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Big, Big Money Problem: Finding Funds for Pell Grants

By Alyson Klein — February 08, 2011 2 min read
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Unless you’ve been living under a rock, you probably know that House Republicans have promised to make dramatic reductions in domestic discretionary spending, which they say has gotten out of control in recent years.

And it’s unclear just what impact that pledge will mean for K-12 programs.

One big complication: There is a major, major shortfall in the Pell Grant program, which finances scholarships to help low-income students attend college. That’s partly because when Congress was under Democratic control, lawmakers boosted the size of grants considerably, arguing that they had not kept pace with the rising cost of higher education. But now, with workers looking to increase their skills during the economic downturn, there’s been a big hike in demand for the grants.

That means that in order to keep grants at their current levels (the maximum is $5,550), Congress will have to find more than $5 billion in fiscal year 2011. Part of that money was included in the stop-gap measure that’s currently funding the entire federal government at fiscal 2010 levels until March 4.

House leaders recently unveiled a budget plan that would include about a 4 percent cut overall to the spending bill that finances the U.S. Departments of Labor, Health and Human Services, and Education, from fiscal 2010 levels.

Right now, it’s unclear whether a budget resolution proposed by the House Budget Committee would include funds for fixing the shortfall. Advocates for education spending are worried that there could be a cut in Pell Grants. (See this letter from the Committee for Education Funding, a lobbying coalition.)

A House aide said that the Pell Grant shortfall would likely be taken care of in the spending plan for fiscal 2011, in part because lawmakers feel they have to cover it. It’s virtually a mandatory program, the aide explained.

That would mean that other programs covered in the spending bill would be cut by roughly 7 percent overall. The aide noted that Labor-HHS-Education spending has grown by more than $25 billion in the past two years.

The proposed reduction could potentially mean a cut to key programs, such as Title I grants for disadvantaged students, but is even more likely to impact other, smaller programs within the Education Department’s budget.

An even bigger possible problem: Even if the shortfall is taken care of this year, the program is massively underfunded next year, too. Joel Packer, a principal at the Washington-based Raben Group and the executive director of the Committee for Education Funding, estimated the shortfall may be around $9 billion in fiscal year 2012.

In short, Pell Grant recipients may be at the center of a huge, looming political battle. And as Congress scrambles to find money to fix the shortfall, other programs are likely to feel the squeeze.

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