As thousands of people across the California protest cuts in education from pre-k all the way through college-level, the Obama administration dealt a blow to state's efforts to pull out of the deep hole.
California was shut out for the first round of the "Race to the Top" fund, a $4.3 billion school resource competition promoted by the Obama administration.
Other states with large populations, including New York, Florida, Pennsylvania and Illinois, were among 16 that made the list of finalists. California was among 41 applicants in the first round of the competition.
California lawmakers wrangled for weeks before passing a package of school reform measures designed to make the state more competitive for the funding. Schwarzenegger says Thursday's decision shows California did not go far enough in making reforms.