California was disqualified Thursday from receiving hundreds of millions of dollars in school reform funds when federal education leaders announced that 15 other states and Washington, D.C., are in the running for billions in federal grants.
The money at stake is the first round of $4.35 billion that the Obama administration plans to give states to spur reforms.
California officials plan to apply for a second round of funding but were unsure exactly how to improve their chances.
To make California a contender for the Race to the Top program, politicians rewrote laws, giving parents the ability to demand aggressive changes at struggling schools and allowing districts to link teacher evaluations to test scores.
The competition was set up to encourage states to take on reforms supported by the Obama administration. These included lifting caps on charter schools, using data to track the progress of students and teachers, and shutting down or replacing the staff at low-performing campuses.
Federal officials would not say why California or any other state fell short.
But according to federal guidelines, California would have lost points because fewer than half of the state's school districts and unions agreed to a package of reforms signed into law in January.
Even though California could have received up to $700 million, some teachers union leaders sounded slightly relieved. They had opposed, for example, basing evaluations on standardized tests they say are flawed.
"There wasn't a great deal of support," said Marty Hittelman, president of the California Federation of Teachers. "I won't say that I'm in sorrow of California losing it."
Others who had pushed hard for the legislation, including Gov. Arnold Schwarzenegger and state Sen. Gloria Romero (D-Los Angeles), expressed disappointment.
"While the reforms we passed did move our state forward, they did not go far enough because other states were more competitive," Schwarzenegger said.
State officials had not planned exactly how to use the money, but California's exclusion is another financial blow in a state confronting a continuing multibillion-dollar budget crisis. School districts up and down the state are confronting teacher layoffs, increased class sizes and fewer electives; protests against budget cuts were held on campuses throughout the state Thursday.
The money would have particularly helped the Los Angeles Unified School District, the nation's second-largest system. Because many other districts chose to sit out the competition, some analysts anticipated a share for L.A. Unified as large as $100 million.
Those funds could not have been applied directly to the district's $640-million deficit -- the money had to be used for specific reform efforts -- but they would have helped significantly.
Several of the finalists lack collective bargaining rights for teachers, such as South Carolina and Louisiana. And in Kentucky, all school districts signed on.
In a news briefing Thursday morning, U.S. Secretary of Education Arne Duncan said that states without collective bargaining rights for teachers were not given special treatment.
Applicants' ability to execute favored reforms carried weight, said officials close to the decision-making process who requested anonymity because they were not authorized to speak publicly.
So a state such as Louisiana, which converted more than half of New Orleans' schools to charters in the wake of Hurricane Katrina in 2005, would presumably have an advantage.
Louisiana is "doing so many of these things that Race to the Top is asking schools and school districts to do," said Paul Vallas, superintendent of the Recovery School District in New Orleans. "Our actions are speaking as loud as our words."
California's application was no worse than many other finalists, some experts said.
They pointed out that Kentucky does not have a law permitting charter schools, and New York legislators failed to repeal a charter school cap.
"I expected a finalist list of five and was quietly hoping for three. My worst-case scenario was 12. I never would have imagined 16," Andy Smarick, a fellow at the Thomas B. Fordham Institute, wrote on his blog, indicating that the federal government was not selective enough.
California will still receive, later this year, its share of $4 billion in separate federal school improvement grants. State officials will decide which districts get the money, federal education spokesman Justin Hamilton said.
Because the state won't receive feedback from the federal government on its application until April, education officials said they are unsure what changes to make. But since the application for the second round of funding isn't due until June, state officials say they will meet with union leaders, parents, school district officials and others in the meantime.
"We plan to meet with all the stakeholders and ask, 'What would you change about our application?' " said Kathryn Gaither, a state undersecretary of education.
Arun Ramanathan, executive director for the Education Trust-West, a nonprofit group, called on lawmakers to be bolder. He proposed modifying or doing away with the requirement that teachers be laid off based solely on seniority and improving teacher evaluations and hiring processes.
"The reason the state didn't get selected is because there weren't enough significant reforms in their application," he said.
David Sanchez, president of the powerful California Teachers Assn., said he hoped for more collaboration between unions and lawmakers while the next application is prepared.
In the past, Sanchez urged local teachers unions not to agree to the package of Race to the Top reforms.
"It's going to be another interesting ball game to see where we go from here," Sanchez said.
Aside from Washington, D.C., the other finalists were: Colorado, Delaware, Florida, Georgia, Illinois, Kentucky, Louisiana, Massachusetts, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina and Tennessee. Winners will be announced in April.