The agreement on how to spend the money was reached during complex budget negotiations between the White House and the Republican-led Congress.

The two sides have agreed to provide federal money to help local school districts hire 100,000 more teachers to reduce the average infant class size to 18.

Three quarters of the money will pay for the teachers, while the rest will be spent on related needs, such as teacher training.

Before the agreement was reached, the White House had wanted to use all of the money to hire teachers, while Republicans had wanted to give school districts a free hand in deciding how to spend it.

Impact

US President Bill Clinton hailed the agreement as "a victory for America's children".

"Though this plan, taxpayer dollars will go for reducing class size in public schools," he said.

Earlier this week, the US Education Secretary, Richard Riley, said cutting class sizes was leading to improvements in academic performance.

He said that the Class Size Reduction Program, launched last year, was "making a real difference in helping students learn".

A report in to the impact of the scheme showed that 29,000 extra teachers had been hired, and 1.7m pupils were being taught in smaller classes.