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I.  SUMMARY OF THE 2004 BUDGET

The time for excuse-making has come to an end. With the No Child Left Behind Act, we have committed the Nation to higher standards for every single public school. And we've committed the resources to help the students achieve those standards. We affirm the right of parents to have better information about the schools, and to make crucial decisions about their children's future. Accountability for results is no longer just a hope of parents. Accountability for results is the law of the land.

President George W. Bush
January 8, 2003

One year after President George W. Bush signed into law the No Child Left Behind Act of 2001 (NCLB Act), State officials, administrators, and teachers across the country are hard at work making changes designed to help ensure that by 2013-2014, every student who attends an American school will be proficient in reading and mathematics. This far-reaching, bipartisan reauthorization of the Elementary and Secondary Education Act (ESEA) is based on accountability for results, choice, proven educational methods, and flexibility and local control in Federal education programs.

In response to the NCLB Act, States are strengthening their accountability systems by setting tough annual progress objectives and expanding the assessments that will be used to measure that progress. School districts are emphasizing efforts to improve low-performing schools while providing new options for parents of students attending schools that do not improve, such as the opportunity to transfer to a better performing school or to use Federal funds to obtain supplemental educational services from the provider of their choice.

Schools are using assessment data to identify areas where instruction must be improved, and adopting proven educational practices to make the changes needed to raise student achievement. Parents are learning more than ever before about how well schools are educating their children from the State and local "report cards" required by the NCLB Act, and are using this information to demand improvement from their schools and options for their children.

President Bush and the Congress have provided significant resources to leverage the improved State and local accountability called for in the NCLB Act. In the first year of implementation, for example, ESEA funding jumped by more than $4.3 billion, or 24 percent, over the level provided for the final year of the old law. In addition, the new law included funding for activities, such as the new State Assessment Grants, that were essentially "unfunded mandates" under the old law. This reflected the President's commitment to provide more resources for education in exchange for stronger accountability for results and on condition that Federal funds be used to support proven educational methods. The President's 2004 budget for education reflects this continuing commitment by providing additional resources to help States, school districts, and schools implement the NCLB Act and improve educational opportunities for all students.

Consistent with the traditionally limited Federal role in the American system of education, this investment is focused squarely on meeting the needs of students from economically disadvantaged and minority backgrounds. These are students who have been left behind for too long, and President Bush has made meeting their educational needs at the K-12 level and beyond a cornerstone of his Administration.

Total Department of Education Appropriations
(in billions of dollars)

The President is requesting $53.1 billion in discretionary appropriations for the Department of Education in fiscal year 2004, an increase of $2.8 billion or 5.6 percent over the 2003 President's request. The 2004 request, together with the 2003 President's budget, builds on the substantial Federal investment in education over the past six years, with discretionary appropriations rising from $23 billion in fiscal year 1996 to $49.9 billion in fiscal year 2002, an increase of 117 percent.

Unfortunately, there is ample evidence that simply spending more money on education will not improve student achievement or close achievement gaps between poor and minority students and other students. For example, long-term trend data from the National Assessment of Educational Progress (NAEP) for 9-year-olds show that reading and math achievement has been nearly flat over the past decade. Results from the 2000 NAEP reading assessment confirmed that the reading skills of the Nation's 4th graders have remained unchanged for 8 years, with 37 percent of those tested scoring below Basic.

For this reason, President Bush has focused new education investments on programs with a demonstrated record of success in improving educational outcomes, or on programs that have been fundamentally reformed by the No Child Left Behind Act. The President also has targeted new resources to programs that help to close the achievement gaps that persist among racial, ethnic, and socioeconomic groups across the country.

The 2004 budget request for the Department of Education includes the following significant increases: $1 billion for Title I Grants to Local Educational Agencies, $1 billion for Special Education Grants to States, $1.9 billion for Pell Grants, $50 million for Reading First State Grants, and $25 million for a proposed Choice Incentive Fund.

These and other increases are offset in part by reductions that likewise reflect the President's priorities for the Department, including the elimination of categorical programs and low-priority activities in favor of funding through the flexible State grant programs created by the NCLB Act. In addition, the Department used findings from the government-wide Program Assessment Rating Tool, or PART, to redirect funds from ineffective programs to more effective activities, as well as to identify reforms to help address program weaknesses. Increases for 2004 also are offset in part by the completion of one-time projects.

In addition to the discretionary priorities described above, the request includes funding for mandatory programs, such as Vocational Rehabilitation State Grants and the student loan programs. Mandatory costs fluctuate from year to year due to changes in inflation, interest rates, and other factors. For 2004, new student loans provided under the Federal Family Education Loans and Federal Direct Loans programs will grow from $44.3 billion to $47.6 billion, an increase of $3.3 billion or 7.4 percent.

The Department's 2004 request is complemented by significant tax-related investments in education, such as a proposed refundable tax credit of 50 percent of the first $5,000 in tuition, fees and transportation costs incurred when parents transfer their child from a public school identified for improvement to another public or private school. The Administration also is proposing to expand from $250 to $400 the above-the-line deduction for qualified out-of-pocket classroom expenses incurred by teachers. Other existing tax-related benefits include education savings accounts (Coverdell IRAs) that permit up to $2,000 in annual contributions and tax-free withdrawals to pay educational expenses from kindergarten through college, tax-free withdrawals from qualified State tuition savings plans, up to $4,000 in above-the-line deductions for higher education expenses, and the HOPE and Lifetime Learning tax credits for postsecondary education tuition and fees.

The combination of discretionary and non-discretionary resources in the President's budget is focused on the following areas:

SUPPORTING STATE AND LOCAL IMPLEMENTATION OF THE NCLB ACT

In the year following the enactment of the NCLB Act, the Department of Education published comprehensive regulations and guidance to help States, school districts, and schools make the new law a reality in American classrooms. States and school districts began implementing the public school choice and supplemental educational services requirements during the 2002-2003 school year. Now the Department is working to help States develop accountability plans that meet the demanding requirements of the NCLB Act, with five States obtaining approval of their plans early in January 2003. As President Bush said on the first anniversary of signing the NCLB Act into law, "We can say that the work of reform is well begun." The 2004 budget request will help ensure that this work does not falter, but continues until "every public school in America is a place of high expectations and a place of achievement." The request includes the following:

• $12.4 billion for Title I Grants to Local Educational Agencies, an increase of $1 billion or 9 percent over the 2003 request, to give States and school districts additional resources to turn around low-performing schools, ensure that no child is trapped in such a school, and improve teacher quality. If enacted, the request would result in a $3.6 billion increase, or 41 percent, in Title I Grants to LEAs funding since the passage of the NCLB Act.

• $1.05 billion for Reading First State Grants, an increase of $50 million or 5 percent over the 2003 request, to expand the nationwide effort to support comprehensive reading instruction for children in grades K-3. The request would help school districts and schools provide professional development in reading instruction for teachers and administrators, adopt and use reading diagnostic assessments for students in kindergarten through third grade to determine where they need help, implement reading curricula that are based on recent findings of the 2000 National Reading Panel report, and provide reading interventions for young grade-school children reading below grade level.

• $100 million for Early Reading First, an increase of $25 million or 33 percent for the pre-school component of the Reading First initiative. This program funds competitive grants to develop and support the school readiness of preschool-aged children in high-poverty communities.

• $100 million for a new mentoring initiative that would support the development, expansion, and strengthening of exemplary school-based mentoring programs that meet the needs of at-risk middle school students. The initiative would partner with the USA Freedom Corps to encourage citizen service to help improve public education outcomes.

• $185 million for Research and Dissemination, an increase of $10 million that would build on the significant increase proposed for 2003 to expand efforts to develop proven, research-based practices for improving student achievement and disseminate those practices to States and school districts across the country. Research efforts would focus on improving teacher quality, reducing student behavior problems, and more effective math and reading instruction.

• $390 million for State Assessment Grants to help States develop and implement—by the 2005-2006 school year—the annual reading and math assessments in grades 3 through 8 that are integral to the strong State accountability systems required by the NCLB Act. This request is particularly important because the Title I requirement for States to develop and administer the new assessments is contingent on continued Federal financial support for this purpose.

• $665 million for English Language Acquisition to support flexible, performance-based formula grants to help ensure that limited English proficient (LEP) students learn English and meet the same high academic standards as all other students. The NCLB Act replaced a complex series of categorical grants to school districts and institutions of higher education with a flexible program that will enable States to design and implement statewide strategies, grounded in scientifically based research, for meeting the educational needs of LEP and immigrant students.

EXPANDING OPTIONS FOR PARENTS

A key achievement of the No Child Left Behind Act was to give the parents of students in low-performing schools the opportunity to transfer their children to a better-performing school. In fact, the Title I regulations require school districts to give parents a choice of more than one school, so that parents can exercise a real choice that best meets the educational needs of their children. However, in many school districts—particularly small rural districts but also in larger districts with many low-performing schools—there are too few options for parents seeking a quality education for their children. To help overcome this problem, the 2004 request includes the following proposals designed to ensure that parents have meaningful choices:

• A new refundable tax credit for parents transferring a child from a low-performing public school would allow a credit of 50 percent of the first $5,000 in tuition, fees, and transportation costs incurred when a student's regular school is identified for improvement and he or she transfers to another public or private school. Eligible students would be those who would normally attend a public school that did not make adequate yearly progress, as defined under the Elementary and Secondary Education Act, during the prior academic year.

• $75 million for a new Choice Incentive Fund that would provide competitive awards to States, school districts, and community-based nonprofit organizations to provide parents the opportunity to transfer their children to a higher-performing public, private, or charter school. A major objective would be to fund applicants proposing to provide large numbers of students with expanded choice opportunities.

• $25 million for Voluntary Public School Choice grants to give families better education options by encouraging States and school districts to establish or expand public school choice programs across a State or across districts. Grants would support planning, transportation, tuition transfer payments, and efforts to increase the capacity of schools to accept students exercising a choice option.

• $220 million for Charter Schools Grants, which would support approximately 1,820 new and existing charter schools. The $20 million increase would initiate a new Per-Pupil Facilities Aid program, which will provide funds to States to assist charter schools in obtaining facilities. Federal funds will match funds for State programs that make payments, on a per-pupil basis, to fund charter schools facilities.

• $100 million for the second year of the Credit Enhancement for Charter School Facilities program proposed for 2003, which would assist charter schools in acquiring, leasing, and renovating school facilities. A major obstacle to the creation of charter schools is their limited ability to obtain suitable academic facilities. This new program would support competitive grants to public and nonprofit entities to help charter schools finance their facilities through such means as providing loan guarantees, insuring debt, and other activities to encourage private lending.

INCREASING FLEXIBILITY AND REDUCING BUREAUCRACY

The NCLB Act provides unprecedented flexibility for States and local educational agencies (LEAs) to combine resources from selected State formula grant programs to pursue their own strategies for raising student achievement and ensuring that no child is left behind. For example, States and LEAs may transfer up to 50 percent of the funding they receive under four major formula grant programs to any one of the programs, or to Title I. The covered programs are Improving Teacher Quality State Grants, Educational Technology, Innovative Programs, and Safe and Drug-Free Schools and Communities. The new law also includes competitive flexibility demonstration programs that will permit up to 7 States and 150 LEAs to consolidate State formula grant funds in exchange for entering into performance agreements. Consolidated funds could be used for any educational purpose authorized under the ESEA. The President's 2004 budget funds the following programs that support this new flexibility:

• $2.85 billion for Improving Teacher Quality State Grants, which gives States and LEAs flexibility to select the research-based strategies that best meet their particular needs for improved teaching that will help them raise student achievement in the core academic subjects. In return for this flexibility, LEAs are required to demonstrate annual progress in ensuring that all teachers teaching in core academic subjects within the State are highly qualified.

• $700.5 million for Educational Technology State Grants to support State and local efforts, particularly in high-poverty districts, to improve student achievement through the effective integration of technology into classroom instruction. Funds may be used, for example, to train teachers to use technology, to develop courses in information technology, and to purchase technology-based curricula.

• $422 million for Safe and Drug-Free Schools and Communities State Grants, which fund a variety of activities to foster a safe and drug-free learning environment and support academic achievement.

• $385 million for State Grants for Innovative Programs, the successor to Title VI and the most flexible of the Department's State formula grant programs, to help States and school districts implement innovative strategies, including expanded school choice options, and other reforms to improve student achievement. Innovative Programs funds may be used by States, for example, to support charter schools or pay for urgent school renovations, as well as to augment funding available for supplemental educational services for students attending schools identified for improvement, corrective action, or restructuring under Title I.

SPECIAL EDUCATION AND VOCATIONAL REHABILITATION

President Bush has demonstrated a strong commitment to improving educational opportunities for children with disabilities, both by requesting significant annual increases for Special Education Grants to States and in his determination to apply the same rigorous accountability demanded by the NCLB Act to the upcoming reauthorization of the Individuals with Disabilities Education Act (IDEA). Drawing on the principles of the NCLB Act, as well as from the recommendations of his Commission on Excellence in Special Education, the President will work with Congress to make changes to IDEA designed to strengthen accountability and improve student outcomes, improve identification practices and promote early intervention, and reduce administrative and paperwork requirements.

The President also is committed to the wide-ranging reform of the Federal government 's overlapping training and employment programs proposed in the 2003 budget request. This multi-year reform effort targets resources to programs with documented effectiveness, and eliminates funding for ineffective, duplicative, or overlapping programs. The 2004 request assumes enactment of the proposed consolidation of three secondary vocational rehabilitation programs in this account (Supported Employment State Grants, Projects with Industry, and the Migrant and Seasonal Farmworkers program) within the Vocational Rehabilitation State Grants program.

The 2004 request for these activities includes the following:

• $9.5 billion for Special Education Grants to States, an increase of $1 billion or nearly 12 percent over the 2003 request, would provide an estimated $1,426 for each child with a disability. At the request level, the Federal contribution would equal about 19 percent of the national average per pupil expenditure for all children—the highest level of Federal support ever provided for children with disabilities. If enacted, the request would result in a $3.2 billion or 50 percent increase in Grants to States under President Bush.

• $2.7 billion for Vocational Rehabilitation State Grants would help State VR agencies increase the participation of individuals with disabilities in the labor force. The request is the estimated amount needed to satisfy the statutory requirement to increase funding for the program by at least the percentage change in the CPIU for the 12-month period completed in October 2002, assuming enactment of the fiscal year 2003 President's request.

VOCATIONAL AND ADULT EDUCATION

Decades of Federal investment in vocational and adult education programs have produced little in the way of measurable benefits either in improved vocational outcomes or significant improvement in reading and math skills that can lead to job placements. President Bush believes that the Nation can no longer afford, nor should tolerate the human costs of, educational investment that does not produce measurable results. For this reason, the Administration will be proposing fundamental changes to vocational and adult education programs during the upcoming reauthorization of both activities. For vocational education, this means a stronger emphasis on accountability and flexibility, while Federal resources for adult education will be targeted on educational approaches that have proven effective in increasing reading and math skills. The following requests will support the Administration's strategy in this area:

• $1 billion for a new Secondary and Technical Education State Grants program would create a coordinated high school and technical education improvement program in place of the current Vocational Education State Grants program. The new program would build on the NCLB Act by requiring States and LEAs to focus more intensively on improving student outcomes, such as academic achievement, and ensuring that students are being taught the necessary skills to make successful transitions from high school to college and college to the workforce. States would use formula allocations to make competitive grants to local educational agencies and community and technical colleges and carry out State-level activities. In addition, States would have the flexibility to transfer program funds to support education-related activities under the ESEA Title I Grants to Local Educational Agencies program.

• $584 million for Adult Basic and Literacy Education State Grants would support a stronger focus on building skills in basic reading, math, and English acquisition for adults who need to improve their literacy or who want to earn their high school diploma or its recognized equivalent (the GED). Proposed amendments to the Adult Education and Family Literacy Act would strengthen accountability, require State standards for adult literacy activities leading to high school-level proficiency, and train teachers in the use of research-validated instructional practices in reading, math and English fluency.

POSTSECONDARY EDUCATION

The Administration's 2004 request would expand overall student aid available for postsecondary education to more than $62 billion, an increase of $3.1 billion, or 5 percent, over the President's 2003 request. The number of recipients of grant, loan, and work-study assistance would grow by 386,000 to 9.2 million students and parents, reflecting both increased aid levels and growth in postsecondary enrollment, which is expected to jump some 20 percent between 1998 and 2010. The 2004 request includes the following proposals to help ensure equal access to quality postsecondary education opportunities for all Americans:

• A $1.9 billion increase for the Pell Grant program, for an all-time high total of $12.7 billion, to retire a shortfall related to the 2002-2003 award year while maintaining a $4,000 maximum award for over 4.8 million students.

• The request assumes that the significant surge in the Pell Grant applicant growth rate over the past few years will begin to level off in 2003-04 and return to levels consistently seen prior to 2001-02. However, if applicant growth rates remain at unusually high levels, projected Pell Grant program costs would significantly increase above the budget estimates.

• The request assumes Internal Revenue Service matching of student aid application income data with applicant tax data would reduce Pell Grant overawards and save an estimated $638 million in 2003 and 2004. These savings would significantly reduce existing funding shortfalls in the Pell Grant program.

• Raising to $17,500, up from $5,000, the amount of student loans that may be forgiven for highly qualified math, science, and special education teachers serving low-income communities. Schools in these communities often are forced to hire uncertified teachers or assign teachers who are teaching "out-of-field." This proposal would help these schools recruit and retain highly qualified math, science, and special education teachers.

• $385 million for the Aid for Institutional Development (HEA Title III) programs, an increase of $11 million, demonstrates the Administration's commitment to assisting institutions that enroll a large proportion of minority and disadvantaged students, including Historically Black Colleges and Universities and Historically Black Graduate Institutions, in order to continue efforts to close achievement and attainment gaps between minority students and other students.

• $94 million for Developing Hispanic-serving Institutions, an increase of $4.5 million, would expand and enhance support to postsecondary education institutions that serve large percentages of Hispanic students. This program is part of the Department efforts to increase academic achievement, high school graduation, postsecondary participation, and life-long learning among Hispanic Americans.

• $102.5 million for the International Education and Foreign Language Studies (IEFLS) programs to help meet the Nation's security and economic needs through the development of expertise in foreign languages and area and international studies. The increased complexity of the post-Cold War world and the events surrounding the September 11 terrorist attacks on the United States underscore the importance of maintaining and expanding American understanding of other peoples and their languages.

• $802.5 million for the Federal TRIO Programs and $285 million for Gaining Early Awareness and Readiness for Undergraduate Programs (GEAR UP), which provide educational outreach and support services to help more than 2.2 million disadvantaged students to enter and complete college.

DEPARTMENT MANAGEMENT

The Department continues to implement its Blueprint for Management Excellence, a long-term action plan for improving Department management that incorporates key features of the President's Management Agenda. The Blueprint sets priorities for management improvement designed to facilitate effective monitoring of Department programs, eliminate financial management deficiencies, and prevent fraud, waste, and abuse of taxpayer dollars. These priorities include (1) developing and maintaining financial integrity and tighter internal controls; (2) modernizing and reducing the high-risk status of the student financial assistance programs; (3) improving management of human capital; (4) managing information technology to meet customer needs; and (5) establishing an "accountability for results" culture within the Department.

The 2004 budget for salaries and expenses would support the following management improvements:

• Continued implementation of the Department's One-ED project, which will apply a Strategic Investment Process to all Department functions to produce an integrated 5-year human capital, strategic-sourcing, and restructuring plan. One-ED is critical to Department efforts to fulfill the President's Management Agenda by making the best possible use of available resources.

• A new Performance-Based Data Management Initiative, launched in 2003, will focus elementary and secondary education program management and reporting on student achievement. The initiative will support internet-based collection of timely data on student achievement and educational outcomes, reduction of existing reporting burdens on States and school districts, and expansion of the use of educational results to identify performance trends and inform management, budget, and policy decisions.

• Ongoing modernization of student aid systems aimed at developing an integrated, user-friendly system that ensures financial integrity while allowing simplified access by students, schools, lenders, and guaranty agencies. Key activities in 2004 will include streamlining application, processing, origination, and disbursement processes to improve customer satisfaction and reduce costs; updating "web portals" used by the Department's customers to access student aid information and conduct business; and improving the integration of Department technology-based systems.

• A government-wide assessment, coordinated by the Department's Inspector General, of the quality of audits conducted under the Single Audit Act. The assessment will determine whether the Department and other agencies can rely on single audits to support Federal program expenditures and identify erroneous payments.

Elementary and Secondary Education

For further information contact the ED Budget Service.

This page last modified—September 15, 2006 (jer).