NAICU Washington Update

In Tough Times, Congress Stands by Pell Grant

Despite days of bitter and tumultuous activity on overall economic recovery legislation still to be resolved, Congress found the resources to infuse the Pell Grant program with an unprecedented $2.5 billion in extra funding this past weekend. The funding is to help pay down a massive program shortfall that only became public knowledge last week. With this new funding, Congress has given an enormous vote of confidence to the program.

Pell Shortfalls

The Pell program frequently faces shortfalls when more low-income students show up for college than Congress anticipates. The last great shortfall for the Pell Grant program occurred in the early 1990s. Then, it took Congress more than three years to solve the funding dilemma, with the Pell Grant maximum having to be cut for the only time in the program's history. In most cases, though, the shortfall is modest and can quickly be paid off in the next year's appropriations bill.

However, when a recession hits, the program can run into deeper problems - more people go to college in search of new job skills, and more families of current students lose jobs and qualify for Pell Grants. This year another factor was added, as the reauthorized Higher Education Act opened the program to more students.

This triple whammy led to an unprecedented shortfall of $6 billion for the $18 billion program. Pell Grant advocates in Washington were extremely concerned about the long-term consequences such a shortfall could have on the program's future. The cumulative shortfall will be over three academic years - 2007-08, 2008-09, and 2009-10.

Last Weekend

With elections too close for any real budget making, and with October 1 - the beginning of the federal fiscal year - around the corner, not a single appropriations bill had been sent to the president. Ultimately, Congress decided to punt any final decisions by approving a bill that funds most government programs at their current levels until March 6, 2009, when a new president and new Congress will have to figure out final FY 2009 funding levels. The House passed this continuation plan on September 24 by a vote of 370 to 58, and the Senate passed it by a vote of 78 to 12 on September 27.

A budgeting rule passed in 2006 requires the Appropriations Committee to pay for any shortfall in the program, instead of letting it accumulate indefinitely or allowing the Department to reduce grants to students. Even so, with Congress and the nation in such an economic crisis, it is still a significant achievement that appropriators found the funds to begin bailing out the program so quickly.

Congress also included language prohibiting the Department of Education from ratably reducing the $490 mandatory Pell Grant add-on, which comes from a special fund set up in the 2007 budget reconciliation legislation. This very important provision ensures that the shortfall will remain an accounting issue, not a threat of cuts to grants for students.

H. R. 2638 includes funding for most agencies at FY 2008 levels; three regular appropriations bills for defense ($487 billion), homeland security ($41 billion), and military construction/veterans ($119 billion); and emergency supplemental appropriations for disaster relief ($23 billion).

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