The federal government announced that nine states and the District of Columbia had won the coveted grants. New Jersey was the top runner-up.
A panel judged the lengthy applications on a 500-point scale. New Jersey finished just three points behind Ohio, which received the grant - and was only barely ahead of Arizona and Louisiana, which didn't.
But New Jersey lost all five points on one section in which officials were asked to show that the state gives a consistent percentage of its revenue to education. The application called for using data from 2008 and 2009 to make the case. New Jersey used figures from the 2010 and 2011 state budgets.
It's not certain that the state would have aced the section if the right numbers had been used - but it certainly would have done better.
The gaffe was first reported by the Star-Ledger of Newark.
It appears that the governor's administration made the error late in the process before it submitted the application June 1, according to differences between a draft of the application reviewed by The Associated Press and the form that was submitted.
Now Democrats are teeing off on Gov. Chris Christie, a Republican, for the problem.
State Assembly Speaker Sheila Oliver, a Democrat, called it "a stunning mistake that is going to hurt New Jersey's children."
At a news conference Wednesday, Christie accepted responsibility for the mistake, which he called a "clerical error" by a midlevel staffer charged with reviewing a 1,000-page document at the state Department of Education.
But he also blamed the administration of President Barack Obama for docking the application because of it.
Education Commissioner Bret Schundler was told about the error at a meeting in Washington this month and provided the correct information, Christie said - but it was still held against the application, which was reviewed by a national panel of education experts.
The panel appears to be more concerned with technical details than the educational proposals, Christie argued.
"This is the stuff, candidly, that drives people crazy about government and crazy about Washington," he said. "Does anybody in Washington, D.C., have a lick of common sense?"
Christie said his administration would ask the federal Education Department if it can have some of the $100 million left in the Race to the Top fund that hasn't been allocated.
The governor also blamed the New Jersey Education Association, the state's main teachers union, for not supporting the application - costing points that were given for having others in the state's education community on board.
"What this application proved is that the NJEA is irrelevant," Christie said. "Because with their support, we would have gotten the Race to the Top money."
Before the deadline, Schundler worked out some compromises with the union to win its support.
Dawn Hiltner, a union spokeswoman who was on the committee, provided a draft of the application that included the budget data from the right years. But before that application was submitted, Christie said he wouldn't abide by the compromises - most of which dealt with how merit pay for teachers would work. The reworked application included the numbers from the wrong years.
Christie said that using the compromise would have cost the state's application even more points that the mistake did.
There's one change sure to come out of the problem: Christie said the state Education Department would have two workers, rather than one, give a final check to future grant applications.
Associated Press writer Beth DeFalco in Trenton contributed to this report.