California has been shut out for the first round of a $4.3 billion school-funding competition promoted by the Obama administration.
Thursday's announcement by the U.S. Department of Education is a blow to Gov. Arnold Schwarzenegger and reform supporters in the state Legislature.
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 "Race to the Top" 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.
