Oct. 6 (Bloomberg) -- School districts and nonprofit groups would have to team up with private-sector organizations to qualify for $650 million in stimulus grants under guidelines proposed by U.S. Education Secretary Arne Duncan.

Private partners such as philanthropic groups would have to provide matching donations equal to at least 20 percent of each federal grant under the proposal, posted today on the Education Department’s Web site.

All school districts and nonprofits, including charter- school organizations, will have a chance to compete for part of the $650 million, known as the Investing in Innovation fund, Duncan said on a conference call with reporters.

“Some will find ways to establish a network of new schools or develop models to turn around low-performing schools,” he said. “Others will find new ways to use technology. Others might explore how to engage children in the arts.”

Duncan, the former head of Chicago’s public schools, is using $100 billion in stimulus funds as leverage to try to reshape U.S. education. While the stimulus law directs most of the money to states under a noncompetitive formula, it also provides more than $5 billion in competitive grants.

The largest chunk of competitive grant money, known as Race to the Top, will disburse $4.35 billion to states that make the most progress in raising academic standards, boosting teacher quality, tracking student gains and improving failing schools.

‘Proven Results’

The $650 million innovation fund also emphasizes those four goals. It will “provide seed money for fresh ideas, help grow promising programs with a good track record and scale up programs with proven results at a national level,” Duncan said.

School districts and nonprofits whose methods have improved student performance and can be replicated nationwide could receive as much as $50 million, Duncan said. The smallest grants, of $5 million or less, would provide startup money for experimental initiatives.

“I’m sure we’ll experience some failures” with the smaller, untested projects, he said. “But like venture capitalists, the number of successes will far exceed the number of failures.”

Grant recipients’ private-sector partners could meet the 20 percent matching requirement with cash or in-kind donations such as administrative support, said James Shelton, who heads the Education Department’s innovation office.

“Being able to demonstrate the ability to assemble a broad set of stakeholders that are going to support this effort after the federal funding runs out is an important part of this work,” Shelton said on the conference call.

The Education Department said it plans to award all innovation grants by Sept. 30, 2010. The public has 30 days to comment.

To contact the reporters on this story: Molly Peterson in Washington at mpeterson9@bloomberg.net;

Last Updated: October 6, 2009 16:19 EDT