Obama seeks $1.35 billion for school reform in next budget

President Obama meets with third and fourth grade students at Viers Mill Elementary School in Silver Spring, Maryland, October 19, 2009.

WASHINGTON (Reuters) - President Barack Obama on Tuesday announced he intends to seek $1.35 billion to extend a nationwide public-school reform program as part of his fiscal 2011 budget proposal.

The funds, aimed at reversing a decline in U.S. public schools, would be on top of the $4.35 billion that financially strapped states already are competing for under Obama's "Race to the Top" initiative included in the $787 billion economic stimulus plan passed last year.

"Over the past few months we've seen such a positive response that today I'm announcing our intention to make a major new investment," in the program, Obama said during a visit at a local elementary school.

"There are any number of actions we can take as a nation to enhance our competitiveness and secure a better future for our people, but few of them will make as much of a difference as improving the way we educate our sons and daughers," he said.

An administration official said the federal school grants likely will continue beyond fiscal 2011, until all states participate. The official said Obama had not set an end date.

Eleven states have implemented reforms so far to make themselves eligible for funding and more than 30 states are expected to have applied for money from the program by Tuesday's deadline for the first round, senior officials said.

Part of the stimulus money allocated to the schools program will be awarded in April. Those states that do not receive money can re-apply in June, an official said.

Competition for funds from next year's budget will be opened to school districts, eliminating the tensions that emerged between local and state governments over distribution of the stimulus money.

Education Secretary Arne Duncan said the program so far had generated an "overwhelming response."

Obama wants states to use the funds to ease limits on charter schools, link teacher pay to student achievement and move toward common U.S. academic standards. Charter schools receive public funding but are exempt from some state or local rules and serve as an alternative to regular public schools.

The United States has one of the worst high school dropout rates in the industrialized world and its students often rank below those in other Western nations in reading and math.

Obama has portrayed the drive to improve education as part of a broader push to promote economic growth.

When the recession began in 2007, states worked to shield schools from the deepest downturn since the Great Depression. As their reserves drained, though, some were only able to save teachers' jobs and keep schools running through direct injections of cash from the stimulus passed last February.

Many states say they expect to feel effects of the recession through 2012, or more than a year after the stimulus expires.

(Editing by Bill Trott)