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higher education in the United States. As the economy slowed in 2008, State
revenues declined, putting pressure on education budgets.
The Recovery Act dramatically increased funding for education
through Title I grants to local education agencies (LEAs), School
Improvement Grants, and grants for special education. In addition, the Act
increased student aid and support for post-secondary institutions to invest
in new buildings and research in innovative health and energy technologies.
In response to these grants, recipients reported that more than 800,000
education job-years were saved or created, keeping teachers, principals,
librarians, and counselors as well as university faculty and staff on the job.
States also reported that they used State Fiscal Stabilization Funds
from the Recovery Act to restore sizable shares of K-12 education funding.
For example, the Recovery Act restored 9 percent of K-12 education funding
in California, Indiana, Alabama and Oregon; 12 percent of such funding in
Florida, Wisconsin and South Carolina; and 23 percent of K-12 education
funding in Illinois in fiscal year 2009. In at least 31 states, Recovery Act funds
prevented or lessened tuition increases at public universities, including
universities in Massachusetts, Minnesota, and Virginia. Without this influx
of State Fiscal Stabilization Funds, these states would have endured drastic
cuts in education funding.
The Recovery Act launched the innovative Race to the Top Program
with $4.35 billion. Race to the Top is a competitive grant program designed
to encourage and reward States to implement critical reforms designed to
help close the achievement gap and improve student outcomes, including
better student assessments; better data systems to provide teachers and
parents with information about student progress; new steps to develop and
support effective teachers; and efforts to turn around low-achieving schools.
Encouraged by the incentives included in Race to the Top, states across the
country chose to adopt more rigorous academic standards aligned to higher
expectations for college and career readiness. To date, 19 states, representing
45 percent of all K-12 students, have received Race to the Top funds; and to
compete for funds, 34 states modified state education laws and policies in
ways known to improve education.
The Recovery Act also expanded the Pell Grant program, raising
the maximum grant from $4,731 to $5,550, and it created the American
Opportunity Tax Credit to modify and replace the Hope higher education
credit (this policy was later extended by the Tax Relief, Unemployment
Insurance Reauthorization and Job Creation Act of 2010 and the American
Taxpayer Relief Act of 2012). The passage of the Health Care and Education
Reconciliation Act of 2010 enabled further expansion of the Pell Grant
award. Together, these efforts to expand higher education opportunity
The Economic Impact of the American Recovery and Reinvestment Act Five Years Later | 127