The Obama administration said the report bolsters its effort to persuade all states to adopt the same set of tougher standards for what students should know.
"States are setting the bar too low," Education Secretary Arne Duncan said in a statement. "We're lying to our children when we tell them they're proficient, but they're not achieving at a level that will prepare them for success once they graduate."
The federal government can't impose a set of standards, because education is largely up to states.
But Duncan noted he is offering millions of dollars in grants to encourage states to accept a set of standards being developed by the National Governors Association and Council of Chief State School Officers. The grants come from the federal stimulus law, which set aside $5 billion to push Obama's vision of educational reform.
While the standards are not yet final, every state but Texas and Alaska already has committed to work toward adopting them.
Kids do far better on state tests than they do on the National Assessment of Educational Progress, or NAEP, which is much more challenging.
Duncan and the House Education and Labor Committee chairman, Rep. George Miller, argued that states should be raising their standards to help students compete with their peers in other countries. But according to the report, more states lowered standards than raised them from 2005 to 2007.
"The quality of a child's education should not be determined by their zip code," Miller, D-Calif., said in a statement. "It is unacceptable that many states have chosen to lower the bar rather than strive for excellence."
However, the head of the department's Institute of Education Sciences cautioned against making broad judgments on the lower standards.
"I'd want to look into it more carefully," IES director John Easton said. Some states were putting new tests in place and might have changed standards to adhere more closely to the tests, he said.
Yet in his home state of Illinois, which lowered its eighth-grade math standard, Easton said officials were trying to make it easier to meet the goals of No Child Left Behind, the 2002 federal law that prods schools to boost test scores to meet annual improvement goals.
Easton said a bigger concern is the wide disparity in standards among the states. A student who is proficient in one state might not be proficient in another, the report said.
"It's a very big puzzle to me, how there can be such a difference," Easton said.
The report by the department's statistics arm compared state achievement levels to achievement levels on NAEP. It found that many states deemed children to be proficient or on grade level when they would rate below basic or lacking even partial mastery of reading and math under the NAEP standards.
Among the findings:
• Thirty-one states deemed fourth-graders proficient in reading when they would have rated below basic on NAEP. Mississippi's standards were lowest, and Massachusetts' were highest.
• Seventeen states deemed eighth-graders proficient at reading when they would have rated below basic on NAEP. Tennessee's standards were lowest, and South Carolina's were highest.
• Ten states deemed fourth- and eighth-graders proficient at math when they would have rated below basic on NAEP. Tennessee's standards were lowest; Massachusetts had the highest fourth-grade math standards, and South Carolina had the highest eighth-grade standards.
In those states, the standards "are fairly low standards, relatively speaking, in terms of what students are able to do," said Peggy Carr, associate commissioner of the department's National Center for Education Statistics, part of the IES.