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State and city education officials took a victory lap today after winning nearly $700 million in federal Race to the Top funds. But they were also emphatic that today’s announcement marks the start of hard work, not the end.

The next step is to flesh out how exactly the funds will be used. Half of the grant money, which federal officials will dole out over four years, will stay with the state education department. The state will pass along the rest to school districts, which have 90 days to pitch the state their plan for spending their share of the funds.

The local proposals must adhere to the state’s school reform blueprint. They can’t be used for other purposes, or to fill budget gaps.

The state’s application centers on four main goals: writing new curriculums and assessments that will be standardized across the state and match the new national standards that the state has adopted; building new databases that track students’ progress from kindergarten through college; finding new ways to train teachers and judge them on their effectiveness; and turn around the lowest-performing schools, sometimes by replacing them with charter schools. (Read our full summary of what the state’s application proposes here.)

Much of the state’s plan relies on expanding programs that the city started under Mayor Michael Bloomberg and Chancellor Joel Klein, including the city’s Leadership Academy to train new principals, the iZone technology pilot and a new data system modeled on the city’s ARIS program.

“The core of our application is about building on successes, replicating successes,” Board of Regents Chancellor Merryl Tisch told reporters today.

New York City expects to see between $250 and $300 million of the total. City officials are just beginning to plan exactly how they will allocate those funds within the state’s overall plan, Chancellor Joel Klein said today. While some districts will have to spend heavily to catch up with New York City, city officials suggested that they would pour the new funds into new initiatives, especially developing the assessments that will soon count for 20 percent of teachers’ evaluations.

Alluding to questions raised about city students’ real progress in the wake of the state’s re-calibrated test scores, Bloomberg said today that he is taking the Race to the Top win as an affirmation of the city’s reform policies.

“In essence, I think it’s safe to say that we’ve received the federal seal of approval for what we’ve done here,” Bloomberg said.

The state will face challenges as it puts its plan into practice. The proposal is built on compromises that state, city and union officials cobbled together after often-rancorous political battles, and the implementation of the state’s plan will likely depend on further compromise.

“Standing behind me is a group whose squabbles have become legendary,” Tisch said. But Tisch said that the fact that state and city officials, union leaders and politicians were able to build consensus around the application’s proposals proved that they would be able to work together to put the plan fully into practice.

“The alignment between this state and this city has never been tighter,” Klein said.

Beyond political battles, the state’s ability to put its plan into action will also depend on its ability to hew closely to its budget, which could be a challenge. For example, the state has proposed using $60 million of the Race to the Top funds on building a new statewide database system modeled on the city’s ARIS system. But the city has already spent more than $80 million on ARIS.

State Education Commissioner David Steiner said that $696 million was a “reasonable” budget for the state’s plan. And Bloomberg swatted away the question.

“The money is useful, but the recognition that we’re going in the right direction and the impetus that gives the people up here is the real benefit,” Bloomberg said. “That’s the long-term benefit.”