Pell Grants Cut

In October and again in November, we warned that Congress might try to cut the Pell Grant program for low-income college students. We argued that after passing a new law in September that rightly whacked excess student loan bank subsidies to increase Pell Grant funding, Congress might later follow up in another bill and cut or shift base Pell Grant funding in order to finance other priorities. Unfortunately, we were right. Worse, those other priorities include increased higher education earmark (also known as "pork barrel") spending.

Last night, Democratic Congressional leaders, who came to power promising substantial increases in spending on student aid, passed through the House a compromise omnibus spending bill for 2008 (the Consolidated Appropriations Act, 2008) that will CUT the maximum Pell Grant by $69. That's right. In September, Congress celebrated a new maximum Pell then slated to be $4,800 between base and added mandatory funding. Today, it's slated to be $4,731. That might not sound like a big difference, but it translates into almost a $300 million cut in financial aid for needy students.

Who's to Blame?

In an earlier 2008 Labor-HHS-Education appropriations conference agreement that Congress passed in November, lawmakers proposed going in the other direction and increasing the maximum Pell Grant award by $125, from $4,800 to $4,925 for the 2008-2009 academic year. See table below. But President Bush, unhappy with the overall level of spending in the bill, vetoed that measure and Congress failed to override him. Congress is now slated to meet the President's level and is doing so in part by reducing the maximum Pell Grant. But of course Congress didn't have to meet the President's level by cutting the maximum Pell Grant to do it. They could have pulled back on other spending priorities, like say for earmarks. But they chose not to go that path.

Now in fairness to the Democratic Congress, despite the reduction in the maximum Pell Grant level as of September 2007, the actual 2008 Pell Grant maximum will still be $421 (as opposed to $490) more than last year's level. That's far short of the Democrats' "Six for '06" campaign promise to increase Pell by $1,000, but it's a step in the right direction and nothing at which to sneeze.

The Back Door

Congress this year for the first time provided a supplementary boost in funding for the Pell grant program through non-appropriations legislation, otherwise known as mandatory spending that will increase the maximum Pell Grant. This new funding source was made available when Congress cut excess taxpayer subsidies provided to lenders that participate in the Federal Family Education Loan (FFEL) program. Congress was able to provide some $2 billion in non-appropriations spending for Pell Grants in 2008, resulting in an increase of $490 to the maximum grant level. Or so some thought.

As we predicted and feared, the new non-appropriations Pell Grant funding source provided a convenient tool for the Congress to reduce base, discretionary Pell Grant funding, spend that money instead on other priorities, and still provide an increase in the Pell Grant level that students will receive. Call it a major front door increase and a relatively small back door cut.

Another Back Door

But it's worth noting that in the 2008 omnibus appropriations bill, Congress also proposes to take $525 million in non-appropriations, mandatory funding that had not been spent on Academic Competitiveness Grants (ACG) and SMART Grants last year and redirect it to Pell Grants for 2008. The redirected funding is another tool that allows Congress to reduce base discretionary Pell Grant appropriations, but maintain an increase in the grant level provided to students. The redirected ACG and SMART Grant funding allows Congress to spend less on Pell Grants than it otherwise would and more on other priorities, while maintaining an increase in the maximum Pell Grant level.

And a 600 Percent Increase in Earmarks

In November, Higher Ed Watch pointed out that Congress planned to boost funding for an earmark slush fund known as the Fund for the Improvement of Postsecondary Education (FIPSE) by 600 percent, or $100 million, from the year before, in the Labor-HHS-Education conference agreement sent to the President. Click here for our previous post on FIPSE earmarks. A list of the earmarks can be found starting on page 139 of the Joint Explanatory Statement for the omnibus bill.

In response to the President's veto of the November bill, did the FIPSE earmarks survive the reductions Congress made to lower the total funding level for the appropriations bill? YES! The table above details each iteration of 2008 funding proposals. The 2008 omnibus appropriations bill passed by the House and now under consideration in the Senate still includes a $100 million increase for FIPSE earmarks; that's a 600 percent increase.

A $100 million increase in FIPSE earmarks. A cut in Supplemental Education Opportunity Grants for needy college students. And a cut in the maximum Pell Grant from the September 2007 level. It's not the bold education budget promised.