Pennsylvania and New Jersey, each hoping for $400 million in federal grants to improve education programs and turn around low-achieving schools, fell short Tuesday, with nine other states and the District of Columbia sharing $3.3 billion.

The failure to win funding in the Race to the Top competition's final round was a setback for both states' hopes to boost academic performance in struggling schools, the main target of the program.

Those schools would have had to implement changes in everything from the length of the school day to how teachers are evaluated. Some would have been converted to charters, turned over to education management companies, or closed.

In a year when both states face budget crunches, the grant money, though not going to all schools, would have indirectly helped by sending additional money to many of the poorest districts.

Still, officials vowed to stay on course for change. The Philadelphia School District had hoped to receive tens of millions of dollars targeting 76 struggling schools. But Superintendent Arlene Ackerman said in a statement that "we are going to continue to move forward. . . . We will be relentless in our pursuit of excellence in our schools no matter the obstacles we may face."

States sought to win Race to the Top awards by pledging to enact changes that the Obama administration said would help improve education. Money was awarded in two rounds. Pennsylvania had placed seventh in first-round scoring earlier this year. New Jersey placed 18th in the first round. Both states were named round-two finalists last month.

The round-two scores showed a reversal: New Jersey finished 11th, just out of the running, while Pennsylvania slid to 18th.

In announcing the recipients of the money Tuesday, U.S. Education Secretary Arne Duncan said he believed several additional states deserved to get funding, based on their applications, but "we simply did not have the money to do that."

The failure of Pennsylvania and New Jersey to make the final cut left politicians and teachers union officials scrambling to explain.

In Pennsylvania, 122 of 500 school districts and 69 of 135 charter schools partnered with the state in its application and would have shared the money. Philadelphia and 23 other area districts, including Chester Upland, Norristown, and Upper Darby, stood to get tens of millions of dollars to improve their schools.

In all of the partner districts, teachers union officials joined with school board members and administrators in supporting the bid. The state's largest teachers union, the Pennsylvania State Education Association, urged its locals to support the state's proposal where appropriate. But some did not sign off on the plan, and they were not included in the state's application.

Gov. Rendell said Tuesday that "in all fairness, we should have won," adding: "Other states, I believe submitted applications that they will not be able to live up to." He said he told Duncan when he spoke to him Tuesday that "he's been deceived."

The governor also said that if all Pennsylvania State Education Association and the American Federation of Teachers locals in the state had "bought in" to the application, "it would have been very helpful." And he said that Pennsylvania continues to be an education leader.

Sen. Jeffrey Piccola (R., Dauphin) the chairman of the state Senate Education Committee, had a different take on the news. Piccola had pushed for passage of state "education empowerment" legislation that would have allowed a state board to make sweeping changes in low-performing districts and schools. That legislation stalled.

"As this announcement underscores, Pennsylvania is not nearing 'the top,' " Piccola said in a statement. "We are lagging behind other states in real education reform."

New Jersey submitted a second-round application that called for a substantial education overhaul, including proposals for changes in the use of seniority for layoffs, the evaluation of teachers for tenure and job fitness, and the introduction of merit pay for some teachers.

The Race to the Top grants were to be awarded according to the extent to which the states demonstrated a commitment to the Obama administration's educational goals.

Those goals included improving educational performance in low-achieving schools, expanding the use of data systems that will help teachers identify and help struggling students, instituting teacher evaluations that use student test scores as one factor in judging performance, enhancing professional development for teachers, and identifying and spreading the use of successful educational techniques.

Jack Jennings, the head of the Center on Education Policy, a Washington think tank, said that he wanted to "compliment the [education] department for sticking for their guns - they said they would hold high standards and not give grants to just anybody. And they did not give awards to some very big states, including Pennsylvania and New Jersey; they have taken an unpopular stand in many cases."

But Michael Petrilli, an education analyst at the Thomas B. Fordham Institute, another Washington think tank, said the shift in Pennsylvania's ranking, along with the failure to give grants to states like Colorado and Louisiana, which have undertaken significant changes in their education systems, called into question the validity of the competition's outcome and did damage to its intent.

"It just shows the vagaries of the . . . process; it is more art than science," he said. "It seemed to depend more on who was on the panels [that reviewed each state's application] than what was in the proposal."

Contact staff writer Dan Hardy at 610-313-8134 or at dhardy@phillynews.com.