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OTTUMWA, IOWA -- The U.S. Department of Education released the finalists for the second phase of its “Race to the Top” program Tuesday and Iowa and Missouri were left off the list.

The District of Columbia joined 18 states as finalist for roughly $3.4 billion in funding.

Those funds will be shared between the top 10-15 schools.

Even without the funding Iowa continues to make changes and improve its education system.

“We are adopting the national standards and that is something they are encouraging. Iowa has been out front on that, but basically what keeps Iowa from getting the Race to the Top are labor issues,” said Ottumwa Community School Districts Superintendent Jon Sheldahl.

Sheldahl said people should not take this too seriously and feel as though the state’s education system is failing.

“Iowa is doing a lot of good things. Not being involved in the “Race to the Top” does not mean that Iowa is a substandard state, it just means that it is a state right now that does not have the political will to move the reform agenda as aggressively as the states that are being selected.”

Iowa sought roughly $175 million. While the money would have been nice and definitely helpful, Sheldahl said it may not be a bad thing Iowa missed out.

“I don’t necessarily think Iowa has to be one of the first states to have “Race to the Top” I think those states that do get it are going to be the laboratories. They are going to be some changes in education policy in those states. We will see how it goes, see how it works.”

Only Delaware and Tennessee received funds in the first phase.

The second phase winners will be announced in September.