The Senate passed the bill 87-10, affirming an overwhelming House vote last week of 381-41. Bush is expected to sign the bill into law in early January.

In a statement, the president thanked lawmakers, saying, "These historic reforms will improve our public schools by creating an environment in which every child can learn -- through real accountability, unprecedented flexibility for states and school districts, greater local control, more options for parents and more funding for what works."

The bill provides $26.5 billion in federal spending on elementary and secondary education in the 2002 budget year — about $8 billion more than in 2001. It's $4 billion more than Bush requested, but nearly $6 billion less than Senate Democrats wanted.

After a nearly year-long effort to institute changes to what many see as a failing school system, Democrats and Republicans both said they were pleased with the outcome.

"We're a long way down the road to historic change," said Sen. Edward Kennedy, D-Mass., one of four key lawmakers who helped to shape the measure.

"Parents of every income level and ethnic background deserve the freedom to choose the best education available for their children," said Rep. John Boehner, R-Ohio, chairman of the House Education and the Workforce Committee. "Congress has taken important steps this year that lay the foundation for equal educational opportunity in America."

The biggest change in the Elementary and Secondary Education Act is a provision that requires public schools to test every student in grades three through eight in reading and math. Schools identified as failing to educate would have to give their federal aid to each student who wants it for transportation to another public school, tutoring or summer school. 

Faith-based providers will be eligible to receive the funds. The bill does not provide students with vouchers to attend private schools.

States and school districts will be allowed to transfer up to 50 percent of their federal dollars to areas they think are most deserving. For example, money intended for teacher improvement could instead go to salary increases, training or additional instructors. But districts would also have to submit annual "report cards" to parents showing a school's standardized test scores and teacher qualifications compared with other schools, both locally and statewide.

The bill would also require schools to adopt plans to close the achievement gaps between low-income and middle-class students and between white and minority students.

Schools would have to show that teachers are qualified in their subjects, and would have to test students with limited English skills in English after three consecutive years in a U.S. school.

Not everyone was happy with the bill. Sen. Paul Wellstone, D-Minn., who voted against the bill, said it was taking away the grassroots authority of local school districts by creating a federal mandate for school testing.

"The only thing we've done here is we have a federal mandate that every child will be tested every year, but we don't have a federal mandate that every child will have the same opportunity to do well, and if they don't do well, that there will be any additional help," he said. 

The Associated Press contributed to this report.

The bill, which passed the House last week, is now set for President Bush's signature.

The $26.5 billion Elementary and Secondary Education bill does not allow federal funding to be used for private schools — a provision stripped from the House bill after protests from teachers unions and Democrats — but it does give the ultimatum to schools to shape up or lose the cash along with the student body.

School voucher advocates call it the first step toward equalizing access for all students.

"Middle- and upper-income Americans have always had the ability to choose their children's schools, either through choice of residence or private education. Only in the sense that it is being extended to low-income families is school choice 'new,'" said Kaleem Caire, president and CEO of the Black Alliance for Educational Options.

Caire, who appeared on Capitol Hill with Marquette University Professor Howard Fuller to present their recently published report, Ten Myths about School Choice, said the next step is to allow full voucher programs so students can attend private schools.

But stiff opposition to vouchers remains.  On Friday, the People For the American Way Foundation filed suit in the U.S. Supreme Court, arguing that the city of Cleveland, Ohio's school voucher program is unconstitutional because it endorses religion by making "direct unrestricted government payments to the participating sectarian private schools providing a religious education."

PFAWF says 82 percent of the private schools participating in the Cleveland voucher program are religious institutions, which means those schools could use federal funds to purchase bibles, icons or other religious materials.

Caire, a guest of Rep. John Boehner, R-Ohio, chairman of the House Education and Workforce Committee, did not address the religious arguments on their face, but said denying the opportunity for low-income students — who are disproportionately Black — to attend private schools is discriminatory.

Boehner, author of the education bill, agreed that equal access is denied to low-income students, but conceded that full education reform has not arrived yet.

"Parents in low-income communities will immediately have new choices and new options for their children's education, and these options will make a difference for many," Boehner said. "But the drive for equal educational opportunity in America must continue until all parents of all incomes can choose the best available school for their children — public, private or otherwise."

ESEA also demands new accountability standards for public schools based on student testing. Schools that demonstrate high performance will be given greater flexibility on how they spend federal education dollars.