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Budget & Finance

What’s at Stake for Schools in the Debt Ceiling Debate

By Andrew Ujifusa — August 21, 2017 3 min read
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Have you missed fights over whether to increase the U.S. government’s borrowing limit? You might be getting a special treat soon. Many education advocates, however, likely aren’t so thrilled.

The recurring squabble over raising the debt ceiling has roots in 2011 when, in exchange for increasing the borrowing limit, Congress imposed mandatory spending caps on government spending. The big budget legacy of that 2011 fight, known as sequestration, is still with us.

Now the issue is back before lawmakers once again. They face a Sept. 30 deadline for increasing the debt ceiling—if they don’t, parts of the government would close, including the U.S. Department of Education, and spending would be severely constricted. (Technically, the government broke through the debt ceiling earlier this year, but the Treasury Department has taken “extraordinary measures” to avoid default.)

“I am more concerned about the debt ceiling than I have been in the past,” said Noelle Ellerson Ng, the associate executive director of AASA, the School Administrators Association.

You wouldn’t think this would be an issue with Republicans controlling both Congress and the White House. But there’s more to it than partisanship.

So what does a potential game of chicken over the debt ceiling mean for education? Here are four points to consider as Sept. 30 approaches.

1) First, what happens if lawmakers don’t raise the debt ceiling and the government goes into default?

In short, the U.S. credit rating could take a big hit, and school districts’ ability to raise and borrow money could also be significantly hampered. If there’s a broader economic impact triggered by a failure to increase the debt ceiling, that would have a major downstream impact on K-12 budgets.

2) There’s the chance that any deal in Congress to increase the debt ceiling could include cuts to spending. A group of about 30 House GOP lawmakers have indicated they won’t vote for the increase unless it comes with spending cuts. Without their support, a debt-ceiling hike could stall in its tracks.

On the one hand, there’s no particular reason to think that education would have a big target on its back amid any budget cut. Right now, the Education Department gets about $68 billion from a federal discretionary spending pie of $1.1 trillion.

“There are bigger fish they are looking to fry in the political arena. That could be a good thing for education,” she said.

3) The Sept. 30 deadline for raising the borrowing limit happens to be the same day as the end of fiscal 2017. By Oct. 1, Congress is supposed to have passed a spending plan for fiscal 2018, but getting a regular budget passed in recent years has proven a huge trial for lawmakers. The confluence of the end of the fiscal year and the debt-ceiling clock hitting zero could create a big political tangle that leads to at least a temporary, partial government shutdown.

Click here for 2013 analysis of what any government shutdown would mean. Here’s a quick rundown:

  • In the first week of any shutdown, about 90 percent of Education Department employees could be furloughed. However, top officials like U.S. Secretary of Education Betsy DeVos would still have to come to work.
  • Early on, big formula-driven programs like Title I and special education grants would still get funded. So would things like Pell Grants.
  • A short shutdown, such as a few days, probably wouldn’t have much of an impact on schools.
  • However, a shutdown that lasts longer than a week could severely curtail funding for districts. And state and local school leaders could have trouble getting answers to questions about things like their Every Student Succeeds Act plans.

We’ve reached out to the Education Department to see if it has developed new or different contingencies for any government shutdown, and we’ll update this post if we hear back.

4) There’s an issue related to fiscal 2018: whether to raise those spending caps we mentioned earlier for the upcoming budget year. The caps apply to defense and non-defense discretionary spending. Trump’s budget plan runs counter to these sequestration-imposed caps by seeking to impose one cap on all discretionary spending (and increasing only defense spending), instead of abiding by the two separate defense and non-defense spending caps.

Any resulting fight over how to handle those caps could stretch to Sept. 30 and beyond. Getting rid of the two separate caps for defense and non-defense spending would require Congress to pass a law, and for at least some Democrats to get on board. All of that might complicate negotiations over the debt ceiling.

Photo: The U.S. Capitol in April. (J. Scott Applewhite/AP)