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Tonight, when President Obama delivers the annual State of the Union address, he will make clear his priorities for the coming year, outline his budget plan for FY15, and indicate his goals for the remaining years in his second term. Specific details of the President's FY15 budget will be released on March 4.

The FY14 budget was finalized on January 16. In December, in a much-lauded federal budget deal, Congress and the White House agreed to a top-level spending number of $1.012 trillion for FY14. Over the holidays, Congressional appropriators had to sort out the details and come to agreement on a spending plan.

Student Aid Funding

In the final agreement, budget writers trimmed the Education Department slightly, going from $14.487 billion in FY13 to $14.385 billion in FY14. Pell grants were protected, with the overall program level-funded at $22.78 billion. Because of mandatory inflationary adjustments, the maximum Pell award will likely see a bump of $85 to $5,730. ED will make a final determination based upon Consumer Price Index data, expected to be released in February. Also written into the FY14 budget legislation, Congress now requires ED to collect and provide more information about graduation rates of Pell recipients.

For FY14, the bill includes a $49 million increase for the Federal Work Study program and a $37 million increase for the Supplemental Educational Opportunity Grant program.

Lawmakers on Capitol Hill did not include any funding for a new Race to the Top for higher education in the FY14 budget, despite a request from the Obama Administration for such a program. Given the Obama Administration's strong interest in college access, affordability, and completion, we anticipate seeing the proposal again in the FY15 budget request. Additionally, the President will likely discuss the college ratings plan, currently under development at the Department of Education; we expect he will again call for tying those ratings to the distribution of federal student aid.

The FY14 budget, however, does include $75 million to enable ED to create a new "First in the World Initiative," providing grants to colleges and universities to implement innovative and effective strategies that aim to improve educational outcomes and reduce the net price paid by students and families. Additionally, Congress provided $1 million to the National Research Council for a study on the impact of federal regulations and reporting requirements.

In the research area, the National Institutes of Health will see a boost of $1 billion over FY13. At $29.934 billion for FY14, however, scientific research advocates in Washington note that even this NIH funding level does not fully reverse cuts made in recent years. At the Department of Energy, scientific research receives a boost to $5.1 billion, an increase of $195 million (4 percent) above the FY13 level. The National Science Foundation is slated for an $82 million cut below the 2013 spending level of $7.254 billion.

IRS Faces Increased Oversight

Congressional appropriators provided $11.3 billion for the Internal Revenue Service, below its FY09 appropriation level. Budget writers are also requiring extensive reports on IRS spending, training, and bonuses.

FY15 Outlook

The December 2013 budget agreement set not only the limit of $1.012 trillion for FY14 but also a spending limit of $1.014 trillion for FY15. With a topline number already set in law, the FY15 budget-setting process may return to a more normal timeline. Election-year politics will, as always, complicate matters, but many inside the Beltway hope for a return to budget hearings in the spring, subcommittee and committee mark-ups in the summer, and floor approval for the bills that will comprise the FY15 federal budget before September 30.


Liz Clark

Vice President, Policy and Research


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