The country is facing a new and painful economic crisis, but "we've been in an education crisis for decades," Bill Gates told a conference of lawmakers today.

Educational performance at every level, from primary school to college, is dropping against the rest of the world, he said. The United States has fallen from No.1 to No.10 among industrialized nations in college graduation rates.

And U.S. high school graduation rates have not improved for 40 years, said Gates, who is co-chair of the Bill & Melinda Gates Foundation. More than 30 percent of all students drop out, including almost half of minority high school students.

MATT ROURKE/ASSOCIATED PRESS

Bill Gates, who dropped out of Harvard to start Microsoft, is calling on lawmakers to reform education and raise graduation rates.

"Success in this century will depend on how well America does what we have so far done very badly -- give low-income and minority students a world-class education," Gates said in a speech at the National Conference of State Legislatures in Philadelphia.

Difficult times can often spark needed reforms, he added.

He called on lawmakers to use $100 billion in federal stimulus money to change the way schools are run, creating new ways to measure and reward graduation rates instead of enrollment rates, for example, and tracking which colleges prepare students best for the job market.

"Colleges are not entitled to escape scrutiny at a time of a plunging educational performance and permanent fiscal pressure," Gates said.

He also advocated linking financial incentives such as state funding, financial aid and other programs to school performance.

Adding financial incentives for graduation can encourage colleges to offer schedules that make more sense for students who have to work, courses and counseling that guide students toward specific job goals and more innovative use of technology, such as online lectures, Gates said.

Teachers play the most important role in student achievement, so effective teachers should be identified and rewarded.

"We reward teachers for things that do not identify effective teaching -- like seniority and master's degrees," Gates said.

He criticized a law passed last year in New York that bars student test scores from being considered in teacher tenure decisions.

"That was a strategic win for people who oppose reform -- because no real reform will happen until we can evaluate teachers based on their students' achievement."

Gates encouraged lawmakers to support the state-led Common Core State Standards Initiative as a way to create higher standards for students across the country.

Linking common standards to curriculum can unleash creativity in new teaching materials, such as online tools and videos of every required course, he said. Gates said he and his wife have used online videos to help their own children with school work.

"Imagine having the people who create electrifying video games applying their intelligence to online tools that pull kids in and make algebra fun," he said.

The Gates Foundation has focused its U.S. grantmaking program on education, but its initial push for small schools produced mixed results and led to revamping of its strategy.

The foundation recently announced a new post-secondary initiative with a goal of doubling the number of low-income students in the United States who graduate from college or other post high-school programs by 2025. The foundation is funding pilot programs at community colleges and technical schools to help low-income adults with full-time jobs get through college.

Of the $20 billion the Gates Foundation has given away over the past 15 years, about $5.2 billion has gone into U.S. programs, mostly for education.