learners.

That money must be obligated — not spent, but at least legally earmarked toward a specific expense — by Sept. 30, which is 27 months after it was released to states.

States then have two final years to spend the money. Ultimately, school money not committed or spent returns to the federal treasury, as happened with $155 million last year.

Todd Jones, a department budget official, acknowledged that the agency does not know how much of the 2002 money already has been obligated because states don't report that level of detail. Also, he said it would make sense if some of the dollars have not been committed, such as money for summer reading expenses that have yet to occur.

The department's move comes as an election-year fight grows over whether states and schools have enough money to do what's demanded of them under new federal law. House Republicans said Tuesday that states have $16.8 billion in unspent school money dating from the former Clinton administration, a figure that the Education Department confirmed but state school officials called misleading without context about how school financing (search) works.

GOP leaders are expanding an argument made this year by the department, the White House and congressional Republicans: that schools are flush with federal money. It's meant to counter the claim that President Bush, who championed a law demanding greater improvement in all schools, has not come close to keeping his promise to pay for changes the law demands.

"We've literally flooded the system with cash, and it's time to start focusing on improving student achievement instead," said Rep. John Boehner, R-Ohio, chairman of the House Education and the Workforce Committee.

The Education Department has issued letters to chief state school officers, reminding them of what appear to be substantial cash balances with just three months before the September deadline.

More than $2.1 billion is unspent from 2002, or about 8 percent of the money allocated for five broad areas, including special education and adult education. The department's letters to states identified only those cash balances that seemed particularly high.

The department issued its reminder, Jones said, to ensure that states don't miss their chances to use the money. It's part of a broader effort this year to help states account for all the federal money available and to draw it down more quickly.

"The states are telling us that they're not seeing this as a red flag at all," Jordan Cross, lobbyist for the Council of Chief State School Officers (search), said after leaders there reviewed the numbers with budget and top education executives from at least 10 states. "They expect, by September, that almost all of that money will be obligated."

Patty Sullivan, the council's deputy executive director, added: "To the department's credit, they gave us a heads-up on this. I don't think this is a `gotcha' activity. I think they really are trying to help."

Still, Sullivan said, the implication from the House education committee leadership that states "have a closet full of money" is misleading. School officials say there are several legitimate reasons why money is in the bank, from the government's own 27-month timeline for incurring expenses to federal delays in approving the programs that the money is meant for.

States have $16.8 billion in unspent school money, most of it from 2003, but $527 million from the final two budgets under Bill Clinton (search), according to the GOP-led education committee. The percentage of unspent money keeps growing yearly, and that's just as billions of 2004 dollars will be released this week, said committee spokesman Josh Holly.