In the midst of an interesting memo defending President Obama’s  decision to propose level funding Title I for next year, Raegan Miller of the Center for American Progress raises the point that many states and school districts don’t need increased Title I money because they are still receiving additional stimulus dollars. That’s a good point and makes a lot of sense–no need to spend more when there are already federal funds available.

But while the stimulus funds may be enough to justify flat-funding Title I for next year, it also hints at some important looming questions in all levels of federal education spending—what to do when the stimulus money expires.

As Miller notes, school districts and states still have some remaining funds from the $10 billion provided for Title I in the stimulus that would supplement the flat funded level of $14.49 billion for Title I. According to Jennifer Cohen, my former colleague at the New America Foundation, only about 24 percent of Title I stimulus funds had been disbursed by March 5. Coupled with the fact that up to 15 percent of the $10 billion can be reserved for the 2011 fiscal year, this increases the likelihood that states will still have a decent amount of money to use.

And in theory, nothing should change when the Title I stimulus money is gone. The Department of Education wrote in its guidance on Title I stimulus funds that states and districts “should focus these funds on short-term investments with the potential for long-term benefits rather than make ongoing commitments that they might not be able to sustain once [stimulus] funds are expended.”

But what if some of the Title I stimulus money ended up going to functions that districts and states view as being important to continue funding?

If the recent case of Pell Grants are any indication, then one can expect a big bill coming due all at once.

The stimulus provided over $17 billion that helped boost the maximum award from $4,731 to $5,350 (it has since increased another $200 as part of the 2010 appropriations process). It was an immediate and direct benefit to students and one that would have obvious and public consequences if it disappeared.

The expiration of stimulus Pell funds for the 2011 fiscal year thus presented a big problem for Congress, one it chose to solve by diverting more than $13 billion of the savings from the recently passed student loan legislation in order to keep the maximum award constant. (See this post here for more on this issue.)

Pell Grants were the first major test of what to do with expiring stimulus education funds, and Congress’ response was to find ways to fill in the gaps. Lingering stimulus funds mean similar Title I spending decisions won’t have to be made next year, though they could very well pop up in FY 2012.

But the biggest test is the $39 billion State Fiscal Stabilization Fund. That money saved jobs and other vital education services and had an immediate benefit for states and districts. Absent improved economic circumstances, the expiring of those funds could have significant effects across the country—just like decreased Pell Grants would have hurt low-income college students. Again, it’s not a decision that must be made tomorrow, but it is coming down the road.

The stimulus was an incredibly important piece of legislation that did a great deal to keep the country afloat and help save students and jobs at all levels of the education system. But as that money slowly winds down, Congress will have to consider letting the Title I boost and State Fiscal Stabilization Fund expire, or whether, like Pell Grants, we can expect a major infusion of federal education dollars in the future.