Will Obama officials succeed in their mission to use the Race to the Top fund to re-write state education laws? The state of Indiana, where a recent down-to-the-wire budget session featured a teacher-evaluation mini drama, offers some clues.

The drama began with pressure from the Obama administration to repeal a law banning the use of student test scores in teacher evaluations. Alarmed, state education officials lobbied the state legislature, and lawmakers acted, inserting a repeal of the law into the state’s budget.

But mere hours before the new budget passed, lawmakers at the state House removed the repeal at the request of the teachers’ union. The final budget includes a roundabout compromise allowing districts to use student data to assess teachers — but only in cases where federal grant money requires it.

“We had a clear message from the secretary [Arne Duncan] that we were putting our ability to compete for the Race to the Top Funds at risk,” a spokesman for the Indiana Department of Education, Cam Savage, said. State Superintendent of Public Instruction Tony Bennett has communicated frequently with the federal education department about Indiana’s strengths in the competition for grant funds, Savage said.

Bans on using student test scores to assess teachers seem to be the next group of laws on the Department of Education’s watch list. States and districts already took note after Obama administration officials used the threat of denying Race to the Top funds to push against state laws limiting the spread of charter schools. Lawmakers in at least eight states have passed or introduced legislation since the end of May to lift their charter caps.

New York is among several high-profile states with bans on linking student and teacher evaluations that Obama administrators have singled out for criticism. New York’s law bans linking student achievement data to tenure decisions. The law in question in Indiana was more extreme, prohibiting the use of student test data in any teacher evaluations.

Supporters of linking student data to teacher evaluations declared victory even without wholesale repeal of the ban. Governor Mitch Daniels congratulated legislators for discarding the “ridiculous prohibition” and spoke to U.S. Education Secretary Arne Duncan about the changes the day after the budget was passed.

But the Indiana teachers’ union is warning everyone to slow down. “There has been no change in the status quo for now,” Dan Clark, deputy executive director of the Indiana State Teachers Association, told me in an interview.

Clark said the union objected to the last-minute repeal without any public discussion or debate. He emphasized that the exception only permits district to use test data if the federal Department of Education makes it a requirement of Race to the Top eligibility, and would apply only to districts receiving those funds.

Clark said the union intends to use the time before the Race to the Top Fund applications are due to stage a more robust debate on the Obama administration’s proposed reforms. “We’re trying to rekindle all of the discussion that should have happened before,” he said.

Speaking last week to a New York audience, Race to the Top Fund administrator Joanne Weiss praised Indiana for repealing the ban and for being responsive to the Obama administration’s calls for reform. Weiss also indicated that use of student data as part of teacher performance evaluations would almost certainly be among the requirements for eligibility to the stimulus fund when criteria are released later this month.

Indiana education department spokesman Savage said that even though the revised provision is “a watered-down version” of what the state needed, the state is still in a strong position for the grant competition. “It’s a minor step forward,” he said. “But it is progress.”

Clark, of the Indiana teachers union, said that it’s too early for federal education officials to push so hard on teacher evaluation laws. Too many questions remain about which student tests could be used to evaluate teacher performance and how the assessments could be used in making personnel decisions, he said.

“Arne Duncan needs to figure this out,” Clark said. “If he’s making strong statements to influence policy, he needs to be able to answer these questions.”