Fiscal stabilization wild card

Can Kentucky spend $532 million on education without quite spending $532 million? The rules for the fiscal stabilization education dollars say each state must:

1. Keep state P-12 and postsecondary funding at the 2006 level in 2009, 2010, and 2011.
2. Use the first slice of the federal money to restore the 2008 level of state P-12 funding, or 2009 if that's higher. The distribution must use the state's main funding formula
   
3. Use the second slice to do the same thing for postesecondary education, again using the state's main formula.
   
4. Distribute what's left to P-12 districts using the Title 1 formula.

Steps 2, 3, and 4 are pretty rigid. Step 1 is where Kentucky leaders have choices to make.

The 2011 budget could drop state education funding down to the 2006 level, and use the stabilization dollars to pull us back up to 2009 levels. That would free some state dollars for something else.

The 2011 budget could also hold education funding steady and let the federal money take schools and universities to a new level of strength for a couple of years.

Naturally, there are options in between those extremes, and the 2010 budget, although it's already been adopted, could be revised along the same lines, especially if revenue stays below original projections in the coming months.

Key point: the net education impact of stabilization dollars won't be clear until we see state budget decisions for the next two fiscal years.

(Notes: All years above are fiscal years. The $532 million is 81.8% of the $651+ figure available here. The stabilization rules in the ARRA are here, with the requirement to spend 81.8% on education and the rules for distributing the dollars appearing in Sec. 14002(a)(2)(A) and (C), and the requirement to maintain 2006 funding being shown in Sec. 14005(d)(1)(A).)