"There are a number of states that I would have loved to have funded, and we just simply didn't have the resources to do that. That's why it's so important that we continue to come back and have a round three and a round four," Duncan said. "We did not take anyone out of rank order. It's been a very fair and impartial process. I give our peer reviewers great, great credit."
The education secretary also made clear that the department will withhold funding from any winners who do not follow through with their proposed reforms.
"These are your dollars and my dollar. These are taxpayer dollars, and every single dollar we want spent extraordinarily wisely. ... If at the end of the day we have a feeling that a state is not acting in good faith or simply doesn't have the capacity or the will or the courage to implement their plans, we're absolutely prepared to stop funding a state where we don't think that's a good investment of scarce taxpayer dollars," Duncan explained.
In the first round of the competition, announced in March, Delaware was awarded $100 million and Tennessee $500 million. In the second round, the Education Department is limiting the amount that a state can receive based on its student population. For example, large states like New York could be awarded as much as $700 million while smaller states like Hawaii are limited to $75 million.
According to Duncan, overall funding for the winners in both rounds will impact 13.6 million students and 980,000 teachers in 25,000 schools.
By using cash as the ultimate carrot, the competition has given states incentives to make dramatic changes to better compete.
For example, after failing to win the first time around, legislators in New York recently raised the cap on charter schools in the state, doubling the number to 460. Other states, including the District of Columbia, approved plans to allow teacher evaluations based on student test scores, a practice that teachers' unions have long opposed.
Duncan praised the change occurring nationwide as a result of Race to the Top.
"We've unleashed this amazing creativity and innovation at the local level," he said. "The amount of reform we saw before round one was amazing, but then again to see so much movement between round one and round two, the average state improving their score by more than 30 points."
Over the course of the competition, 35 states and the District of Columbia have adopted rigorous common academic standards in reading and math, and 34 states have changed laws or policies to improve education.
However, critics question the long-term impact of these legislative changes.
"Throughout the process, states got much credit for making changes to laws that actually, in most cases, will have little to no impact as long as teacher contracts control the classroom and quality school choices are limited or nonexistent. While there is no question that Race to the Top has been the administration's positive bully pulpit on education, the dramatic need for laws to change remains largely undone," Jeanne Allen, the president of The Center for Education Reform, said in statement.