Education Budget

Normally, Congress uses a budget resolution to set the overall limit on appropriations funding that lawmakers then divvy up among subcommittees and individual programs later in the year. (Nearly all federal education programs are funded entirely through the annual appropriations process, requiring Congress to pass funding for those programs one year at a time.) In that regard, the budget resolution is a key step in the education funding process. But last year’s debt ceiling agreement – the Budget Control Act – took some of the surprise out of fiscal year 2013’s appropriation levels, as the law already set an appropriations limit for the upcoming fiscal year. Of course, that doesn’t mean that uncertainty around the fiscal year 2013 appropriations process is gone. There’s still plenty. 

Consider that the House recently passed a fiscal year 2013 budget resolution (H.Con.Res. 112) that, among other things, sets an appropriations limit of $1.028 trillion for fiscal year 2013­, which is $19 billion lower than the limit set by the Budget Control Act. The House also indicated that it plans to distribute cuts across non-defense programs only. Those moves have set up a fight with the Senate and the president as the appropriations process proceeds.

The president’s fiscal year 2013 budget proposal sticks with the appropriations limit set by the Budget Control Act, $1.047 trillion. And it looks like the limit in the Budget Control Act will also be the Senate’s figure. Democratic Majority Leader Harry Reid (D-NV) says he won’t bring up any fiscal year 2013 budget resolution for a vote (not because it would be filibustered; budget resolutions cannot be filibustered and require only a simple majority to pass). Therefore, Senator Kent Conrad (D-ND), chairman of the budget committee, filed a “deeming resolution” (authorized under the Budget Control Act) last month that sets the Budget Control Act limit in stone.

At the same time, Senator Conrad has released a proposal which reflects the plan outlined by the National Commission on Fiscal Responsibility and Reform (aka the “Simpson-Bowles” Commission). That plan would limit fiscal year 2013 appropriations to $1.041 trillion, about $6 billion less than the Budget Control Act. But Senator Conrad doesn’t plan to hold a committee vote on it, so it’s probably irrelevant – or maybe it’s relevant for that fact alone.

All in all, the appropriations limit in the Budget Control Act – and possibly the House Republicans’ lower limit – is the only proposal on the table that has momentum in these early days of the fiscal year 2013 appropriations process.

But wait. What about the looming sequestration that was triggered when last year’s bipartisan supercommittee failed to come up with a deficit reduction plan?

Those across-the-board cuts, which will hit fiscal year 2013 appropriations in January 2013, are still set to occur under current law. Congress and the president will have to pass a new law if they want to override the sequestration. If they don’t, sequestration will automatically cut all of the spending limits outlined above by $94 billion.

That makes the pending sequestration the biggest uncertainty in the fiscal year 2013 appropriations process. And the stakes are much higher than the current debate over the appropriations limit.

The Obama administration has made improving struggling schools a major part of its education agenda. One piece of that effort is the School Improvement Grant (SIG) program, which received a large one-time influx of  $3 billion through the American Recovery and Reinvestment Act of 2009 (ARRA).

This SIG funding came with a host of new regulations for the program, including a requirement that schools use the funds to implement one of four strictly-defined reform models. The models range from replacing some principals and teachers at schools, to complete school closure. But although schools had lofty aspirations, a recently-released Government Accountability Office (GAO) report suggests that many districts didn’t have the capacity or expertise to see them to fruition.

As a quick refresher, in 2010 the Department of Education divvied up $3.5 billion in SIG funds (including regular appropriations) to states in proportion to their share of Title I funds. States then distributed the funds to eligible school districts – those either in the bottom 5 percent in terms student performance or high schools with graduation rates below 60 percent – through a competitive grant process. Schools could receive a maximum grant of $2 million each year for three years. States selected the winning proposals and distributed the funds to districts beginning in mid-2010. Districts in some states received their SIG funds just weeks prior the start of the school year in which they had to implement their selected school turnaround plans.

The GAO report discusses the degree to which states provided capacity and oversight to districts as they adopted their school reform models based on a survey of all 50 states and the District of Columbia. From these surveys and through conversations with officials at the U.S. Department of Education, state education agencies, and districts, GAO identified several areas where states and districts lacked the resources, capacity, or oversight to effectively implement their respective reform plans.

For example, California, Nebraska, Rhode Island, and Texas all cited budgetary constraints as a major obstacle to effectively administering the SIG program. Though all states were allowed to use up to 5 percent of the funds for administrative purposes, California only used 0.5 percent of its funds for this purpose. It appears that the state, due to budget restrictions, was unable to hire more staff to work on the program and the existing administrative staff was already over-extended.

But money was not the only resource districts and schools were short on. In many states, districts and schools – particularly those in rural areas that already faced staffing shortages – found it difficult to recruit new principals and teachers to replace ineffective school staff. According to the Department of Education, three of the states being monitored did not provide adequate oversight to ensure that schools actually replaced their principals – one of the criteria for schools receiving SIG funds. If staffing schools with high quality teachers and principals is a cornerstone of school improvement, it appears that some schools are already set up for failure.

GAO also noted that many schools struggled to make school reform decisions based on achievement data, either because they did not actually have access to the necessary data or because they lacked the expertise to analyze the data towards meaningful decisions. Schools become SIG-eligible based on their test outcomes. It is troubling that some of the nation’s lowest-performing schools still do not have the capacity to harness this information and learn from it.  

When it came time to determine whether schools and districts should receive continued SIG funding, many states renewed grants even when districts were failing to implement their school turnaround plans. States likely understood that these districts faced many challenges with abbreviated timelines and limited capacity. Indeed, some states explicitly acknowledged these difficulties. However, it is unclear whether these states were responsive to their districts’ needs or are currently providing outreach to ensure these problems don’t persist.

The GAO report reveals some significant shortcomings in the implementation of SIGs so far. However, it also raises some important questions about how the Department should move forward with the program. For example, it is clear that districts need more technical assistance and capacity to implement the Department-mandated reforms. But who is ultimately responsible for increasing school capacity – the federal government, states, or districts?

And though prior to 2009 the Department established two systems to help schools boost their capacity for school reform – Comprehensive Centers and Regional Educational Laboratories – they haven’t necessarily filled the capacity vacuum among the lowest-performing schools. These schools either don’t have sufficient access to Department services, or they need more support than is currently available to them.

Similarly, many states renewed district grants even when districts were far behind schedule. What is the right balance between providing extra flexibility to struggling districts and ensuring districts are accountable for the funds they receive? Currently, the Department provides funds, and expects states and districts to oversee implementation. But states have not yet effectively met the needs of their most struggling schools, raising the question of whether a more active federal role is needed.

The School Improvement Grant program can only succeed if schools and districts are given the tools necessary to implement their chosen reform models. Giving districts funds when they lack the capacity to use them wisely seems akin to expecting a team of rookies to win the World Series – anything can happen, but the odds are against them. 

Many student aid advocates and pundits have panned the House Budget Committee’s loosely outlined funding plan for Pell Grants. The plan was part of the fiscal year 2013 budget resolution (aka the “Ryan Budget”) that the House passed a few weeks back. Critics say it would make deep cuts to Pell Grants and kick a million students out of the aid program. Indeed, the House Republican proposal would make some changes to the program to permanently address a $7 billion funding cliff that the program will face in 2014. But where were these critics when President Obama outlined his Pell Grant funding proposal earlier this year?

The president’s proposal included only a one-year fix for the massive $7 billion Pell Grant funding cliff. After the one-year fix, the president’s budget simply assumes that an extra $7 billion will materialize in the annual appropriation for Pell Grants each year. But this extra funding must be offset by $7 billion in cuts to other programs funded with annual appropriations, which the president’s budget doesn’t specify.

Do student aid advocates really believe the president’s “let’s not make tough decisions now; we’ll find an extra $7 billion later” is the better proposal?

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Many student aid advocates and pundits have panned the House Budget Committee’s loosely outlined funding plan for Pell Grants. The plan was part of the fiscal year 2013 budget resolution (aka the “Ryan Budget”) that the House passed a few weeks back. Critics say it would make deep cuts to Pell Grants and kick a million students out of the aid program. Indeed, the House Republican proposal would make some changes to the program to permanently address a $7 billion funding cliff that the program will face in 2014. But where were these critics when President Obama outlined his Pell Grant funding proposal earlier this year?

The president’s proposal included only a one-year fix for the massive $7 billion Pell Grant funding cliff. After the one-year fix, the president’s budget simply assumes that an extra $7 billion will materialize in the annual appropriation for Pell Grants each year. But this extra funding must be offset by $7 billion in cuts to other programs funded with annual appropriations, which the president’s budget doesn’t specify.

Do student aid advocates really believe the president’s “let’s not make tough decisions now; we’ll find an extra $7 billion later” is the better proposal?

Sure, the president doesn’t propose any eligibility changes for Pell Grants or big cuts to other aid programs to address the funding cliff, so it might appear to be a better deal for students come 2015. But student aid advocates are taking a big gamble because the appropriations spending caps in place under the Budget Control Act require that any big increases in appropriations spending on one program must be offset by spending cuts to other programs (tax increases cannot be counted as an offset). It should be noted that the president’s budget would “turn off” the across-the-board (sequestration) cuts pending for 2013 and cancel the lower annual appropriations limits, both triggered by last year’s supercommittee failure.

The president does not call for a $7 billion increase in overall appropriations spending each year to accommodate Pell Grant costs. Instead, the president proposes to keep the annual appropriations limits set in the Budget Control Act of 2011. Those spending limits effectively locked in the 2011 Pell Grant appropriations funding levels for future years—about $22 billion annually. That means the president and lawmakers must offset his proposed $7 billion increase over that amount with $7 billion in cuts to other programs in 2015 and every year thereafter.

Those cuts could come from anywhere, including other education programs. Not even a Democratic Congress opted for that route when they had to address a similar Pell Grant funding cliff in 2010.

More importantly, the Congressional Budget Office won’t give the president’s budget credit for its Pell Grant funding plan past 2014. When the president or Congress promises to increase appropriations for one program in the future while promising to cut unspecified other programs by the same amount, the budget agency considers that to be more political posturing than a concrete proposal. In response, CBO will only measure total appropriations funding in a budget proposal. Since the president did not identify specific cuts in non-appropriations funding to offset the $7 billion increase past 2014, the official estimate from CBO shows that the president’s proposal, or lack thereof, cuts Pell Grant funding dramatically in 2015. The next year, total funding will be half what it was in 2012.

Why isn’t the press covering this like they are the House Pell Grant proposal? Why aren’t student aid advocates up in arms?  Where are the PreK-12 education advocates whose favorite programs might be called on to absorb the unspecified $7 billion in funding cuts the president’s budget envisions to support Pell Grants? Can President Obama fairly claim that the House-passed budget would cut Pell Grants by $1,000 per recipient when his lack of a proposal would, according to the Congressional Budget Office, cut them by much more?

That’s the most disappointing part of this whole story. The president punted on a long-term plan to shore up Pell Grants because he could be criticized for making tough choices. Then, when House Republicans put out a feasible, gimmick-free Pell Grant proposal that makes tough choices (i.e. cuts to other aid programs and eligibility changes) needed to fund the program for the long-term, the president didn’t attempt to work with them, but lambasted them instead.

Maybe the president doesn’t see the House proposal as a constructive, move-to-the-middle plan. In that case, he is free to propose his own long-term solution and show how he’d pay for it. The future of the Pell Grant program and the students who will rely on it would benefit from a more robust discussion.

As we wrote last week, congressional budget resolutions are always light on details. At best, lawmakers include vague descriptions of policies that Congress could enact to meet spending goals. That’s exactly what House Republicans did for Pell Grant reforms in the fiscal year 2013 budget resolution that passed the House of Representatives last week. The document offers only a few hints about how lawmakers might fund Pell Grants as the program nears a major funding cliff in fiscal year 2014.

Using those hints, we’ve done some detective work to put together what we think the House Republicans might be after with respect to Pell Grant funding levels. The results suggest that House Republicans do in fact have a long-term plan for Pell Grants that would stave off a big cut to the maximum grant and/or avoid radical eligibility changes come 2014 – but their plan includes a few key tradeoffs.

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As we wrote last week, congressional budget resolutions are always light on details. At best, lawmakers include vague descriptions of policies that Congress could enact to meet spending goals. That’s exactly what House Republicans did for Pell Grant reforms in the fiscal year 2013 budget resolution that passed the House of Representatives last week. The document offers only a few hints about how lawmakers might fund Pell Grants as the program nears a major funding cliff in fiscal year 2014.

Using those hints, we’ve done some detective work to put together what we think the House Republicans might be after with respect to Pell Grant funding levels. The results suggest that House Republicans do in fact have a long-term plan for Pell Grants that would stave off a big cut to the maximum grant and/or avoid radical eligibility changes come 2014 – but their plan includes a few key tradeoffs. 

The report accompanying the House-passed budget resolution says it will make Pell Grants sustainable, referring to the funding cliff Congress must address for the fiscal year 2014 appropriation and each year thereafter. The funding cliff is the $30.7 billion annual appropriation needed to maintain the maximum grant under current law. (Keep in mind that the upcoming fiscal year 2013 appropriation isn’t problematic due to a current surplus of $2.1 billion and funding provided through other sources like the Budget Control Act of 2011. More information on funding history and the cliff is here.) To address the upcoming funding cliff, House lawmakers propose several policy and eligibility changes.

As part of their sustainability plan, House Republicans would set the maximum grant at $5,550 indefinitely – the same level as in fiscal years 2010 through 2012. That is a major concession over past proposals. House Republicans last year vowed to return the program to its “pre-stimulus” levels (a maximum grant of $4,731 at a cost of $16.2 billion). Congress first set the $5,550 maximum grant level using funds from the 2009 America Recovery and Reinvestment Act. Republican lawmakers have now proposed to fix that “post-stimulus” grant level in perpetuity.

Under current law, the maximum grant is scheduled to rise with inflation for five years starting in fiscal year 2013. The change proposed by the House budget – forgoing the five years of inflationary increases – reduces the cost of the program by about $1.5 billion in 2014 and a bit more each year thereafter based on figures from the Congressional Budget Office’s March 2012 baseline. It’s important to understand that House lawmakers would end the portion of the grant funded as an entitlement (not the portion funded through the appropriations process) to achieve the cost savings.

The entitlement funding source provided $5.0 billion in 2012 when the maximum grant was $5,550. Therefore, we assume that even though the House proposal would end entitlement funding currently in law for Pell Grants, lawmakers would move $5.0 billion each year from that funding source to support the annual appropriation in future years. Therefore, the portion of the entitlement funding that is eliminated by capping the maximum grant is the only actual reduction in program costs ($1.5 billion in 2014) that stems from eliminating the entitlement funding.

Other savings stem from changes House lawmakers would make to eligibility rules for Pell Grants (see this side-by-side). These include eliminating Pell Grants for students attending school less than half time, reducing the individual income threshold that automatically qualifies a student for the maximum grant from $23,000 to $20,000, and limiting grant eligibility to students below an absolute income threshold, though the proposal doesn’t specify what that income level would be. The first two proposals result in minor savings according to previous Congressional Budget Office estimates.

The latter proposal, however, could be the source of major savings depending on where lawmakers set the income ceiling. Current rules don’t set an absolute income limit for Pell Grant recipients. Eligibility is instead determined by a formula that takes income and other factors into account. Data from the U.S. Department of Education show that more than $7 billion in Pell Grants went to families earning incomes of $30,000 and above. For our estimate, we assume the House budget envisions an income cap of $45,000, which we approximate would lower the cost of providing a maximum grant of $5,550 by about $2.5 billion per year.  

Finally, we assume that savings generated by the House resolution’s proposal to end the interest-free benefits on Subsidized Stafford loans for undergraduate students would be used to fund Pell Grants. Ending the interest benefit produces large savings according to a Congressional Budget Office estimate released in 2010. It would free up about $4.8 billion annually to be reallocated to Pell Grants indefinitely.

When you add up the reallocated funding and the cost reductions that stem from the proposed eligibility changes, the House proposal would require Congress to appropriate annually about $21 billion. (See table below.) That’s about $9 billion less than what would be needed under current law starting in 2014 and each year thereafter. Furthermore, a $21 billion annual appropriation is in line with what Congress has provided through the regular appropriations process in recent years, bolstering the House Republican’s claim that their plan makes the Pell Grant program “sustainable.”

Of course, it is possible that House Republicans would not reallocate savings achieved by the various proposals into Pell Grants. Still, House Republicans state in their budget resolution that they want to support a maximum Pell Grant of $5,550 indefinitely. That concrete proposal gives us a good sense of how much funding Congress will need to provide each year for the program (after the proposed eligibility changes are made). Our calculations suggest that to eliminate the 2014 funding cliff and support a maximum grant of $5,550, most of the savings associated with the proposed spending cuts would have to be reallocated to Pell Grants.

If our assumptions are right, we think the House Republicans have a feasible proposal that trades cuts to other aid programs, a freeze to the maximum Pell Grant, and a few eligibility changes to fund maximum Pell Grants at $5,550 for the long-term. Now the question is: Will House Republicans provide all the details behind their proposal?

On Thursday, the House voted to approve a fiscal year 2013 budget resolution drafted by Budget Committee Chairman Paul Ryan (R-WI). The resolution is a long way from a final budget, and includes no agency or programmatic funding plans, but it kicks off the 2013 budget debate, at least on the House side.

Congressional budget resolutions are notoriously light on details. That is by design. Congress uses the budget resolution as a framework for overall funding and revenue guidelines for 10 years out. And Congress may or may not follow that framework as it writes actual spending and revenue bills later in the year. The budget committees need not specify any tax policies, program cuts, or the like in their resolutions; instead, they just set broad targets.

Of course, though, the budget committees do have to develop a sense of which types of policies they could enact to keep spending, revenue, debts, and deficits within the proposed guidelines. Those “assumptions” are about the only aspect of the resolution that could have meaning for education policy stakeholders.

Last week, the House Budget Committee approved a fiscal year 2013 budget resolution that was full of assumptions about education programs. And despite the flurry of media coverage last week, the committee waited until this week to make any of those assumptions public. Even so, the documents currently available only illuminate a few key assumptions and do not provide an estimate of how the proposals would reach the spending levels outlined in the new fiscal year 2013 budget resolution.

Click here to read the full article on Ed Money Watch...

Congressional budget resolutions are notoriously light on details. That is by design. Congress uses the budget resolution as a framework for overall funding and revenue guidelines for 10 years out. And Congress may or may not follow that framework as it writes actual spending and revenue bills later in the year. The budget committees need not specify any tax policies, program cuts, or the like in their resolutions; instead, they just set broad targets.

Of course the budget committees do have to develop a sense of which types of policies they could enact to keep spending, revenue, debts, and deficits within the proposed guidelines. Those “assumptions” are about the only aspect of the resolution that could have meaning for education policy stakeholders if Congress takes them up through the legislative process later in the year.

Last week, the House Budget Committee approved a fiscal year 2013 budget resolution that was full of assumptions about education programs. And despite the flurry of media coverage last week, the committee waited until this week to make any of those assumptions public. Even so, the documents currently available only illuminate a few key assumptions and do not provide an estimate of how the proposals would reach the spending levels outlined in the new fiscal year 2013 budget resolution.

In short, there’s not much to say yet, except to call attention to these few education policy proposals, the bulk of which focus on higher education spending. The policies appear in the report that accompanies the legislative language of the budget resolution.

Higher Education

• Implement a series of reforms to Pell Grants, including:
  • Limit the maximum Pell Grant award to $5,550 and fund it entirely through the appropriations process. This would end the entitlement portion of the program’s budget;
  • Set an unspecified income limit for eligibility;
  • Eliminate Pell eligibility for less-than-half-time students, as was proposed in the House draft fiscal year 2012 appropriations bill;
  • End the $5 per-grant fees paid to schools to cover administrative costs (a 2009 estimate from the Congressional Budget Office [CBO] found that this would save nearly $1.8 billion over ten years when instituted for Pell Grants and campus-based aid programs); and
  • Revert automatic zero expected family contribution and income protection allowance limits to pre-College Cost Reduction and Access Act of 2007 (CCRAA) level of $20,000. (The automatic zero level was already reduced from CCRAA levels – $32,000 as of 2011-12 award year – to $23,000 in the fiscal year 2012 appropriations process.)
     
• Eliminate Subsidized Stafford loans for undergraduate students, as laid out by the Fiscal Commission. Congress enacted the same change for graduate students in last year’s debt ceiling agreement. An estimate provided by the CBO in 2010 shows that the undergraduate loan proposal would reduce federal spending by over $40 billion over ten years.
   
• Encourage innovation in higher education by limiting federal regulations and supporting unconventional models of postsecondary education like online learning.  Provide students with additional data to allow them to make informed postsecondary education decisions.
   
• Eliminate 5 percent set-aside for administrative costs for campus-based student aid programs, including the Supplemental Educational Opportunity Grants, Federal Work-Study, and Federal Perkins Loan programs.
   
• Recalculate savings set aside in Student Aid and Fiscal Responsibility Act (SAFRA), passed in the healthcare reform bill, using fair-value accounting standards and cancel the expenditure of those funds according to one or more of several recommendations:
  • Cancel income-based repayment programs for student loans established by the 2007 CCRAA;
  • Repeal the College Access Challenge Grants, which included $750 million in mandatory spending under SAFRA to sunset in 2014; and/or
  • Move all payments for Direct Loan Program servicers to annual appropriations funding.

• Cap the annual allowable increase for tuition expenses under Post-9/11 GI Bill for veterans’ education benefits at 3 percent.

K-12 Program Consolidations

• Eliminate or scale back programs that are not proven to be effective in increasing student achievement.  Examine and reform 82 duplicative teacher quality improvement programs (outlined in a GAO report last year) to streamline federal efforts.

• Zero out the Safe and Drug-Free Schools program because it has been found ineffective.

There is one additional matter that will be of interest to education policy stakeholders. The House-proposed budget resolution includes “reconciliation instructions” for several committees, but not the Education and Workforce Committee. Reconciliation instructions require committees to draft legislation that reduces federal spending on entitlement programs, so that the bills then qualify for expedited consideration in the House and Senate – mainly meaning that they cannot be filibustered in the Senate. It is curious that the House Budget Committee opted not to provide reconciliation instructions for the Education and Workforce Committee given that the proposals listed above would certainly reduce spending on entitlement programs (including Pell Grants and student loans).

If you felt like you couldn’t find any information on the House proposed fiscal year 2013 budget resolution last week despite all the press coverage, it’s not because you didn’t know where to look.  The Committee barely released anything meaningful for education policy stakeholders last week. But with the release of a committee report yesterday, at least some of Chairman Paul Ryan’s (R-WI) “assumptions” are now available – and that’s about as much as will ever be made public for a budget resolution.

Last week the Republican majority on the House Budget Committee released a fiscal year 2013 budget resolution. For the second year in a row, the document includes a so-called “fair value” rule that applies to cost estimates for federal loan programs – including student loans. While the rule went largely unnoticed last year (except by us here at Ed Money Watch), this year it has attracted a bit more attention. And with any budget rule, added attention begets added confusion.

Many have mischaracterized fair-value accounting as a Republican gambit to reinstate some version of a guaranteed student loan program and replace the 100 percent direct lending model in place since 2010. If that is in fact the intent, Republican lawmakers are terribly confused, because reinstating the guaranteed loan program in place of direct lending would cost $102 billion over a ten-year budget window according to fair-value estimates.

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