The federal government will release hundreds of millions of dollars to prop up Arizona’s schools system with a proviso that the money must be used to restore education funding to fiscal 2008 or 2009 levels, whichever is greater, according to the final set of rules released last week by the United States Department of Education.

The rules also include a maintenance-of-effort clause that requires states to maintain education funding through fiscal 2011 at a level that does not fall below the amount of money spent on education in fiscal 2006.

To receive the bulk of the federal money, Gov. Jan Brewer must first provide an outline to the U.S. Department of Education to explain how the state intends to spend it. She also must offer assurances that Arizona will comply with the maintenance-of-effort requirements and that the state is committed to advancing education reforms, including equity in the distribution of teachers across districts.

Once that phase is complete, Arizona will receive 67 percent of the estimated $1 billion available to the state under this specific component of the stimulus package. The state must then provide a comprehensive plan to achieve education reform before becoming eligible for the rest of the money.

The U.S. Department of Education noted that has yet to adopt rules to govern the release of the rest of the money. The department indicated the remaining money would be awarded to states by September.

Arizona, which faces a $3 billion budget deficit in fiscal year 2010, might be eligible to receive as much as 90 percent in the initial phase of stimulus distribution if it demonstrates that the initial amount is insufficient to prevent immediate layoffs of employees of K-12 schools, the universities or state agencies.

Specifically, if Arizona can show that the money needed to restore state funding for education is larger than what it would get under the initial disbursement, the federal education department could decide to distribute more money.

The federal rules came just in time, as state lawmakers were determining funding levels for schools and other state services for fiscal 2010. In fact, Senators last week were planning to draft a budget proposal with "placeholder" figures, instead of actual distribution amounts from the stimulus package, because too many questions remained regarding the qualification standards.

The federal rules, which followed at least one draft and are expected to be the final set of guidelines for the states, give Brewer and other governors nearly unfettered discretion to apply for and distribute the money.

It's up to Brewer to decide whether to apply for additional, up-front education funding. And she can decide when to release the money for public schools and universities. Governors must, however, "obligate" the money by Sept. 30, 2011.

Also, individual school districts have the flexibility to spend their portions of the stimulus money at any time through fiscal 2011.

The rules also give states flexibility to determine what formula to use in calculating education funding. But at the minimum, basic support to K-12 schools must be included in the calculation. Basic state support usually means general fund money. The rules say Arizona cannot include local tax revenue for schools in determining the level of state support for K-12 education. 

The rules also provide the same flexibility as far as higher education, except tuitions and fees paid by students must be excluded from the equation when determining the level of state support for universities. 

Also, Brewer has authority to restrict use of the funds by a university. In fact, she may also impose specific eligibility requirements on universities to ensure that the federal law's intentions are met.

One of the purposes of the federal funding, for instance, is to help mitigate the need for tuition and fee increases. So, Brewer, under the rules, could choose to refuse to allocate money to a university that does not minimize tuition and fee increases for in-state students.