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Exclusive: CBO’s New Pell Grant Estimates Complicate Budget Negotiations

Published:  March 10, 2011

As Congress and President Obama continue to negotiate over a final fiscal year 2011 spending bill, things are about to get a lot more complicated for the 2011-12 academic year Pell Grant.

Back in January we wrote that the Congressional Budget Office (CBO) had revised its estimate for what lawmakers must appropriate to maintain a maximum grant of $5,550 for the upcoming school year. The figure had previously been $23.2 billion based on estimates done in 2010. In January of this year the CBO said it actually needs to be $28.2 billion, $5.0 billion more, based on the latest projections of eligible students. With the blessing of the House and Senate budget committees, CBO said it wouldn’t require Congress to fund the program at this new level as it worked to finalize fiscal year 2011 appropriations. So in the latest stop gap spending bill (“continuing resolution”) that goes through March 18, Congress funded the program at $23.2 billion and set a maximum grant of $5,550.

Next week the CBO will release its March 2011 baseline estimates and will no longer use the 2010 estimates to calculate the cost of the Pell Grant program. Absent instructions from the House and Senate budget committees, CBO will “score” any appropriations bill for fiscal year 2011 that sets a maximum grant of $5,550 at a cost of $28.2 billion rather than $23.2 billion.

Recall that Congress and the president are wrangling over whether and how to cut $4 or $10 billion in the fiscal year 2011 appropriation bill across all federal agencies. The new Pell Grant funding target due out next week means that any agreed-upon cuts are moot since the 2011 appropriations bill will need to be $5.0 billion higher than the past stop-gap funding bills to fund the new Pell Grant level. That’s going to throw a big monkey wrench into budget negotiations.

However, the chairmen of the House and Senate budget committees could decide to instruct CBO to use the March 2010 numbers instead of the March 2011 numbers when the agency scores any fiscal year 2011 appropriations bill or continuing resolution. We should add that both chairmen would have to agree to instruct CBO to use last year’s numbers.

We can’t imagine Rep. Paul Ryan (R-WI), chairman of House Budget Committee going along with a scheme to use last year’s numbers to make the program look like it costs less. Nor can we imagine the House Republican caucus going along with it either. What’s more, Senator Conrad (D-ND), chairman of the committee in the Democratically controlled Senate, didn’t intervene when CBO used more up-to-date but less-favorable estimates to score the Health Care and Education Reconciliation Act last year.

Even if the chairmen of the budget committees agreed to instruct CBO to use the lower Pell Grant funding number from 2010, the decision will come back to haunt them soon. That’s because when Congress starts the fiscal year 2012 budget cycle, any funding it provides for the Pell Grant has to first backfill any funding shortfall from 2011. So lawmakers have to pay for that extra $5.0 billion one way or another, and it won’t be any easier to find the money when they get to work on the 2012 budget in a few weeks.

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