Congressional Affairs: Shutdown Still Looms, Congress Grapples with Sustaining Pell Grant Program

The Senate will reconvene on Monday, March 28, and the House will reconvene the following day, after a week-long district work period. Before adjourning for the break from Washington, Congress sent President Obama a stop-gap, three-week continuing resolution (CR) to keep the federal government operating until April 8. The possibility of a government shutdown continues to loom as House Republicans, Senate Democrats and the Administration are still deeply and fundamentally at odds over spending cuts and policy riders attached to H.R. 1, the House-passed budget plan for FY11.

The path toward agreement on the FY11 budget is complicated by long-term fiscal concerns and the looming vote on raising the federal debt ceiling. Last week, 64 Senators – 32 Democrats and 32 Republicans – sent a letter to President Obama calling for a comprehensive plan to address “the scope and breadth of our nation’s long-term fiscal challenges.” Behind the scenes, a “Gang of Six” Senators is developing a yet-to-be released fiscal reform plan which is expected to be a comprehensive proposal including both spending cuts and avenues to raise revenue.

The Treasury Department has estimated that the current debt limit is likely to be reached between April 15 and May 31. The cap is set by Congress and many Republicans have stated that they will not vote on raising the debt ceiling unless other fiscal reforms are put in place. The debt limit has never been reached in the past – it has been avoided both by votes to raise the limit and extraordinary measures at the Treasury. According to a recent Congressional Research Service report, “if these financing options are also exhausted and Treasury is no longer able to pay the bills, serious financial and economic implications could result that could have a lasting impact on federal programs and the U.S.’s ability to borrow in the future.”

FY11 Pell Funding Challenges

The most immediate task ahead for Congress is passage of a final FY11 budget. The Pell Grant program has proven to be a significant sticking point in negotiations over the budget, and the final outcome for the program in FY11 could have considerable implications for the program in FY12 and beyond. If enacted, H.R. 1 would cut the maximum Pell Grant award by $845, bringing it from $5,550 to $4,705 in the FY11 budget. The proposed cuts to the Pell award in H.R. 1 are a part of an overall $61.5 billion House Republicans want to see eliminated from programs across the federal government in FY11.

However, focusing only on the FY11 budget debate fails to address the fact that the Pell budget has experienced massive growth in recent years, creating significant budget pressure not only in FY11 but also in future years. According to a recent Inside Higher Ed story, the budget for Pell is now larger than the budget for eight cabinet agencies, and the White House estimates that the Department of Education will disburse more than $36 billion in Pell awards in the 2010-2011 award year. In just the past three years, the number of Federal Pell Grant recipients has grown from 6.2 million in award year 2008-2009 to an estimated 9.4 million in 2011-2012, an increase of 52 percent.

Recognizing these challenges, the House Labor, Health and Human Services, Education and Related Agencies Appropriations Subcommittee, which writes the part of the federal budget that includes the Pell Grant program, held a hearing on March 15 to address the future of the program. Undersecretary of Education Martha Kanter was the only witness called to testify. In her testimony, Kanter reiterated the Administration’s commitment to maintaining the maximum award at $5,550. However, she also urged that certain reforms be put in place in order to offset the cost and keep the program on sound financial footing: eliminate year-round Pell awards and end student loan interest subsidies for graduate and professional students.

In its FY12 budget request, the Obama Administration proposed a Pell Grant Protection Act in order to achieve these goals, effectively recognizing that elements of the Pell Grant Program itself would need to be cut in order to protect the maximum award. The administration estimates that ending year-round Pell awards would achieve $8 billion in savings per year. They also estimate that elimination of the in-school subsidy for graduate and professional students would save $2 billion 2012 and $33 billion over 10 years.

The Outlook for Pell

In February, the Student Aid Alliance, which NACUBO is a member of, sent a letter to the House of Representatives opposing the cuts, and has since been activating its members and student organizations across the country in opposition to the cuts. The Alliance’s new website, provides an action center for contacting policymakers, and gives access to data on the prevalence of federal student aid by state and congressional district. A number of op-eds by higher education leaders and student organizations have appeared across the country in recent weeks calling on Congress to prevent the cuts to Pell included in H.R. 1.

Ultimately, budget writers will likely do their best to protect the Pell maximum award, as historically there has been significant bipartisan support for the program. However, negotiators are also likely to embrace the Obama administration proposal to eliminate year-round Pell and are expected to implement the cost-saving measure in FY11. This would do away with the year-round Pell subsidy for students in 2012. NACUBO will provide additional guidance once the dust settles on this debate.