THE BLOG
03/22/2010 05:12 am ET | Updated May 25, 2011

Is Competition Good For The Public Sector?

The Secretary of Education is probably not the most popular man among state legislators right now. His Race to the Top competitive grant program, included in the American Recovery and Reinvestment Act, has opened fault lines between teachers unions, education reformers, school district leaders, mayors, and state-level politicians throughout the country. The $4.35 billion fund promises grants to states that submit plans for innovation and reform in education, emphasizing standards and assessments, data, teacher effectiveness, and turning around poorly performing schools.

This type of competitive grant program encouraging reform is not unique. The Recovery Act included similar provisions that incentivized modernization of state unemployment insurance programs and that awarded transportation funds to state and local governments by merit rather than by formula.

Nor are competitive grants without controversy. Several Republican governors, including Bobby Jindal of Louisiana and Mark Sanford of South Carolina - initially pledged to reject the stimulus funds associated with unemployment insurance because the bill required states to expand eligibility for benefits in exchange for increased federal assistance. Texas Governor Rick Perry recently withdrew his state from the Race to the Top competition entirely (forfeiting a potential $700 million for which Texas was eligible) "in the interest of preserving our state sovereignty over matters concerning education," saying that it "smacks of a federal takeover of our public schools."

Meanwhile, in New York Governor David Paterson was receptive to the competition. So instead of being able to attack Governor Paterson's 5% cut to state education aid in the budget he released yesterday, state legislators in New York were being called "Knaves and Dwarves" who had said "The kids be damned" for failing to act on education reform legislation. Indeed, as the application deadline for the Race to the Top program neared on Tuesday, state leaders, Mayor Bloomberg, Governor Paterson, and teachers unions were warring over competing proposals for whether and how to increase a cap on the number of charter schools in New York, a move supporters believed would improve the state's chances in the competition. No matter the merits of the various plans, the application for the funds strained the always-fraught relationships among those interested in education reform.

At a time when states, cities, and school districts are already facing record budget shortfalls, it is reasonable to wonder whether the Education Secretary's desire to "shake things up" is just causing problems for beleaguered local politicians. Indeed, competitions among state and local governments for federal funds have in the past produced heated political debate that ends without reform, as happened when New York City sought federal funds for a congestion pricing initiative that would have charged cars for entry into Manhattan.

Yet, these competitive grant programs provide an opportunity for the federal government to set not only minimum standards for what states must be doing, but aspirational standards for what they should be doing. By setting the terms of debate, Washington can in fact neutralize tired arguments against reform and create a viable relationship between local priorities and national standards. For better or worse, the debate in New York was not about whether to increase the cap on charter schools, but how to increase it.

Race to the Top and programs like it will always be controversial in the criteria they use to judge winners and losers. Indeed, the creation of winners and losers among states and localities is itself a defect of such competitions. But criteria for federal dollars exist whether they are made explicit or merely persist as biases. Better to let Governor Perry be pilloried in the press for refusing the funds than to let him use them any way he pleases.