March 23 (Bloomberg) -- After only 50 percent of Arizona's eighth-grade public school students passed a standardized reading test, state education officials took decisive action: They made the exam easier. Last year, 71 percent of students were rated ``proficient'' in reading.

As students throughout the U.S. undergo the latest round of tests this month, corporate leaders including Craig Barrett, chairman of Intel Corp., and Edward Rust, chief executive officer of State Farm Mutual Automobile Insurance Co., say they're concerned about slipping standards among states. They're exploring whether to renew a decade-old push for national tests.

``Ultimately, the competitiveness of your kids ought to prompt people into action,'' says Barrett, 66, whose Santa Clara, California-based company, the world's largest semiconductor maker, invests $100 million a year in education programs.

Rust, 55, whose Bloomington, Illinois-based State Farm is the biggest U.S. auto and home insurer, says having different standards among states makes no sense. ``The laws of physics apply equally here in Illinois as in New York,'' he says.

The shortcut to better results that Arizona is taking suggests that President George W. Bush's ``No Child Left Behind'' law, which uses financial penalties to try to raise educational standards, might be having the opposite effect: Critics say some states are making tests easier as they face a cutoff in funding to low-performing schools.

Barrett and Rust serve on a commission that's developing recommendations on the future of the No Child Left Behind law. The panel's Democratic co-chairman, former Georgia Governor Roy Barnes, already has suggested that Congress create incentives for states to move toward national tests.

`Racing to the Bottom'

Michael Petrilli, a former U.S. Department of Education official who helped the Bush administration implement the No Child Left Behind law in 2002, says the legislation's penalties, combined with the lack of any federal benchmark, create an incentive for states to lower standards.

``What we see right now is actually the worst of both worlds,'' says Petrilli, 33, now vice president for policy at the Thomas B. Fordham Foundation, a Washington-based research group. ``We have states racing to the bottom.''

In Arizona, test revisions led to improved results in several grades. For fifth-grade math, the passing rate jumped to 71 percent from 47 percent in 2004. Schools Superintendent Tom Horne says some changes were intended to bring eighth-grade results more in line with other grades. In other cases, the results may reflect pressure within the school system to show gains in the aftermath of the No Child Left Behind law, he says.

`Common Sense'

``Use your common sense: If you have more kids or less kids passing a test, you have to make an assumption as to whether that is due to easier questions or whether that's due to learning less,'' says Horne, 60.

Under the law, schools that fail to make sufficient academic progress for two consecutive years must let students transfer to another school or pay for tutoring for low-income children. States that don't comply can have their federal education funding withheld. Some states have complained that the federal government hasn't provided enough money to pay for the law's mandates, including testing and tutoring, and Connecticut is seeking a court order to bar any punitive action.

Preliminary figures submitted to the U.S. Department of Education by states show that 27 percent of the more than 90,000 schools nationwide failed to meet the federally required standard for making progress in the last school year.

Don't Dumb It Down

The Department of Education should investigate any state suspected of manipulating tests to improve scores, says Representative Mike Castle, chairman of the House Subcommittee on Education Reform, who helped write the No Child Left Behind law.

``If all of a sudden you have states jumping 30 percent in one year because they've redone their tests, that's an issue,'' says Castle, a Republican former governor of Delaware.

``The idea is not to dumb this thing down.''

For most corporate executives, the ultimate idea is a well- trained workforce.

``These issues must become more of a priority,'' Richard Templeton, CEO of Texas Instruments Inc., said at a December summit of corporate and government officials that focused on economic competitiveness. Otherwise, he said, U.S. policy makers will see more jobs moved overseas.

U.S. companies must increasingly rely on foreign engineers, says Paula Collins, vice president for government relations at Dallas-based Texas Instruments.

Shift Overseas

The annual federal allotment of 65,000 U.S. visas for such workers is typically exhausted after the first month of each year, Collins says. That, and the sheer number of motivated workers overseas, is prompting U.S. companies to consider locating factories abroad even if foreign labor isn't cheaper, says John Greenagel, a spokesman for the Semiconductor Industry Association, a San Jose, California-based trade group.

Foreign students earned 38 percent of all U.S. doctorates in science and engineering in 2003 and 59 percent of engineering doctorates, according to a survey last year by the Arlington, Virginia-based National Science Foundation.

James Lanich, president of California Business for Education Excellence, says lowering standards is self-defeating.

``We are never in support of redrawing targets in order to meet our academic objectives,'' he says. ``Our college-readiness target is entry into college with at least basic skills with no need for remediation. And we expect that same level of preparedness, at a minimum, for entry into the workforce.

``At the end of the day, the necessity for a rigorous national test is appropriate,'' says Lanich, 49.

`The Worst Thing'

Yet some business groups are wary of lobbying for nationwide tests, citing political obstacles. Bush was able to enact No Child Left Behind only after pledging that states would retain the power to write their own tests. He's keeping that promise.

``I've never said the federal government is going to tell you how to teach,'' Bush, 59, said during a Jan. 9 visit to an elementary school in Glenburnie, Maryland. ``That would be the worst thing that could happen to the public school system.''

While many countries already use national standardized tests, the resistance in the U.S. may be insurmountable. Both Presidents Bill Clinton and George H.W. Bush failed in their efforts to introduce national exams.

The ``bitter taste'' left by the failure to enact such tests dissuaded U.S. executives from pressing for them during the creation of the No Child Left Behind law, Petrilli says.

Companies Spending

Companies are trying other ways to boost standards. Irving, Texas-based Exxon Mobil Corp. spends as much as $10 million a year on projects to prepare students to enroll in advanced math, science and technology courses. Texas Instruments helps high schools adopt new technologies.

Armonk, New York-based International Business Machines Corp. encourages departing employees to become teachers, reimbursing them up to $15,000 for tuition and stipends while they student teach. Fairfield, Connecticut-based General Electric Co. last year gave Jefferson County, Kentucky, public schools a $25 million grant to improve math and science education. GE's Consumer and Industrial unit is based in Louisville, Kentucky.

The U.S. has one broad measure of students' abilities: The National Assessment of Educational Progress is a set of federal tests to provide policy makers with general indications of student achievement. The results are sometimes stark: Alabama reported in 2004 that 83 percent of its students were proficient in reading on state tests. Only 22 percent of Alabama students given the federal test were rated proficient.

Frustrated Over Scores

The NAEP exam is given only to a sampling of students and carries no consequences for poor performance. Still, states pay attention to the results.

In Missouri, Education Commissioner Kent King says state lawmakers ordered revisions to their math test because they were frustrated that their state exam was proving tougher than NAEP. The NAEP test last year rated 26 percent of Missouri's eighth- grade math students proficient or advanced, while the state exam put the figure at 16 percent. After the revisions, 40 percent of eighth-graders are projected to be rated math proficient.

Powerful Pressures

Petrilli agrees that Missouri had some of the nation's top standards, and said its decision reflects ``powerful'' pressures to show year-by-year improvement in the aftermath of the No Child Left Behind law.

Without a nationwide test, the public has no way of knowing if comparisons are valid when it sees such shifts, he says. ``This is the government saying, `Trust us, we're not playing games with the numbers.' There's no way to verify it,'' he says.

In Ohio, the number of sixth-graders rated proficient in math jumped from barely more than half in 2003 to almost two- thirds in 2004. State officials deny making an intentional shift to improve results, though the passing score for 2004 was dropped to 45 percent from 50 percent.

The change in score was a scientifically based adjustment meant to reflect a tougher test, says Mitchell Chester, assistant superintendent at Ohio's Department of Education.

Missouri's King says the state simply wanted to be judged more closely to a national benchmark.

``If that's lowering the standards,'' he says, ``then I guess I can't refute that.''

To contact the reporter on this story: Paul Basken in Washington at pbasken@bloomberg.net

Last Updated: March 23, 2006 00:03 EST