When Congress finally passed the $26 billion state aid bill earlier this month, it included a provision — added at the behest of Rep. Lloyd Doggett (D-TX) — that Texas not receive any of its allocated education money unless it was willing to certify that it wouldn’t cut its state contribution to education funding.

There was a good rationale for the provision, as when the American Recovery and Reinvestment Act (the stimulus) passed, Gov. Rick Perry (R-TX) simply cut the state’s education budget by the same amount as the stimulus funding the state received, resulting in no net increase in education spending.

But maybe Indiana should have been on the list for heightened scrutiny as well. The Sunlight Foundation today highlighted a report in The North West Indiana County Times showing that Indiana, led by Gov. Mitch Daniels (R), pocketed its stimulus money and then placed its own education funding into a rainy day fund:

Indiana State Budget Director Christopher Ruhl confirmed the federal stimulus money was used to provide basic tuition support dollars for school districts, allowing the state to squirrel away funds that normally would have been used for that purpose. “The state dollars saved were placed in our education rainy day fund,” he said.

Hebron schools Superintendent George Letz said that the stimulus funding “was not used the way in which he thought it was designated by Congress.” “I had understood the Obama administration wanted the money to be used to provide personnel and programs to help our students improve their achievement level, but instead the government took the money and substituted it for basic tuition support,” he said.

East Porter County School Corp. Superintendent Rod Gardin confirmed this, saying “we didn’t receive any extra money.” In addition, Daniels changed the funding formula for his state’s education budget, actually shortchanging poorer districts that are losing students, even when the state technically had more education dollars to spend.

Daniels and Perry seem to have inspired some other states to at least look at using education funding to instead reduce their deficits. As Lucia Graves reported, “in California, legislators, including state Sen. Darrell Steinberg, have proposed using the $1.2 billion in federal money designated for the schools to help offset the state’s $19 billion deficit.” In Oregon, Gov. Ted Kulongoski (D) has also said he might cut the state education budget after receiving federal funds.

At this point, was it a mistake to not apply the Texas standard to every state, ensuring that federal dollars actually wind up with students and teachers in the classroom? “If this is a good idea, then why not make it apply to all states?” asked Debbie Ratcliffe, a spokeswoman for the Texas Education Agency.

Florida’s Republican Senate candidate Marco Rubio has released a series of policy proposals in various subject areas, in an attempt to prove that he isn’t out “just to paralyze government.” We’ve already taken a look at his ideas when it comes to tax and budget policy, but Rubio has also released an outline for education reform.

His very first idea is to convert an unnamed number of tax credits and deductions into a “universal education tax deduction” for sending students to private school. “On the whole, this would provide tax relief to parents for school supplies, home schooling costs, sending their children to private school or for those saving for their children’s college education,” Rubio claimed.

There are a couple of problems with this. First, choosing a deduction — instead of a straight tax credit — makes this worth more to rich families than poor, as deductions get applied to the last dollar of taxable income. So a rich family paying in the 35 percent income tax bracket gets a bigger break than a family paying in the 10 percent bracket.

Plus, as the Orlando Sentinel’s Mike Thomas pointed out, “what good is a deduction for school supplies…to low-income parents who don’t itemize?” In fact, by choosing a deduction, Rubio explicitly prevents any low-income family that is too poor to have federal tax liability from gaining any benefit at all, as you must have some income tax liability to claim a deduction (whereas you can claim a refundable credit even if you paid no federal income tax).

Next, as M.S. at the Economist noted, Rubio doesn’t dedicate enough money to the credit to make it any more than a giveaway to families who were already going to send their kids to private school anyway:

There are 55m students in primary and secondary education in America; 5.8 m of those students are enrolled in private primary and secondary schools. (Mr Rubio’s credits would apply to college as well.) And the goal would presumably be to allow more students to transfer to private schools, if they so choose. Average private-school tuition in 2007-8 was $8,550. (Religious schools are only moderately cheaper than average: average tuition at Catholic high schools was $7,500.) So Mr Rubio’s $7 billion could, at best, provide a thousand-dollar tax break for those parents already able to afford private-school tuition, or those at the margin who are almost able to do so. There isn’t enough money there to allow low-income families who can’t currently afford to spend thousands of dollars per year on tuition to do so.

Not all of Rubio’s ideas on education reform are as bad as this one. In fact, his proposal that state block grants for education “should require performance and accountability measures” is a good one! But his plan for converting billions in education tax credits into a private school tax deduction shifts education spending from those who need it the most to those who need it the least.