Hearing of the Labor, Health And Human Services, Education, and Related Agencies Subcommittee Of The Senate Appropriations Committee - Fiscal Year 2010 Budget Request For The Department Of Education

Statement

Chaired By: Senator Tom Harkin (D-IA)

Witnesses: Arne Duncan, Secretary, Department Of Education

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SEN. HARKIN: Education Appropriations Subcommittee will come to order. I want to start by welcoming Secretary Duncan. I was honored to chair the confirmation hearing on the other committee on which I sit. But this is his first appearance before this subcommittee.

So today, Mr. Secretary, we get to talk about money this morning. That's what this committee talks about, money, our taxpayers' money.

Every year when Congress considers the President's budget, you hear people say it's a critical moment in the nation's history. In hindsight, some of those moments were probably more important than others, but I would submit when it comes to education, this is truly one of those historic moments.

The Recovery Act will add almost $100 billion to the nation's education system, the largest one-time investment of education funds in our history. That's on top of the more than $60 billion in the regular 2009 bill. There's never been this much federal funding in the nation's schools before in our history. So we in Congress, and especially on this committee and the Education Department, have a special responsibility to make sure the money's used wisely.

Funding of this scale brings enormous opportunities, both to help pull our economy out of the recession and to encourage new innovations in the way we education our students. But if we're not careful, the money can also be squandered. Therefore, we'll spend part of today's hearing talking about the implementation of the Recovery Act so far and what the Department plans to do with the rest of the money in the months ahead.

We'll also consider the President's request for the fiscal year 2010 budget. I think there's much to admire in his proposal. I am especially pleased by his plan to end entitlements for financial institutions that process federal student loans and switch to direct lending instead. This plan will save billions of dollars a year that can be reinvested to help poor and middle income students get a college education.

The President's budget also puts real money behind the effort to improve our nation's high schools. And at the other end of the education spectrum, the budget request makes a strong investment in early learning. One area that is not addressed in the President's budget is school repair, renovations repair and construction.

The last minute decision to remove funding designated for that purpose in the Recovery Act was, in my opinion, a grave mistake. This money would have created jobs, met a pressing educational need, and avoided long out year funding commitments. But even though the funding was pulled from the Recovery Act, the need for better school facilities grows with each passing day. I recently introduced the School Building Fairness Act of 2009, and I intend to include money for this purpose in the regular fiscal year 2010 appropriations bill.

So Mr. Secretary, I look forward to hearing your testimony about the President's budget, also the Recovery Act and other items that will come up here. But first I would yield to Senator Cochran for an opening statement.

SEN. THAD COCHRAN (R-MS): Mr. Chairman, thank you. I'm pleased to join you in welcoming this distinguished secretary to our committee to review the budget for the next fiscal year. We appreciate your cooperation with the committee and look forward to working with you through the year as we proceed with our deliberations on the budget request the President has submitted.

I ask unanimous consent, Mr. Chairman, that the balance of my remarks be printed in the record.

SEN. HARKIN: Without objection, so ordered. Thank you, Senator Cochran.

Senator Murray.

SEN. PATTY MURRAY (D-MA): Thank you very much, Mr. Chairman, Senator Cochran. Thank you so much for having this hearing.

Secretary Duncan, welcome. I am looking forward to hearing you talk today about the budget request and a wide range of education challenges that you are addressing, both opportunities and priorities. These are issues that I have been focused on for a very long time, both as an educator and a member of this committee.

So I was very pleased to see that you and the President are preparing to tackle, or more appropriately, put a full court press on a lot of the large issues facing us in education today. The budget takes some exciting steps forward. I was very happy to see the College Access and Completion Fund that will help our students enter and succeed in college. I think that's a promising idea. I look forward to hearing more about that. That's been a long time issue of mine, especially for disadvantaged students. And Washington State has some innovative work in this area, so I'm looking forward to hearing some comments on that.

I'm also very encouraged by the President's goal that every student will complete at least one year of post secondary education. I share that goal, and as a long time advocate for job training and education programs, it's great to have a strong partner in the White House on that. I discussed with you earlier by bill promoting innovations to 21st century careers, and looking forward to your work on that area as well.

Pleased that your budget proposal has some significant increase -- Pell Grants, Teacher Quality State Grants, School Leadership Program for Principles, literacy efforts. Those are all very important in our work today. This is a very ambitious education agenda, and it comes at a very difficult time. Every weekend I go home and I see more headlines about teachers being laid off and challenges in our education system. I can tell you that teachers in my home state and across the country are not only worried about their own job security, but the impact on their students, and so a lot of our states are facing some very tough times. So our work on the Recovery package to support our schools was very important, and I look forward to what you have to say about that as well today.

And Mr. Chairman, just as a note of personal privilege, I want to just mention that I've got some students here from one of our high schools in Washington State, Met Odail (ph). If you guys could just stand up -- they are here all the way across the country, and I just remind all of us this is what we're talking about today, so thank you for being here.

SEN. HARKIN: Yeah, we welcome you here. Where'd you say they were from? What?

SEN. MURRAY: Met Odail (ph) High School in my home state.

SEN. HARKIN: Oh. Welcome here to Washington. Thank you very much, Senator Murray.

Senator Reed.

SEN. JACK REED (D-RI): Mr. Chairman, I simply want to welcome the secretary and also underscore what Senator Murray said about the Access and Completion Incentive Fund. Much of that was built on work, a leap and gap that we did last year, and I look forward to the secretary's comments about how he's going to use his leap and gap provisions to help bolster this particular fund.

Thank you, Mr. Chairman.

SEN. HARKIN: Senator Reed -- Senator Landrieu.

SEN. MARY LANDRIEU (D-LA): Thank you, Mr. Secretary, and just briefly I want to thank you for you early visit right after your confirmation to New Orleans, to the continued effort to rebuild our school system, not just in the city, but in the region, and most excitingly, Mr. Chairman, to build a brand new school system that's based in large measure on some of the work that's been done in this committee and our full Appropriations Committee, but now being led by Secretary Duncan and President Obama.

And I just want to comment that some of the same principles about rebuilding a new, revitalized public school system -- we can take from that and give options and opportunities for the rest of the country, particularly, Mr. Chairman, the focus on expanding our commitment to quality charter schools, which are independent public schools to some degree that are showing extraordinary promise across the country.

And I want to thank the secretary for his leadership and just say that this budget is not only a commitment to bold reform, but I'm also excited about your commitment to funding and the President's commitment -- that bold reform, because that didn't happen in the last Administration. And I'm very excited that the commitment to funding and the commitment to excellence have been put together, and under your extraordinary leadership, I think we can get it accomplished.

Thank you.

SEN. HARKIN: Thank you, Senator Landrieu.

Again, Secretary Duncan, welcome to the committee. Your statement will be made apart of the record in its entirety, and please proceed as you so desire.

MR. DUNCAN: Thank you, Mr. Chairman, for your leadership, and I've gotten the chance to spend time with many of the committee members, and I haven't seen more passion and commitment to education anywhere, so I feel very excited to have the opportunity to work with you and try and do something dramatically better collaboratively for the children of our country.

Thank you so much for the opportunity to be here today to talk with you about President Obama's fiscal 2010 budget request.

SEN. HARKIN: Mr. Secretary, is your mike on? Or if it is, could you pull it in just a little bit closer?

MR. DUNCAN: Yes. This budget makes important choices to continue and expand programs that will support our children from cradle to career. It provides the resources necessary to expand access to high quality early childhood programs, to ensure that our K to 12 schools are preparing their students for success in college and the workplace, and to provide college students with the money they need to pay for college and the assurance that the federal government will be there to help them.

Together, all of these policies will help our country reach the President's ambitious goal that by 2020 the United States will once again have the largest proportion of college graduates in the world. I'm extremely grateful for the work you have already done to help our nation's schools, and I look forward to working with you in the future.

As you know, in the American Recovery and Reinvestment Act you provided $100 billion to schools and to students. The law provides a great, great start in addressing the needs at every point along the cradle to career spectrum. Thanks to your support, we were able to stave off an education catastrophe and save a generation of children.

As you know, the ERA had two goals in education; to create and preserve jobs and to promote school reforms. Even though the U.S. Department of Education hasn't yet distributed all of the money in the stimulus, we are seeing signs that we are meeting the goal of preserving the jobs of teachers and other educators. We are collecting data on the number of jobs preserved, but we can point to several districts where the stimulus funding has made a significant difference.

Because of ERA, the Los Angeles Unified School District averted almost 3,800 layoffs. In New York City, that number if 14,000 layoffs averted. 139 teachers kept their jobs in Seminole County, Florida, and in Boston Teacher Union leaders say the stimulus money ensures that the city won't lay off any teachers. Alabama's state superintendant has said the stimulus money will help avert all layoffs in his state as well.

I'm confident that in just about all of our 14,000 districts around the country stimulus money will be used to preserve jobs that otherwise would've been lost, or to create jobs that they never would have been able to add if they didn't receive money from the ERA.

Before the stimulus, we were heading for an education disaster. With it, we have largely avoided that catastrophe and now must also work to continue to improve student achievement. I'm convinced we have to education our way to a better economy.

Through ERA, states are promising to make commitments on policies that we consider to be essential for reform. They will improve the effectiveness of teachers and work to make sure the best teachers are in the schools that need them the most. They will improve the quality of their academic standards so that they will lead students down a path that truly prepares them for college, the workforce, and global competitiveness.

These standards needs to be aligned with strong assessments. I'm particularly concerned that these assessments accurately measure the achievement of English language learners and students with disabilities. Under the third assurance, states will commit to fixing their lowest performing schools.

Finally, they will build or enhance data systems that track student performance from one year to the next, from one school to another, so that those students and their parents know when they are making progress and when they need extra help. This information must also be put in the hands of educators so they can use it to improve instruction.

Another key ingredient of reform is to add more time for instruction. I grew up in my mother's after school program in Chicago, so I know firsthand the importance of after school and summer programs. That is why we are asking districts to consider using Recovery Act funding as well as Title 1 funding to extend the school day and the school year. In places like Cincinnati, we are already seeing such innovation taking place. Cincinnati's adding what they're calling a fifth quarter where students are going to spend an extra month in school this summer.

This is also a key component of our school turnaround strategy, because we know kids who are struggling absolutely need more time in order to catch up. Through ERA, we'll be rewarding states, districts, and nonprofit leaders that are dedicating themselves to moving forward in each of these areas of reform.

The $4.35 billion Race to the Top Fund will reward states that are making commitments to reforms so they can push forward and provide an example for the rest of the country to follow. The $650 million What Works and Innovation Fund will provides grants to districts and nonprofits to scale up successful programs and evaluate promising practices. My department expects to issue invitations for applications this summer and start awarding grants in the late fall.

With ERA as a foundation, we have submitted a fiscal year 2010 budget that will build on the Recovery Act and advance all of the President's priorities. Overall, President Obama is asking for $46.7 billion in discretionary funding for the Department, an increase of $1.3 billion over the comparable 2009 level.

I want to highlight our requests in several important areas; early childhood education, improving the pay and professional development of teachers, turning around low performing schools, and assuring that college students have the financial aid and student loans they need not just to enter college, but to complete. And again, the goal is not just access. It's attainment.

In K to 12 education, we are requesting two important investments in the key priorities identified under the stimulus; improving the quality of our teachers and turning around low performing schools. In other countries, the top third of college graduates enter the teaching force. Unfortunately, too often here in the United States our best college graduates choose other professions. We need to change the way we promote and compensate teachers so that we can attract the best and brightest into the profession by rewarding excellence and providing supports that enable success.

As for turning around low performing schools, we know that too many of our schools are actually letting our children down. In too many places achievement is low and not improving. For example, in approximately 2,000 high schools, 60 percent of the entering freshman class will drop out by the time they're supposed to be seniors. That collective loss of human potential and the long-term negative impact on our economy are both staggering.

Onto ERA, we have asked states to identify the bottom five percent of their schools. In our FY 2010 budget request, we want to give them the resources to fix them with a strong focus on dropout prevention and these so-called dropout factories. And just to pause for a moment, our dropout rate for our country -- for the nation is approximately 30 percent, so it's a problem that plagues every community, urban, rural, suburban. Recently, the Alliance for Excellent Education came out with a study that the cost for the economy for the dropouts form the class of 2008 had they graduated and they not dropped out -- that would've added an additional $319 billion in income over their lifetimes.

And if we don't do something about this dropout crisis, over the next decade the loss to our country will be $3 trillion. So the economic impact beyond the loss of human potential is something we absolutely have to come to grips with.

Our budget includes $1.5 billion for the Title 1 School Improvement Program. That's almost a billion dollar increase over last year. When that amount is added to the $3 billion the program received in ERA and the $545 million in fiscal 2009, we'll have more than $5 billion to help turn around low performing schools.

I am talking about dramatic changes here. I will not be investing in the status quo or in changes around the margins. I want states and districts to take bold actions that will lead directly to improvement of student learning. I want superintendents to be aggressive in taking the difficult step of shutting down a failing school and replacing it with one they know will work.

To improve both the quality of teachers and the critically important support they receive, we are requesting $517 million for the Teacher Incentive Fund, including $30 million for a national teacher recruitment campaign. This program is designed to improve the quality of the teaching workforce using innovative professional development and compensation systems as the core strategy. I want to be clear that I want the grants awarded under this program to be a cooperative effort between districts and teachers. The President has often said that he believes changes to the teaching profession should be made by working with teachers, not by doing things to teachers. The chance for real collaboration here is remarkable.

Chicago is one of the first 34 projects to receive a grant from this program. Like many others, we work closely with our teachers to create the program. In fact, a team of our best teachers actually gave the program shape and chose the design framework that became our foundation. Together, we created a program which emphasized the improving professional practices of teachers, identify what it takes to make teachers better, and rewarded those who improved.

One important change that we are requesting to the Teacher Incentive Fund would allow districts to reward all the employees of a school for helping that school and rewarding that school for improving student achievement. Students excel and thrive when all adults in the school work together. Te janitors, the custodians, the cafeteria workers, the security guards also need to be rewarded when the students in their school succeed. I've seen throughout my life that when every adult in a school building collaborates to create a culture of high expectations, magic happens for children.

In addition, we are seeking $370 million for the Striving Readers Program. The program now works to improve the literacy skills of adolescent students who are reading below grade level. We will dedicate $70.4 million for that purpose, almost double the amount in the fiscal year 2009 budget. With the remaining $300 million, we will create a competitive grant program to support districts that create comprehensive and coherent programs that address the needs of our young readers.

These programs ensure students learn all of the skills they need to become good readers, teaching them everything from (phonetic ?) awareness to reading comprehension. We intend to build upon the successes and the lessons of the Reading First Program while simultaneously fixing the problems.

I would like to say a word or two about the two largest programs for K to 12 students; the Title 1 Program and the Individuals with Disabilities Education Act that, Senator Harkin, you worked so hard on. Both programs received dramatic funding under ERA. Title 1 received $10 billion for grants to districts in addition to the $3 billion for the School Improvement Program while IDA received $11.3 billion. That's almost as much as IDA received in fiscal year 2009. We are working closely with districts to ensure that they spend this money wisely and not put it into programs that they won't be able to sustain when that money has run out.

I would also like to note that both of these programs didn't receive the increases they otherwise might have in the fiscal year 2010 request because of the amount of money provided in the Recovery Act and the period of availability. We hope to resume our commitment to funding increases for these programs once the stimulus money has expired. In the short term, we need increased funding for school turnaround efforts. The students attending these schools cannot afford to wait. We are in crisis.

More of the same in our dropout factories will not help children succeed and beat the odds. It will only ensure that we as educators actually perpetuate poverty and social failure. We have too many examples of what does work and what is possible around the country to continue to allow devastating failure to exist.

In fiscal year 2010, we'll also be making important investments in early childhood programs. Under Title 1, we are requesting $500 million to encourage districts to use the program's money to expand the preschool programs. This money will help build one piece of the comprehensive early childhood programs that President Obama has proposed. It is necessary to schools serving the Title 1 population, which will benefit the most from early childhood education.

The budget also includes $300 million to start the Early Learning Challenge Fund. The program's initial goal is to help states build a network of services that will maximize the investments in early childhood education. Expanding access to high quality early childhood programs is one of the best investments we can make.

All of those changes will help push school reform in K to 12 schools. We also have significant and important policy changes for higher education.

The Recovery Act made an important down payment on our plans to expand student aid. And in addition to more aid, we want to make sure that more students are not just attending college, but graduating. The stimulus bill provided $17.1 billion so we could raise the maximum Pell award from $4,850 to $5,350.

In our fiscal year 2010 budget we proposed important and permanent changes to ensure students will have access to federal grant aid and loans. The first thing we propose is to move the Pell program from discretionary to a mandatory appropriated entitlement. Second, we propose to link the increase in the maximum grant to the Consumer Price Index, plus one percent every year, which will allow the maximum grant to grow at a rate higher than inflation so that we can keep up with the rising cost of college.

I am grateful for all the work that the appropriators have done to fund annual increases for Pell grants, particularly in the last four years, but even with that dedication, the maximum grant has not kept up with the rising cost of college tuition. By making the Pell Grant program mandatory and indexing annual increases to the CPI, we are ensuring that students will know that their Pell Grant will increase at the same rate as their tuition. This will give them assurances that they'll have the assistance they need to make it through college.

This is, of course, a major financial commitment. We are able to pay for this change in part by streamlining and improving the federal student loan program. We will move all loans over time from the Federal Family Education Loan Program to the Direct Loan Program, making loans more efficient for taxpayers and freeing up money for Pell grants. In doing so, we can dramatically expand access to college without going back to taxpayers and asking them for one additional dollar.

In closing, I would like to note that this budget makes tough decisions. President Obama asked all Cabinet agencies to examine their budgets line-by-line to identify programs that are ineffective or too small to have a significant impact. Our student loan proposal saves more than $4 billion per year. In addition, we are proposing to eliminate 12 programs, creating an additional savings of $550 million. Even though we recommend cutting these programs, we remain committed to their goals. We are eliminating the $294 million State Grant Program under the Safe and Drug-free Schools and Community Program, because several research studies have found that the program is ineffective. But we absolutely remain committed to fighting drug use and stopping violence in our schools, which is why we are recommending $100 million increase in spending for the national activities under the Safe and Drug-free Schools Program.

Also, we are proposing to eliminate the Even Start Program, but we will continue to support the program's focus on comprehensive literacy programs through the expanded Striving Readers Program and Early Reading First. These program eliminations show that our fiscal year 2010 budget is a responsible one. It is investing in our country's future economic security while also making the tough decisions to eliminate programs that aren't working.

I appreciate the opportunity to discuss our fiscal year 2010 budget and look forward to your questions. Thank you so much.

SEN HARKIN: Well, thank you very much, Mr. Secretary. That's a pretty awesome list of investments that we're making education. I just off the top might say that on that issue the Pell grants -- well, I guess we're just going to have to discuss that further. I think there may be a little bit of a concern here on this committee and others about making that a mandatory program rather than discretionary, but it's open for discussion. I don't have a closed mind on it, but I think there are reasons on both sides.

MR. DUNCAN: I look forward to the discussion, and, you know, we're absolutely open to that. The thing that I worry about a lot, Mr. Chairman, is that -- I worry about fifth and sixth and seventh graders who are really smart, and because dad or mom is losing a job or taking a huge pay cut -- that they start to think that college isn't for them, that they won't be able to afford it. And what I really want is those young children to know that regardless of how tough things are at home, that they're going to have an opportunity down the road, that if they work hard -- and I worry about the psychological impact where families are under tremendous financial stress of children just thinking college isn't for me, and those dreams start to die at a early age.

So whatever we can do to signal to young children that whatever stress your family is under, if you work hard, if you committed, you're going to have an opportunity to go to college. That's what's important to me.

SEN. HARKIN: Well, listen, I'm glad to hear you say it. It's true. And you're saying it by making Pell mandatory, that -- you're assured of that. But there are a lot of other ways that we could be looking at perhaps making sure that students have access to college at an early age as long as they study and get good grades, or I'm sure you have some ideas of your own about changing that system, about providing incentives to kids early on that if they can keep up their grades and keep up their work, that they get scholarships and they get access to college. But we'll discuss that later. Like I said, I don't have a closed mind on it, but there's arguments on both sides of that.

I wanted to cover -- my time -- a little bit on the couple of issues you raised, one on the Title 1 program. Of course, we did put a lot in there, as you mentioned, in the Recovery Act, $10 billion. So for this year and next year things are fine. But obviously, we're looking at what happens when the recovery funds go out. Now, in your budget you've requested about a $1.5 billion cut. Well, you can say, well, that's okay, since we have all this money in the Recovery Act. But the problem with that is you cut the base. And you said that we're going to resume a commitment to this funding after the Recovery Act money runs out. But if we cut the base this year, then as we move into next year, you've got to make that up, plus an increase. And that's what I'm concerned about, is cutting the baseline --

MR. DUNCAN: Right.

SEN. HARKIN: -- in this.

MR. DUNCAN: Yeah, I hear the concern, and what we're trying to do is really focus our Title 1 money on Title 1 children, but again, particularly those schools that have historically struggled. Just, again, to (frame ?) this, I worry tremendously about our national dropout rate. It's a 30 percent dropout rate. And there was a time in our country, you know, a couple decades ago when there was an acceptable dropout rate. There were jobs out there for students --

SEN. HARKIN: That's right.

MR. DUNCAN: -- who didn't have a high school diploma. As all of you know so well, there are no good jobs out there without a minimum of a high school diploma. And when we look at the high school dropout problem, it's fascinating. Again, a 30 percent rate -- we have these 2,000 dropout factories. About half are in urban areas, 20 percent in rural, 30 percent in suburban. So those is a national issue. This isn't one or the other. And we can identify 2,000 high schools that are producing half of our nation's dropout rate, half the rate, and 75 percent of our minority students dropout from the 2,000 high schools.

And the costs to our economy are just absolutely devastating, the loss of human potential.

So what I want to do is target that Title 1 money, to really take this challenge on and not just keep perpetuating the status quo.

SEN. HARKIN: That's fine. I'm concerned about making up the gap though next year.

MR. DUNCAN: Yeah.

SEN. HARKIN: Now, you've got to come back here again next year with a budget for FY 211, 2011, and I'm concerned about how you make up that one point -- I mean, I don't know that we're going to have any better allocation next year than we've had this year and how we make up that gap in that $1.5 billion, because we've cut the base. So we're in a bit of a quandary there, and I just -- I mean, when you say resume, would you look next year at bringing it back up to the '09 level, or would it go higher than that? I mean, I'm just trying to --

MR. DUNCAN: Yeah.

SEN. HARKIN: -- figure out where we're headed on this.

MR. DUNCAN: Right. Well, those commitments are really important to me, and so how we do it, you know, is obviously an open question. We don't know yet. But I want to get those numbers back up and keep them high.

SEN. HARKIN: Fair enough, but we're concerned about that cut in the base.

MR. DUNCAN: Yeah.

SEN. HARKIN: Students with disabilities -- as you point out, this is one that we pay special attention to. And we've done well, of course, in the Recovery Act with this money. It's an historic increase. But I'm concerned about something that predates you. In 2004 -- reauthorization of IDEA -- there was an allowance that a school district could reduce its special education expenditures by 50 percent of the increase. Whatever increase they got, they could reduce it by 50 percent over what they received in a prior year and spend those funds on any other purpose authorized under the Elementary and Secondary Education Act.

Well, now, if a school has fulfilled all of its responsibilities to kids with disabilities in meeting their needs, then I could see that that might be fine for them to do that, but in all -- well, information we've received and the things that we've looked at -- obviously, some schools have done that. But a lot of schools haven't. And if they haven't met the basic needs of kids with disabilities, then I'm concerned that if they take that money out, students won't get the services they need.

o I guess I would just say tell me again how your department is supporting the effective use of the Recovery Act funds to improve the educational outcomes for students with disabilities, and how will you ensure that school districts are effectively meeting the needs of these kids with disabilities before they're allowed to shift that IDEA money?

MR. DUNCAN: Very simply. I'm actually in absolute agreement with you, and so where states or districts are in compliance, we'll give them flexibility. When states are out of compliance, we will not give them that flexibility.

SEN. HARKIN: Right on. Thank you very much. I appreciate that very much. Now, again, when we talk about dropout rates, kids with disabilities right now are dropping out at a much higher rate. And a lot of this for just lack of basic supporting services for these kids in school. Almost 34 percent -- one in three leave school early. Just 52 percent of kids with disabilities complete high school.

So again, I appreciate your response on that, and I see my time is out, and I will yield to Senator Cochran.

SEN. COCHRAN: Mr. Chairman, thank you very much.

Mr. Secretary, the budget requests $300 million for a new Early Learning Challenge Program providing grants for the development of statewide programs for children from birth through age five. Some states don't have preschool programs in place, like my state. Would states like Mississippi be eligible for funding under this program in some fashion or another?

MR. DUNCAN: It would be, and let me explain how, and obviously, we think this investment in early childhood is -- you know, you can make a pretty good case it's the best investment any of us can make, so we're strongly encouraging it. So what we're looking -- for states like Mississippi that haven't historically invested -- they can use the stimulus dollars. They can use Title 1 dollars to do that, and then we can match those resources. So with all the resources coming Mississippi's way -- if they invest that in early childhood, that would count as a match.

So there is an absolute opportunity there, but we want the state to start to invest in early childhood. The state needs it. The country needs it.

SEN. COCHRAN: In some states, dropout rates are declining. I think in our state they're coming down. But most recent statistics indicate that too many students still do not complete high school. At what age will your programs begin under the new High School Graduation Initiative?

MR. DUNCAN: That's a great question. I would argue that it's not one age that -- the folks we have in early childhood is helping to prevent those dropouts long-term. So I don't think there's one magical age to start, that if you can start at one and two and three and four-year-olds, that's the best -- you know, prevention's a lot better than the -- you know, in the backend. So I would argue that every investment we're making, from early childhood to, you know, getting the best teachers to work in the toughest communities, to thinking about turning around schools, to making college more accessible and affordable, to -- you know, we haven't talked about raising standards that we're pushing very hard on.

I would argue that everything we're trying to do is with a single-minded goal of having more students graduate from high school and having more of those graduates prepare to be successful, both in college and the world of work. So I wouldn't give you one age. I think you have to have a comprehensive approach.

SEN. COCHRAN: The budget also proposes that all new post secondary student loans originate and be services through the Direct Lending Program. How do we pay for this entitlement program and ensure that students will not have their maximum grant reduced?

MR. DUNCAN: This is one that I think, again, we can pay for without asking for anymore money from taxpayers because we will basically -- again, this is controversial and not everyone agrees, but we'll get out of the business of subsidizing banks, and we're going to put all of that money into our students who are graduating from high school and going on to higher education. And so this is a program that will generate savings conservatively estimated in more than $4 billion annually, every single year.

And so this is one where we can dramatically increase access for students, do it without going back to taxpayers, do it more efficiently, and this is not sort of, you know, a big government idea. We want and we have to have dramatic private sector involvement on the servicing of those loans. We don't want to be in that business. We can't be in that business. And so the real chance for the private sector to play -- and we'll reward those players who do a great job of servicing those loans.

SEN. COCHRAN: Well, let me wish you well and assure you that on both sides of the aisle in this committee we're interesting in improving opportunities in education for all students, whatever their financial situation is, or whatever state they come from. And from states like mine where we have had -- struggled over the years to meet the educational needs of elementary and secondary students, that still is an area that cries out for support and assistance from the federal government. And I can remember they used to -- in my state it was kind of -- we didn't want the federal government coming in and taking over our schools and tell us how to teach and all the rest.

But the fact of the matter is a lot of these programs have been very valuable. My mother spent a career in Title 1 mathematics education and as a supervisor for schools. My father was a county superintendent of education in the largest elementary and secondary school district in the state of Mississippi.

And I've observed at close range all the challenges that face educators and students alike in states where there just doesn't seem to be enough money to go around and meet all the needs that exist. So we appreciate your efforts and your support for states like mine.

MR. DUNCAN: I appreciate your family's commitment. I look forward to working with you.

SEN. HARKIN: Mr. Secretary, I might just add that CBO gave an estimate on the savings of $96 billion over ten years, so --

MR. DUNCAN: That's correct.

SEN. HARKIN: -- you might want to talk to Mr. Orszag and -- (inaudible) -- get his --

MR. DUNCAN: Yeah. You know, I tried to --

SEN. HARKIN: Or talk to Mr. Skelly here. (laughs) (I don't' know ?).

MR. DUNCAN: (Inaudible) -- very, very conservative, but again, I talked about a minimum of $4 billion, and maybe north, well north of that.

SEN. HARKIN: I should've introduced for the record Thomas Skelly, your budget director for the Department of Education.

Welcome back to the committee again, Mr. Skelly.

MR. DUNCAN: He's the brains of the organization.

SEN. HARKIN: Yeah, he's been here before. (Laughs.) Thank you.

Senator Murray.

SEN. MURRAY: Thank you very much, Mr. Chairman.

I mentioned in my opening remarks my focus on making sure that the skills that we are teaching in our schools actually match what our businesses need, and I often hear from employers in my state, whether it's our high-tech clean energy companies, or whether it's out boat builders and our construction workers, that the skills don't match between what our students are learning and what they need in their jobs. And I think we have to bridge that gap. And as I told you, I've introduced -- will be shortly introducing my legislation again to bring together all the players from the employers to the schools, to the community leaders to labor, business, workforce experts to design programs for their own communities to focus on the employers and the skills that are needed in their own communities.

And I wanted to ask you if you see a place in your budget for promoting those kinds of partnerships at the local level.

MR. DUNCAN: Yeah, that's hugely important, and I will also say, which we didn't talk enough about -- that I think the community colleges play a huge role in this sort of trajectory of education continuum, and I think that's been a really under utilized, under valued resource. And whether it's, you know, high-tech jobs, or green jobs, or health care jobs, or jobs specific to an -- you know, in your area it might be boat building. I was in Miami and there's a fashion industry there. There's a huge play there, and I'm actually trying to bring in as my undersecretary Martha Kanter, who's a phenomenal community college president. I understand there's never been a community college president at that level of our organization.

We did that strategically because I think it's so important that we be preparing our students for real jobs and building those pipelines and working very closely with those local partnerships. Some places you see great, great partnerships. Some places you don't. But whatever we can do to make sure that those employers are actually helping to shape the curriculum and helping to shape the opportunities that our high school students as well as our community college students have -- we can't do enough of that. We have to tie education to the real world.

SEN. MURRAY: And we have to look at the funding programs that are already there. We've got Carl Perkins funding that. With the level funded in your budget, how do you see any chance for improvement of funding in that?

MR. DUNCAN: Well, again, we have an opportunity, not just there, but this is a real chance for folks to be creative. Again, the $4.35 billion Race to the Top Fund is all about investing and scaling up what works. The $650 million Innovation Fund is a chance for nonprofits and local players to partner with districts. So there's a huge chance where we have demonstrated partnerships that are leading to higher student achievement for us to invest at unprecedented levels and do more of what's working.

SEN. MURRAY: Okay.

MR. DUNCAN: That's what those pools of money are for.

SEN. MURRAY: Okay, I look forward to further conversations with you on that. And you mentioned in your remarks to literacy in the Striving Readers Act, which I introduced along with Senator Sessions -- and I want to make sure that -- and I only have a short amount of time and I want to ask you another question, but I'd like to have an opportunity to talk to you in the future about that and how you're going to include both adolescent and early literacy grants in the proposal.

But with just the few minutes I have left, I did want to ask you about the proposal for the Teacher Incentive Fund. It's a very large increase that you've asked. It's going to grow the program to five times the funding it currently receives, about $520 million. That program already received an additional $200 million this year in stimulus funds. Now, this administration often has stressed to us the importance to implementing reforms that we know and can prove are effective. So can you tell me what the research base is for -- and that shows the effectiveness for incentives for teachers that justify an expansion of that (program experiment ?) at such a high rate?

MR. DUNCAN: It's a great question. There are two themes that I'm going to keep coming back to. One I talked about was time, that we need more time of our students, and that the school day to school week to school year is too short. The second one I fundamentally believe is that we have to invest more in our teachers. And there's a tremendous body of research, that great teachers, great principles matter tremendously. And there's studies I've seen that talk about -- where the average student has three great teachers in a row. That child is a year and a half to two years ahead of grade level, and that average child who has three poor teachers in a row can be so far behind it's hard for them to catch up.

And so I worry a lot about -- we talked a lot about the achievement gap. I'm more interested in what I called the opportunity gap of how we get the best and brightest educators to --

SEN. MURRAY: Yeah, and I don't think anybody at all disagrees with the goal. I'm just asking if you can provide us with some studies that show that the incentives actually are what makes those poor teachers better or that --

MR. DUNCAN: I'd be happy to do that. It's not just making poor teachers better. That's why I was -- (inaudible) -- the next step. What it does is -- we want to create incentives for the best teachers to go into the most under served communities. And --

SEN. MURRAY: And so that's the focus of the program then?

MR. DUNCAN: That's a piece of it. It's both developing talent and creating incentives. And I can just say from personal experience in Chicago where we did this -- we only put this program into hard to staff schools that had significant turnover, and we only put the program into schools where 75 percent or more of the teachers asked for it.

SEN. MURRAY: Okay, and can you explain to me what the -- since this has not been authorized, I assume you're going to work with Congress to do that.

MR. DUNCAN: Absolutely.

SEN. MURRAY: But as you put a significant amount of money forward that has not gone through an authorization, can you tell me what safeguards are going to be in there against some subjective awards or awards that are based solely on test scores, since you're putting this money out there?

MR. DUNCAN: Absolutely, and we can sit down and walk it through very, very carefully with you. And in any good program test scores are never the only thing you evaluate.

SEN. MURRAY: Okay. My concern is it's a program that goes out to the states, so it sounds good when you say it to us. I just want to know how it's going to be implemented so we know -- (inaudible).

MR. DUNCAN: Well, let me clear. The money's not going out to states. This is going out on a competitive -- on a competitive grant basis, so folks are going to have to apply to a -- so we can walk through with you what our RFPR -- our request proposals is going to look like and what our criterion will be for evaluating those proposals. So this is not money that's going to go out willy-nilly. We want to invest in those places that we think are doing this the right way, and we would be happy to sort of walk through with you and --

SEN. MURRAY: It's not just going to be test scores and --

MR. DUNCAN: Again, that never -- let me be clear on two things. One, it can never just be about test scores. Secondly, it cannot pit teachers against each other.

SEN. MURRAY: Okay, so I'd like to at some point walk through with you to understand how that's going to happen.

MR. DUNCAN: Absolutely.

SEN. MURRAY: Okay.

SEN. HARKIN: Senator Murray -- Senator Landrieu.

SEN. LANDRIEU: Thank you.

Mr. Secretary, I just can't tell you how encouraged I am by what I've heard this morning. I just really believe that you are the right person to lead this effort, and I am so encouraged with President Obama's continued focus amidst all the other things that he's got to do. But he comes across to me and to many of us as just unrelenting, which is the way I think he should be, and obviously, you are, on the subject of reforming a school system in crisis and reforming a school system that is in such a state right now that it is unable to support the economic growth of this nation.

And the bold vision that you've outlined I generally support, and I want to let you know that. I have a comment though. If you could take a minute to explain to me and to the committee a little bit about why -- and the President's and first lady's first visits -- they stopped at charter schools. What is it that they see that we need to know about, because there's some questions, as you know, about this issue around the country. We've had very good experiences -- what we call independent public schools. But tell us for a minute about why you and the President feel so strongly about this direction?

MR. DUNCAN: It's a piece of the answer. It's not the answer -- and this budget, which I didn't mention, includes an additional $52 million for charter schools. But let me tell you what we need. We don't need more charters. We need more good schools in this country. And for charters to be good, I think three things have to happen. First, you have to have a very high barrier to entry. This is not let a thousand flowers bloom. And if you do that, you just perpetuate the status quo. So you only pick the best of the best to be able to open schools. That's like a sacred obligation, a chance to education children. That should not go to everybody. That should go to the small percent who can be absolute pros.

Secondly, after you set that high bar, you need to give these educators real autonomy. These are by definition entrepreneurs and innovators. And you need to give them room and freedom from the bureaucracy. Secondly, you need to tie that real autonomy with real accountability. You have to have performance contracts. And obviously, I'm a big fan of charter schools, but I closed three for academic failure.

And so I think if you have just autonomy without accountability, you don't get there. If you just have the accountability without the autonomy, nobody will want to play. So if you hit those three conditions -- and that doesn't happen all the way around the country. I think you guys are doing a great job of it in Louisiana and New Orleans. But where those three things happen, you generally have some very high performing schools in some of the most underserved communities of our country; inner city, urban and rural.

And so I think it is not by any means the answer, but when done well and when done right and thoughtfully and strategically, it is a piece of the answer, and I think what is going on in your state and in New Orleans specifically is a fascinating example of what's possible when things are done the right way.

SEN. LANDRIEU: Thank you. My second question is about the disability issue and program, and Senator Harkin has been such an extraordinary leader, and I've tried to be supportive where I can be.

But I want to just share from my experience, Mr. Chairman, as the chairman of the D.C. Subcommittee at some point when we really looked into the disability, the cost of the disability program here in the district -- and my staff is going to be getting me some specific numbers for the record. But I believe, if my memory serves me correctly, that the cost per student here is somewhere between $20,000 and $40,000 a year. Is that your understanding of the students in the district that are going to outside of the public system?

And Mr. Skelly, do you know what the numbers are?

MR. SKELLY: Senator, those numbers sound about right, but I'm not aware of the specifics.

SEN. LANDRIEU: Okay, I'm going to ask the staff to get those numbers on the record, because the point that I'm making here is that if we don't get on the front end of this situation, which is I think what your budget is attempting to do, which is investing in early childhood education, keeping children, Mr. Chairman, from getting an inappropriate and unnecessary label as dysfunctional, but just because they can't read -- then they get into a track that is actually unsustainable from any budget to continue, which is a totally different issue than trying to provide basic services, which the chairman and our committee will insist be given.

So I just want to lay the record down that we need to find those numbers out because it's unsustainable at the $20,000 to $25,000 a year.

MR. DUNCAN: Yeah. I would argue in many places it's much higher than that, and as you know, so many children go into special education because they're labeled LD, learning disabled, and a high percentage of those --

SEN. LANDRIEU: It's just because they can't read.

MR. DUNCAN: -- mean they can't read. And so if we teach our children to read, they don't go into special education, and what's amazing to me is you almost never see anyone exit special education. Once you go in --

SEN. LANDRIEU: Correct.

MR. DUNCAN: -- in many places you're there forever. And so the right thing to do is to do a much better job on the front end, and it's the right investment for multiple reasons, but if we could have -- if we could reduce over time the number of students who are going into special education because they can't read, we'll be doing those children a tremendous service.

SEN. LANDRIEU: Thank you, Mr. Secretary.

SEN. HARKIN: Thank you, Senator Landrieu.

Senator Kohl.

SEN. HERB KOHL (D-WI): Thank you, Mr. Chairman.

Mr. Secretary, as you've said here this morning, one of the most urgent crises that we face is the epidemic of high school dropout and the fact that No Child Left Behind did not do very much to address this problem.

Many ideas are proposed to increase high school graduation rates and better prepare our students for college. I've been talking about additional federal support for what they call dual enrollment programs to help low income students get on a fast track to their high school, as well as a college degree. As you know, these programs help students. They save time and money on college courses while building the skills and confidence they need to success in the college environment.

The President has expressed his support for efforts to help high school students begin earning college credits. How do you anticipate increased support for early college and dual enrollment programs?

MR. DUNCAN: Senator Kohl, I'm very familiar with that work and with your leadership, and I want to let you know how much I appreciate it. It does a couple things for students. And I'll tell you how we want to support it, but let me tell you why I think it's so important. First of all, in these tough economic times having students get that college credit in their back pocket before they go on to college, while they're still in high school, saves them significant money. The second thing it does, which I think is probably more important, particularly for children who might be first generation going to college or English language learners -- it helps them really understand in their heart that they can be successful at the college level, that they really can do this.

And some of these children reach a psychological barrier that they're academically prepared, but because they don't have family members who have taken that step, they don't believe they can do it. And when they have that dual enrollment, or, you know, dual credit system as a tenth and 11th and 12th grader, they know that they can be successful at that collegiate level.

So there's a huge opportunity in both the $4.35 billion Race to the Top Fund for States, as well as the $650 million Innovation Fund, (Investment ?) Works, for districts, community colleges, universities, cities, whatever it might be, to come together and expand upon those programs that are working. But I think that's a very significant investment.

SEN. KOHL: In terms of priority, the program -- it seems to me to -- it should have a very high priority if we talk about encouraging our high school students to aspire to going to college, and more than talk about it, to give them a way in which they can start down that path of -- what kind of a priority do you have on that?

MR. DUNCAN: Dual enrollment is one of our FIPSE competitive priorities in FY '10.

SEN. KOHL: Thank you. On the Incentive Fund and the Merit Pay -- during your time in Chicago how did you work with teachers and unions to get this kind of a system up and going and implemented, and what did you learn that will prepare you?

MR. DUNCAN: As I said, the only way -- I know Senator Murray has some concerns, so I should've addressed this more clearly when she was here. The only way this works is when you do it in collaboration. And actually, what we did in Chicago is we had a set of the best teachers in the system who served as the Advisory Council for me. They actually set the program up. So this is absolutely teacher led. They figured it out. (Laughs.) They went out and met with school -- they met with schools around the city, and they applied for the grant through the Department of Education, did a phenomenal job, I think were awarded the largest grant in the country.

And what's interesting -- you do all this hard work and you think you have a good idea, but at the end of the day you don't know if anyone's going to be interested. We had 120 schools show interest. And we would only go to schools where 75 percent of the teachers wanted the program. And most of the schools we picked -- 95, 98, 100 percent of teachers asked for it.

So this is driven by great, great teachers. They want to be rewarded. They want that excellence to shine a spotlight on that. And they want to get more great teachers into under served communities. So this is a perfect opportunity for collaboration. And there can be, you know, tough conversations or differences of opinion, and that's part of the process. But the program we did in Chicago was created and established and led by a set of the best teachers in the city.

SEN. KOHL: Good. As you know, the Recovery Act passed by Congress contains billions of dollars for one-time funding for public schools. In many states, such as my own state, they're facing serious budget constraints and struggling just to preserve jobs and maintain existing education services. As you administer the funds provided in the recovery package, how will you help states invest in sustainable improvements while also addressing their immediate fiscal concerns?

MR. DUNCAN: Right. And sometimes people can see that as a tension, and I think this is a real test of leadership and creativity, so this is -- you know, in times of crisis that provides huge opportunity. We have to be thinking about both. But let me give you a prime example on the IDEA funding. Unprecedented resources -- how can you spend that money wisely? I would argue one of the best things we could do is invest a massive amount of money in training all teachers how to better work with special education teachers. I think we've had this divide between special education teachers and regular ed teachers. And the fact of the matter is so many of our regular education teachers have special education students in their classroom and don't know how to do a good job with them,

And so I think that's one area where the benefits for those teachers and for school systems will far outlast the availability of those funds. And so we want to work very, very hard. You see, again, I've talked a lot about time, you know, thinking differently about time. I've seen lots of school districts starting to figure out how to do more over the summer and more on the weekends and more on Saturdays, and bring in nonprofit partners and build sustainable programs where schools are open 12, 13, 14 hours a day where the money can be the catalyst, but by bringing in all these outside partners, you have huge leverage for those resources.

So we're going to continue to provide guidance. We're going to highlight examples of success, like Cincinnati that's adding what they're calling a fifth quarter this summer now for their students, keeping them a month longer after school year ends. We're going to continue to provide those kinds of best practices as examples for folks around the country. And you'll see some real innovation, and you'll see some folks who are paralyzed by the crisis. And this would be a real test of how leadership handles a tough situation and an opportunity. And I would argue that the nexus of crisis and opportunity gives a huge chance to push for the kind of dramatic change we need.

SEN. KOHL: Thank you so much.

Thank you, Mr. Chairman.

SEN. HARKIN: Thank you, Senator Kohl.

Senator Pryor.

SEN. MARK PRYOR (D-AR): Thank you, Mr. Chairman, and Mr. Secretary, thank you for being here.

I first want to start on the stimulus spending and say that the feedback from the Arkansas Department of Education and educators in Arkansas has been very positive on that, and we appreciate your help and your department's cooperation and assistance, and I'm sure a lot of other states have had that same experience. So we want to thank you for that.

MR. DUNCAN: We'll try and keep it that way, and just one plug for our staff, who's done a phenomenal job as folks are applying. We committed to turning around the applications in 14 days. We've been doing it in six. And our staff is working nights and weekends, and I couldn't be more proud of their collective effort.

SEN. PRYOR: That's very un-federal government like, and that's good.

Let me also mention just one concern, and that is our state Department of Ed. Has put a lot of requirements and, you know, very stringent guidelines on the money to make sure it's going the right places and doing the right things. And we understand that there's going to be an audit of that, and that's great. I think everybody should welcome that. But the only thing is I would ask that your department coordinate with our -- the state departments around the country to make sure that we're auditing the same things and we're focused on the same things.

MR. DUNCAN: Right. I think, obviously, the goal is identical, that with unprecedented resources you want to have unprecedented transparency and real clarity and visibility into how every single dollar is being spent.

SEN. PRYOR: Right.

MR. DUNCAN: And as much as we can coordinate and work together and not waste and overlap or duplicate resources, that makes a lot of sense.

SEN. PRYOR: Oh, exactly. Thank you very much for that.

I also want to follow up on something that Senator Cochran mentioned earlier about dropouts and how that's been a real challenge for the nation, and you mentioned -- about the drag on the economy and the problems that that causes long-term. I think you guys have set aside, what, $50 million for a new High School Graduation Initiative, and how did you arrive at that figure, and how do you envision that money being spent out there?

MR. DUNCAN: That's a piece of the money, and again, I'd go to the $5 billion (entitlement to ?) school improvement money that we want really a laser like focus on this. And I think as a country we've -- we're shied away from the complexity of this and the difficulties of this, and I think we do that at great detriment to those children and a great harm to our nation's economy long-term. So I want to confront this front and center. And again, when you look at the data, it's fascinating. The economic costs are staggering, but when you think about 2,000 high schools producing half the nation's dropouts and 75 percent of them are minority children dropouts, that's a number you can get your hands around, and we can't tackle every school tomorrow.

But if we could systemically year after year come back and do something dramatically better, not just those high schools, but those feeder elementaries as well, I think we could turn this around. And what we have -- why I'm optimistic is we have in every rural community that's poor and any inner city urban community -- while we have these quote, unquote dropout factories, we also have schools where 95 percent of the students are graduating, and 90 percent of those who graduate are going on to college.

So we know what works. We know what success -- (inaudible). There are more good examples out there today than ever before. And what we want to do is scale those up, invest in those best practices, and give more students those kinds of opportunities. So this is a tough battle, but it's absolutely a battle I think we need to fight, and I'm committed to being in it for the long haul.

SEN. PRYOR: And it's another example of where the public schools inherit the demographics of the population that they're serving and presents a lot of unique challenges and different circumstances around the country. Let me just let you know about something if you don't already. And that is, last year Senator Harry Reid and I had a bill, we call it the GRADUATES Act.

MR. DUNCAN: Yeah, sure.

SEN. PRYOR: And basically, what we were trying to do is come up with a way to incentivize and reward sort of innovative partnerships to try to keep people in school with public-private sector. Are you familiar with that effort?

MR. DUNCAN: Yeah. And we want to build upon all those -- everything we can do to have students not just graduate from high school, but go to college; and not just go but graduate from college. We have to -- I mean, that is what this work is about at the end of the day, trying dramatically to drive up our college graduates by 2020. We have to take steps every single year; and I appreciate your leadership in that effort.

SEN. PRYOR: Well, I just -- that was a little bit before your time, before you got here. And I just wanted to make sure you are aware of it.

There are some grants that serve at-risks populations that the administration has eliminated or is proposing elimination of that deal with safe and drug-free schools. Could you talk a little bit about that?

MR. DUNCAN: I did, I talked about it in my statement. That what we saw is that the money we put out -- obviously those are big issues for me both trying to keep our schools drug free, but also dramatically reduce violence. We found through research and an evaluation of this money we put out through the states there wasn't much effectiveness there. The money we put out directly to districts and schools we saw more effectiveness. And we basically eliminated the state grants and put an additional $100 million into a national program.

So we're trying to be more strategic -- same goals, same commitment, but trying to be much more targeted in getting those resources where it needs to happen. The money is given out to states and we just weren't seeing, you know, on an objective research evaluative study, we weren't seeing the impact we wanted.

SEN. PRYOR: Do you feel like you have good ways to measure that? Are you confident in your ability to measure?

MR. DUNCAN: Yes, I am pretty confident in that ability. Yes.

SEN. PRYOR: Thank you, Mr. Chairman.

SEN. HARKIN: Senator Pryor.

And Senator Specter.

SEN. ARLEN SPECTER (D-PA): Thank you, Mr. Chairman.

(Off mike) -- you have taken on a tough job. But I've had the opportunity to work on this subcommittee for many years; and it's very, very difficult.

I'd like to start by asking you about the Federal Family Education Loan Program where the proposal has been made to have direct loans as of July 1, 2010. And questions have been raised in my state by the Pennsylvania Higher Educational Assistance Agency as to whether that can be implemented in that length of time. And whether the allocation of funding set at $500 million per year would be adequate to take on the services; which are currently provided including early awareness, financial literacy training, and counseling programs.

And what will happen to the very substantial number of employees who are working on -- for not-for-profit and public agencies in their states? It is a sweeping change. No doubt this is a very important program and necessary to keep young people in school, especially given the economic problems of the day. How do you propose to address those very serious considerations?

MR. DUNCAN: Yes, there are a couple of pieces to it. First is by making that switch from FFEL to direct lending; we can dramatically increase the amount of money going out to students directly, you know, in Pell Grants. And so, we're anticipating savings of over $4 billion a year. And at a time when going to college has never been more important, as you know, it's never been more expensive. And families have never been under more financial duress. So we can sustain indefinitely dramatically higher levels of funding for students without going back to taxpayers for another dollar.

The $2.5 billion over five years to help work on not just access, but on completion actually significantly increases the amount of resources that will go out to non-profits. That will help keep those students in school and build a culture of universities where it's not just about access, but it's about attainment. Making sure those students know what the opportunities are; and then making sure they are graduating.

So we think these are the right investments to make.

On the servicing of loans, we don't want to get into that business. That's all going to be done by the private sector. We don't want to get into that, don't have no expertise in it.

SEN. SPECTER: Mr. Secretary, how about programs that I stated -- enumerated on early awareness, financial literacy training, counseling programs; will they be maintained under the change program?

MR. DUNCAN: I think more than maintained. We want to actually enhance. We want to do more of that. I would argue --

SEN. SPECTER: Have more than the $500 million which is currently allocated there?

MR. DUNCAN: Well that's the starting point; but I think that's a very significant investment. And to be able to do that every year over the next five years gives a huge opportunity to better inform and better help students understand what their options are.

SEN. SPECTER: How about the large number of employees? Will there be some effort made to transition and accommodate the 2,200 employees who are in my state? That is a great concern to me.

MR. DUNCAN: Again, it depends what business they're in. On that side, we think there will be a growing market. We're going to need more folks doing this work. And we think that we're actually going to increase the market share for folks working on the servicing of loans. And so, we're hopeful that the job loss will be minimal. And we're actually going to create jobs in those two areas.

SEN. SPECTER: Secretary, shifting to another program. There has been an operation called GEAR UP which was originated by Congress - (inaudible) - on the House side. And this committee -- subcommittee provided very substantial funding, some $300 million a year. The program has been in existence seven, eight years now. So it has really taken off. And these are at-risks students and they tie into efforts which this subcommittee has taken the lead on, on mentoring.

So many single-parent families, working mothers, children at loose ends, not after school care; and efforts have been made to find an adult mentor in the community. This ties into many facets of their lives -- the learning program, the delinquency issue, the crime problem. And I'd be interested to know what thought you might have through your department to supplement the efforts now being undertaken.

MR. DUNCAN: I'm a big fan of the GEAR UP Program. We were a large beneficiary of that program in Chicago. For all the reasons you said, these are students who desperately need that help and need the chance to be supported in that transition from high school to college. And so, we're going to support those efforts going forward.

SEN. SPECTER: How about the mentoring aspect?

MR. DUNCAN: That's hugely important. Our children need adults in their lives, who are helping them understand what their options are; and who are doing the hard work with them every single day to stay on track.

SEN. SPECTER: Well thank you, Mr. Secretary. I'd appreciate it if I could have your commitment to take a personal look at how the direct loan program is going to go to accommodate as best you can the kinds of concerns I've raised.

MR. DUNCAN: You have that. And I'd be happy to sit down with you further and discuss exactly what is going on in your state.

SEN. SPECTER: Thank you.

Thank you, Mr. Chairman.

SEN. HARKIN: Thank you. I just want to echo a little bit what Senator Specter just said there. The last thing I want to see happen is to see Mr. Lord get more money to buy more -- to build more private golf courses for himself. You know, this whole scandal that happened in Sallie Mae was awful. And if someone can make that much money off the back of students, that just shouldn't be allowed. Now again, because Sallie Mae has gotten so big, because of the subsidies that we've given Sallie Mae over the years, now they're able to undercut everybody else.

So it does require some more looking in -- if just the cost is the only -- the only basis on which we're going to award these service contracts, then Sallie Mae can undercut everybody. But my gosh, we're the ones that gave them all these subsidies all these years so that they could get that big. So --

MR. DUNCAN: It can't just be cost; it has got to be cost and ability to help those students exactly.

SEN. HARKIN: I appreciate that.

MR. DUNCAN: You have to look at both. You have to look at outcomes.

SEN. HARKIN: And outcomes, exactly right, exactly, exactly.

Mr. Secretary, you mentioned about Cincinnati that is increasing its school year by a month. Well, that's pretty good. My question is where is the money coming from?

MR. DUNCAN: Stimulus.

SEN. HARKIN: Stimulus money. So what are they going to do when the stimulus money runs out?

MR. DUNCAN: Well, we'll cross that bridge when we get there. But this is the right thing to do for children now. And it keeps -- again, it keeps students at risks in school. It keeps teachers teaching. And what I would argue is that every dollar historically hasn't always been used really wisely. And you may see some innovation with stimulus dollars. And if these things work, I'm very optimistic. Obviously, there is no data yet.

What I would argue -- if districts and states start to do some creative things with stimulus dollars that might change their allocation and their strategic use of the dollars once that money is gone.

SEN. HARKIN: Yes. Don't misunderstand me; I happen to be one of those in favor of a longer school year. I think the school year ought to be 11 months.

MR. DUNCAN: Twelve.

SEN. HARKIN: Well --

(Laughter)

SEN. HARKIN: I'm all for giving them the month of August off.

(Laughter)

SEN. HARKIN: Any how -- three or four weeks in August, that would be fine. But I do believe it should be longer. And we've got to get to that point. It's just not right what we're doing with these kids today.

MR. DUNCAN: And again, I think this is one that we've not had as much creativity as we need. And more and more the data is showing this. And if we can use stimulus dollars as sort of the impetus to get in this game, I think folks will start to think about how they are using the resources and start to allocate more funding in this direction. But this starts -- this opens that door which I think is so important.

SEN. HARKIN: Well, let's open the door further. I would -- both on this committee, as the chair of the subcommittee, but also on the authorizing committee, we ought to be saying what can we do over the next few years to expand that school year? We've got to do this. We just can't keep on like we are. So --

MR. DUNCAN: I appreciate your leadership on this issue.

I think it's a big, big deal.

SEN. HARKIN: I don't know if I have much leadership. I've got a lot of support for you. Put you out there on the point, Mr. Secretary. (Laughter) We'll be right there backing you up.

Let me ask you a little bit more about the Recovery Act. It provides -- you get more discretion, more money for discretion than any secretary of education has ever had. This is your money. You just sort of do with it as you wish -- $4.35 billion for the Race to the Top Fund, $650 million for the What Works and Innovation Fund. Now again, this can be powerful incentives.

Again, we don't really have much details on what you plan to do with it. On the Race to the Top Fund, I mean, let's fast forward a few years. I mean, if we go ahead five years, what will you hope to have achieved? How will we know if its worked? What will be different in terms of what districts and states do in education? Give me some idea about this Race to the Top Fund.

MR. DUNCAN: Yes. What we want to do in -- well, I think historically what we've had a bit is a race to the bottom. And that has really hurt our country and hurt our economy and hurt our children. And we want to fundamentally use these dollars to reverse that. And the Race to the Top name is not by accident.

What we want to do -- let me take the $4.35 (billion) first; and then I'll come back on the $650 (million). On the $4.35 billion, we want to work with a set of states that are willing to lead the country where we believe we need to go. There are sort of four areas where we're looking at. One is -- we want to see higher standards. I've been arguing pretty vociferously that in too many states, due to political pressures, standards have been dummied down and watered down. And then, in fact, we've been lying to children.

And let me take one minute on why I say that. When you tell a child they're quote, unquote, "meeting a state standard," the logical assumption by that child or that parent is that child is on track to be successful. In far too many places, including the state I'm from, from Illinois, those children who are quote, unquote "meeting standards" are barely able to graduate from high school; and absolutely inadequately prepared to go to a competitive university, let alone graduate. So we want to talk about common, college-ready, career-ready, international benchmark standards. We'll be raising the bar there.

Secondly, we want to talk about comprehensive data systems that you can't lose children throughout their educational trajectory. You have to know how they are performing. You want to be able to track students to their teachers to know which teachers are making the biggest difference in the students' lives. And you want to be able to track teachers back to the schools of education so you can know which schools of education are producing the teachers that are producing the students that are learning the most.

Third, we want to invest deeply in talent. Great teaching, great principals matter tremendously. And how do we think about getting the best and brightest to work in the communities that have been historically underserved -- rural, inner city, urban. I've been arguing -- we've had a math and science shortage of teachers for how long -- a couple decades?

I'd like to pay math and science teachers more. Some people disagree with me. I think we need to end that. How can we create the next generation of engineers and mathematicians and people who are going to, you know, have the breakthrough, you know, create the breakthrough technologies if they're not being taught by teachers who know the content.

So really working with states that are willing to think differently about talent. Getting the best and brightest where we need them, rewarding excellence, thinking about areas of critical need.

And then finally, I keep coming back to this idea of struggling schools. And let me just take one second on this. We have about 95,000 schools in our country -- let's call it 100,000. What if we took the bottom one percent, the bottom one percent of schools each year?

SEN. HARKIN: Bottom in what way?

MR. DUNCAN: A thousand schools -- dropout factories, low gain, students not learning, basically, just simply not working. And we could figure out, you know, state by state, you know, what that looked like. What if we took that bottom one percent every year and just fundamentally turned it around. Stop tweaking around the edges, stop looking at incremental change, but really try to attack this dropout program, you know, full square on in both the high school, the middle school and the elementary level.

What we want to do is look at those four reforms; and work with a set of states and invest hundreds of millions of dollars in those states that are willing to lead the country where we need to go. And this is really about having courage and having the will to challenge the status quo in some areas. So in the next two months or so, we will issue a request for proposals to states. We'll look at how they're making progress against these things. And we want to have a set of states again lead the country and set an example of what is possible.

On the $650 million, the Innovation Fund, Invest in What Works --

SEN. HARKIN: Before you go on, can I interrupt for a second. So the request for proposals when you put those out; and you're going to do that within the next couple of months.

MR. DUNCAN: Next two to three months.

SEN. HARKIN: Okay.

MR. DUNCAN: We are going to be really thoughtful about it. So we're spending lots of time thinking about it now.

SEN. HARKIN: So they will include specific areas of focus in the request?

MR. DUNCAN: Yeah, and these echo and mirror -- with the assurances we look for on these stimulus dollars on the Recovery Act. These are the same areas. We're trying to be very, very consistent on message. We ask states to make a series of assurances to receive stimulus dollars. And this RFP, this request for proposal, will mirror those same assurances. So we're trying again to be laser like focused on those things that we think will make the biggest difference.

SEN. HARKIN: Okay. Now, the $650 --

MR. DUNCAN: The $650 million is not focused on states; it's focused on districts and non-profits. So this is really trying to -- again, we have so many districts, we have so many schools, we have so many non-profits that are making a huge difference in students' lives. For me what's so helpful is that I don't think I have to come up with any great ideas. I think all the great ideas are out there. We need to listen, we need to learn, we need to invest in what works and scale it up.

And what our challenge is and our opportunity I think Mr. Chairman, is that we have these huge pockets of excellence. We have these islands of excellence. I want to take those to scale. When something is working, I want to give more students, more teachers, more communities the opportunity to benefit from that. And we've seen this flourishing of innovation in education over the next -- over the past 10, 15 years.

We have wonderful examples of what is happening, but they're all constrained by resources. If we could significantly invest in those and give more students, more teachers, more schools, more districts, more communities those kinds of opportunities; I just simply want to invest in what -- in those programs that have demonstrated an ability to make a difference in students' lives. That's the purpose of the $650 million.

SEN. HARKIN: Well, thank you very much. I'll come back to that, but first I want to yield to Senator Reed.

SEN. JACK REED (D-RI): Thank you very much, Mr. Chairman.

Welcome, Mr. Secretary and let me first raise a question that I suggested in my opening comments. That is that the access and completion incentive fund is something that we're all excited about.

MR. DUNCAN: Yeah.

SEN. REED: And in your own statement you suggest that it's going to be built on in some form of the leap and gap program that we passed last year. And I wonder if you might sort of fill in some of the details as you see those.

MR. DUNCAN: Yeah, I think these are really complimentary. With the leap -- your base, or you want to know the leap in some states to do more to create a need-based aid; and not just merit based in really helping those students who are poor. And again, what I want to do is not just help get them access. I want to drive up completion rates. I want to work on attainment.

And so what these resources would do -- we'll go through states to universities, to really build a culture that helps those -- it probably helps those very same students that your program is supporting those students who come in, who might not have family members who have gone to college, who might be English-language learners. And so for me, the goal is not just about access, it's about completion. I think these two could be actually very, very complimentary and mutually reinforcing.

SEN. REED: Well part of the -- this whole process is making children aware really of their potential to go on to higher education; and also, trying to incentivize the states to put more money in at a very difficult time. So anything you could do to coordinate those programs, make them work in tandem, not just to get them there, but as you say, so hopefully to complete, both financially and academically.

MR. DUNCAN: And it's really interesting -- not to belabor the point, but as you well know, the university is actually to me a lot like high school. You have some high schools who do a great job on graduation rates, and some that don't. You have some colleges that do a great job in working with at-risks students to help them graduate and some don't. Again, we have to scale up those best practices.

I will tell you honestly that we tracked the state very, very close in Chicago. And we started to steer our graduates away from some universities and towards others. Because as we looked at the data, we saw some universities that would, you know, this type of population, this GPA, this class rank, this ACT score, 90 percent of those students were graduating and in another university 50 percent were. I mean huge disparities from very similar populations.

And so, the more we can share those best practices and get more universities thinking about this. As you know, we've done very little to incent universities to graduate students. We've given them lots of money to get students in the door. We haven't done enough on the completion side; and that's where I want to continue to focus every single year.

SEN. REED: Thank you. Let me turn the page literally to another issue and that is, I commend you for the economic recovery package, getting the money out. As you pointed out in your opening statement, preserving employment and preserving opportunities for students in thousands of communities large and small across the country. The first round was really -- I think your sense was to get the money out to plug gaps. The second round though I think you're going to have to look closely at how that money has been spent so that it's truly honed in on the objectives and the outcomes and reform that you're emphasizing.

Can you give us an indication of how you're going to look at the second round funding and what judgments you'll make?

MR. DUNCAN: Sure, and it's a great question. We intentionally did not put out 100 percent of the money. We put out a lot because there is desperate need and we wanted to stave off this education catastrophe. And again coming from my previous job, you want to give districts and states, the opportunity to plan for the upcoming school year and not have that uncertainty. But you're exactly right. As we go into the second round, let me be clear, where states are doing the right thing and, you know, being creative and being innovative, that's great. We'll continue to support them.

Where states are acting in bad faith, they're playing shell games of doing something; we have the ability to withhold that money. And further beyond that, that's the stick and we're prepared -- don't want to use it, but we're prepared to use it if we need be. And the second part -- that's the stick, the carrot is, as the chairman brought up, is we have these unprecedented discretionary resources. You know $4.35 billion Race to the Top; $650 million you know Invest in What Works Innovation Fund.

And I will tell you, states that are trying to game the system or play shell games or act in bad faith, they will basically eliminate themselves from those further competitions. And deprive their states of unprecedented new resources coming in. And so, we're trying to work with both carrots and sticks to encourage states to do the right thing by their children.

SEN. REED: Well I think that's a very important message to get out today; because states are under excruciating fiscal pressure. And the pressure to just get through the day is so excruciating that unless you lay down clear guidance, clear markers, and what you --

MR. DUNCAN: Yeah, well we try to be absolutely, explicitly clear. We will continue to do that. And again, we're not looking for a fight, but we're prepared to have that if need be. This is too big of an opportunity for our nation's school children to mess around.

SEN. REED: Let me raise another issue Mr. Secretary. And that is that with my colleagues we worked to improve school libraries. And not only just for the sake of the library, but for improving literacy. And we've had some very impressive results in terms of demonstrating increases in literacy. And I note that the budget is rather slim, about $19 million I think. The grants that have been put out, I think there is roughly 496 applicants, only 60 were filled because of budget limitations.

And the other aspect of the legislation is that if we ever reached the $100 million mark, and it's a formula that every state or a few states and the District of Columbia that have never yet received a grant. So again, in a difficult set of priorities I would like to work with you to see if we could put some more resources on the program; and also, to validate the effectiveness of this in terms of literacy.

MR. DUNCAN: Yeah, I appreciate that and we can look at that line item. But again I would -- so I'm happy to work with you now. But with stimulus dollars, with Race to the Top dollars, it's a huge opportunity for states and districts to invest in creative ways.

And the Title I dollars, you know, unprecedented resources on the table that folks can think about. We're trying to get folks not just to think about line items but how they strategically use all these resources to drive to a common agenda. And that's a huge potential avenue for schools to improve.

SEN. REED: I think just your sort of emphasis on school libraries and their role in literacy, together with those other resources might be a very important ingredient in this program.

MR. DUNCAN: I appreciate that.

SEN. REED: Thank you, Mr. Secretary.

Thank you, Mr. Chairman.

SEN. HARKIN: Thank you very much Senator Reed.

Back to the RFPs, the request for proposals, how many do you expect to award? Do you have any ballpark idea at all?

MR. DUNCAN: I really don't. We're going to set a high bar. And so, this is not, you know, we're going to say no to some folks; and that's going to create some pressure. But we -- when we say a Race to the Top, we literally mean that. And so, we'll set a high bar and states that hit it, that's great. And what we may do is, we may come back with a second round, you know, down the road. So states that don't hit the bar now we'll come back and say you've got another opportunity if you make these changes. We'll be very, very clear with states this is where you hit it and this is where you didn't.

And you know, I would love -- at the end of the day when we're done with this, if we had all 50 states, you know, doing these things our children -- it would be phenomenal.

I mean, our children would be in great, great shape. But this is going to be -- we're going to be very, very clear about our expectations; and give folks a chance to hit it now; and give folks a chance to come back. And where they're a little short or not, you know, not doing something we think is important, they will have the opportunity to address that, to correct it and come back down the road.

SEN. HARKIN: Let me --

MR. DUNCAN: We're also going -- we're going to obviously put all of this out for public comment. So before anything goes out, we're going to, you know, put out a draft, give folks feedback; and go through that process before we finalize anything.

SEN. HARKIN: Well, you're really going to have to move rapidly. That money is -- that money expires if I'm not mistaken September 30 of next year, right?

MR. DUNCAN: No, you can extend beyond.

SEN. HARKIN: Well, it has to be obligated then. It has to be obligated, I think. No?

MR. DUNCAN: We have to use it by 2010.

SEN. HARKIN: That's what I mean. You have to get it out by --

MR. DUNCAN: Yeah, we have to get it out by the end of -- and they have time beyond that.

SEN. HARKIN: That's right, but it has to be obligated by then.

MR. DUNCAN: Yeah, yeah. So we will hit that, I promise you.

SEN. HARKIN: Okay, all right. Let me ask you a question about -- it's an article that said that states will hurt their chances to compete for millions of federal stimulus dollars if they fail to embrace innovations like charter schools, Education Secretary Arne Duncan said Thursday. Is this -- is that it, if states have a cap on the number of charter schools that they would have a harder time of winning one of these awards? So is charter schools a litmus test?

MR. DUNCAN: It's not a litmus test, it may be one -- we're going to ask a series of questions around those four assurances. And so that may be a piece of that, and again, we haven't finalized the RFP, but that may be one of the questions that we ask in those topics. And again, I'm not -- let me be clear, I'm not for just more charters I'm for more good charters. And so, it's not just about a cap, it's much more complex than that. It's about having accountability, autonomy and a high barrier to entry.

SEN. HARKIN: I'm glad to hear you say that.

MR. DUNCAN: We want to address all of those things.

SEN. HARKIN: Yes, because there seems to be some thought that you're focusing so much on charter schools that every charter school is just great no matter what.

MR. DUNCAN: I've tried to be explicit because I've never said that. And again, you look at my record; I've closed three charter schools for failure. And so, I'm for good schools of every stripe, every ilk,

SEN. HARKIN: Well I'm glad to clear that up and to make that clear that it's not necessarily just a litmus test. And there is one other thing that I wanted to ask you about here and that was in this What Works and Innovation Fund or maybe the other one, I wouldn't know where this might fall. But again, it has been my view after all these years of looking at schools and finding schools that work that there are a lot of different reasons why a school might be successful and one nearby won't. You go look through a lot of factors. But the one element that always seems to be present is whether or not they have a good principal.

MR. DUNCAN: I agree.

SEN. HARKIN: A principal who is smart, who is dedicated, who knows how to organize, how to motivate teachers. That's just invaluable. But we haven't really had a good program for training principals. You're a teacher and then you become a principal. Well sometimes a best teacher may not be the best principal. The skill set may be different.

So we have this School Leadership Program and quite frankly, you in your request, in your budget you've bumped it up a lot. From $19 million -- we bumped it up quite a bit from '08 to '09. But then you asked for about a $10 million increase up to $29.2 million for 2010. I guess my question has to do with these RFPs that go out. Are you going to be looking at things like that too?

MR. DUNCAN: Absolutely, that's exactly -- whether it's districts, whether it's states, whether it's universities, whether it's non- profits, there are lots of folks that are training principals. Some are doing a great job of it and some aren't. We can look at the data of how those principals they've trained have done in terms of driving student achievement. And those places again districts, universities, non-profits, states, whatever players might be doing a great job of this. There's a huge chance to do more of that.

And I absolutely concur with you. I don't think there is a good school in this country without a good principal. I've seen quite the inverse, I've seen a school that struggled that had a great principal, but took 10 or 12 years to improve. And without the right succession plan, that good principal leaves and within six months the place is a disaster. It is much, much harder to build this thing up than it is to tear it down.

And just to, you know, in your business many businesses, leadership matters tremendously. Good principals keep good teachers. They help good teachers improve. They work with the community. And so, there is a huge opportunity here to invest in leadership. And that would cure many of the problems that ail us.

When you see these high-performing schools in tough neighborhoods, every single one has a dynamic principal driving that change. It can't happen without it.

SEN. HARKIN: Well, I'm really glad to hear you say that. So that when I'm looking at that request for the $29.2 that you're requesting -- and believe me, we're going to meet that. I think that's that important. But then there might be more than that in the --

SEC. DUNCAN: Six hundred and fifty million is absolutely eligible for that. That's the kind of thing we want to look at.

SEN. HARKIN: I'm really glad to hear that. That's good, let's see what else I wanted to -- the other thing is just more of a general, one of the four elements that you mentioned that you're looking at in these RFP's

SEC. DUNCAN: The assurances, yes.

SEN. HARKIN: The comprehensive data systems on tracking students

SEC. DUNCAN: Yes

SEN. HARKIN: There are some systems that are out there that do this, I don't know which are good enough for you, I'm sure you're looking at those that are existing already.

SEC. DUNCAN: Exactly.

SEN. HARKIN: Now I don't know which ones are good enough for you but I know there are some out there.

SEC. DUNCAN: Yeah, again, and this is where there are some huge variations, some states are doing a phenomenal job with this now, and other states are, you know, just sort of starting off, and what we're saying is this is important.

You need to know where your students are, you need to know how your teachers are doing, you need to know how the school's education are producing teachers that are helping and that you have to have this fundamental basis of fact or otherwise we're just guessing, we're continuing to guess at what's important.

We need to know what's happening and that we have to track students throughout their educational career, we can't be losing students through the cracks. It's not right.

SEN. HARKIN: So you've already tasked someone in your organization to start gathering the information on this.

SEC. DUNCAN: Yeah, it actually goes well beyond this, there is an outside group called the Data Quality Council DQC that's done extensive work for years in this.

They've ranked every state, they have ten requirements, there is a set of states that make all ten, there are states at nine, eight, seven, six, five and our goal would be to get every state to hit all ten of those benchmarks.

So this goes far beyond our department, this is really a national movement, with some clear bars and clear objective criteria and every state knows exactly where they stand; and we have money in the budget for Data Systems and we just want to help state get where they need to go.

I think there are six states now that hit all ten of those criteria so we've got some work to do.

SEN. HARKIN: We have a system that was started in Iowa just a few years ago, it's not, I don't think it's complete in the state yet, but my information from the school board is that they really like this tracking system that they have but I'll have to get more information on it.

SEC. DUNCAN: Good.

But again objectively I don't know how well it's working but what I hear from people, they said they are doing a great job of tracking students and making sure they know what each student, where is student is, and each teacher knows where the student is, and where they are weak and where they are strong, what happened to them last year, that type of thing.

SEC. DUNCAN: That sounds like exactly what we're looking for.

SEN. HARKIN: Yeah. Okay, lastly, and I don't mean to keep you any longer, but on the Recovery Act funding, you mentioned some of the guiding principals that you would be doing.

You said that they could spend money quickly to save and create jobs, implement school reform, minimize the funding cliff that we're going to be facing and that is a big concern of all of us here, yours too, obviously, but what's going to happen when we get passed next year?

Some school districts are confused how to balance all these, they say how do we create jobs without creating this funding cliff, how do we implement school reform if we just focus on reserving jobs.

I don't know that I have a real point in question on that, it's just that there is, and I'm hearing back some confusion from school districts out there, you know, what am I supposed to do?

Which is the priority? Am I supposed to save some jobs, or am I supposed to hire some new employees, some new people? But then what's going to happen if, next year when the money runs out, what will happen to them?

I keep getting input on this all the time and I just want to explore that with you a little bit.

SEC. DUNCAN: It's a really, really fair question and where I would really urge is first of all, I see these things as not as contradictory, but you need to do both, let me be clear in this saving jobs, without this stimulus, you know, we think we're going to save or create well north of 300,000 jobs.

SEN. HARKIN: Saving them, that otherwise would have been lost.

SEC. DUNCAN: Yeah.

SEN. HARKIN: Yeah.

SEC. DUNCAN: And you know if class size would have gone from 25 to 40, if we would have laid off librarians and social workers and counselors that would have been an absolute disaster, obviously I'm pushing for us to get dramatically better.

If we would have taken a step backwards that would have been a catastrophe for the country. So you have to do that. Simultaneously I would push very hard, is all we invest in the status quo? That's not going to get us where we need to go either, and that, you know, we have to attack this 30 percent national drop out rate.

We have to attack these drop out factories, we have to think differently about time, we have to think differently about talent, and we can do these things at the same time.

And you've seen, you know, real innovation and real creativity happen some places, you've seen other folks that are a little bit paralyzed and this is hard, its a lot, you know folks are under huge financial pressure this is --(inaudible) -- this is a real test of leadership.

And you're going to see some states and some districts and some schools do a phenomenal job of this and obviously you'll see some places get paralyzed and they won't, they can't handle the pressure.

And I would argue, Rahm Emanuel, the President's Chief of Staff, has this great line, "Never waste a good crisis", and I really believe that, that sometimes it's the times of crisis, this intersection of crisis and opportunity that you can sort of push these kinds of fundamental reforms.

So I would argue that if we could now with existing resources and additional Title 1 money and school improvement that we're requesting, that if we could fundamentally challenge some of these drop out factories and fix them, we fix them forever.

And we stop this pouring out of kids onto the streets that have no ability to compete in today's economy and hold a good job, support a family, and own their own home.

If we train a generation of teachers to work better with special education students and tend to teach to read early we prevent another whole generation of students from being labeled, "Special Ed" and they never escape.

So there are things that we can do now that are early childhood investment, if we do that well these children will be better prepared for work and for life 20 years from now.

So if we do the right thing now, on both fronts, we have this chance to fundamentally change education in our country, I really believe that.

And so these things are not in conflict, I think they can be absolutely complementary, but it's going to take leadership and vision and we want to share best practices so there should be no secrets in this, we're all in this together.

As we see states and districts doing innovative things we're going to continue trying to highlight those best practices so other folks can steal some ideas, and we're all in this together, we're all in this together.

SEN. HARKIN: Well that's very encouraging, there's been some concern that states might try to siphon some of this money off into other areas, I hope we're being diligent and trying to check that.

SEC. DUNCAN: We're going to check it, and again, I'm not looking for a fight, but we put out tens of billions of dollars, but we withheld tens of billions of dollars, and we did that for a reason and that's exactly the reason.

And again that's the stick side, the carrot side is unprecedented discretion of resources, and if states are gaining things they're basically going to walk away, they're going to eliminate themselves, they're going to walk away from hundreds of millions of dollars in additional resources coming into their state.

And we're trying to push very hard on both sides, carrots and sticks, to get states to do the right thing.

And I know the pressure they're under, I know the difficulties and I can only imagine -- it varies, some states are in disastrous situations, but everyone is under stress, but again, this is a test of leadership, when you're under stress, what do you do?

This is a real test of leadership right now.

SEN. HARKIN: Well, uh, it is a real test and I think that the President was very bold in the recovery act, and I think that we met that with putting that money in there for education. I think the total was about 100 billion dollars.

SEC. DUNCAN: North of that, it was a phenomenal investment and I appreciate your tremendous leadership in this.

SEN. HARKIN: Well, but now we just can make sure that we use it well and wisely and I can't tell you how much I like everything I hear coming from you and from the President on this. And that we're going to make some real changes and get us moving in a new direction on education.

So whatever, you know, we'll look at these budgets and these numbers and we obviously will be consulting with you and your people on this as we go through our Appropriations cycle here.

The last thing I just want to mention this is not really appropriate probably for this hearing, it would be probably be more appropriate in my other hat on the Authorizing Committee, but, what the heck, you're here and I'm here.

I can't tell you how many times I met with your predecessor, Margaret Spellings, on the issue of No Child Left Behind and that what we had seen is because of these AYPs and the focus on schools to do more on math and science, that, what we found is that schools under this pressure, were -- because they were trying to put more money into that, the first people to go were their art teachers and their music teachers and the Phys Ed teachers.

We uh, so there's the two areas, one the physical health of our kids in school, and when you build an elementary school without a playground, I don't know what kind of statement you're making about the health of our kids.

I had this quote from this one principal that said that, "We're in the business of teaching kids, not letting them play around on monkey bars", when asked about the fact that they had built the school without a playground. And so the health of our kids is important, early, in those early years.

But also, Quinton Marsalis just gave a great one hour discourse on culture at the Kennedy Center about a month or so ago, it was one of the most fantastic discourses on American culture and the history of culture as its interwoven with the arts and music.

And it just seems that we do ourselves a disservice if we don't have again, school, education for little kids and where they learn about art and music and what music means, and not every kid is talented enough to be in math and science, but they may have other talents, they may have talents in artistic fields and we have to engender that.

And I just think we're falling way behind on that, we're just giving it short shrift, as though it's not important. I would submit it is vitally important. And so again, with all the thrust of No Child Left Behind, and I hope we think about those other two things.

Don't leave them behind in terms of their health, and don't leave them behind in terms of their culture, and their appreciation for culture and arts and music and that type of thing.

I just state that to you, that --

SEC. DUNCAN: I couldn't agree with you more, I worry a lot about the narrowing of the curriculum. I think our students desperately need arts and music and dance, and drama, they need health, they need P.E.

I think we have to give students multiple opportunities to develop their unique skills and passions and talents and give them a reason to be excited about coming to school every single day.

For me, it was sports, for other kids it be debate or chess, or dance or drama.

SEN. HARKIN: Sure.

SEC. DUNCAN: We have to provide those opportunities. Our students have to be healthy, they have to be physically active. You and I went to a phenomenal school that I'll never forget in your state that is absolutely state of the art P. E. program, but guess what, I'm convinced that those students are going to do better academically because of what's going on there and the lessons that are being learned.

And so again, it's so funny that people always talk about these things being contradictory, monkey bars vs. learning, spend some time on the monkey bars and I think you're going to learn more.

I was one of those young kids, I couldn't sit still for all day, frankly, this is a long time for me to sit still here, still a challenge, I need some monkey bars.

But kids need to get up and get some fresh air and run around a little bit and I worry a lot about our young kids that don't have those kinds of opportunities. So these things, to me, aren't contradictory, they absolutely -- you want to improve some math scores do some music, there's actually a lot of data about that.

And so I go back to narrowing the curriculum is a problem, the school day being too short, we can't pack all this stuff in, we have to get some more time, so this could be before school, it could be after school --

SEN. HARKIN: Longer school year.

SEC. DUNCAN: Longer school year. Summer enrichment so if a kid is great at the piano, or violin or dance or drama, it's not just more of the same, that somebody has the chance to build upon those skills. And so I think we have a real chance to be creative and stop these sort of false dichotomies and false battles.

Say that every kid needs these kinds of opportunities and let them figure out what the right path is for them. So this one that we want to spend a lot of time and thought on and try and get it right.

SEN. HARKIN: Well, how are we going to be helpful both on the authorizing end, but also on this end in the Appropriations Committee, if there are things that we need to pilot or if we need to look at in terms of boosting some funds someplace, to enhance that, I'd like to know your thoughts on that.

We may have some of our own, but I'd like to hear your thoughts on that.

SEC. DUNCAN: I look forward to that.

SEN. HARKIN: Well Mr. Secretary, thank you very much, you've been very generous with your time and your input and I'm sure that we'll be dealing with your people -- (inaudible) -- and others as we move ahead on the appropriations process.

SEC. DUNCAN: Thank you for your leadership I really appreciate it.

SEN. HARKIN: Thank you for your leadership. Thank you Mr. Secretary. The sub committee will stand adjourned.

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