Education Budget

Last week a subcommittee in the Senate passed an appropriations bill to fund nearly all federal education programs for fiscal year 2013, which starts October 1, 2012. That isn’t big news because the details of a final bill that would be viable in both the House and Senate are contingent on some major roadblocks: It’s an election year; the Labor, Health & Human Services, and Education Appropriations bill is the most contentious funding bill; automatic, across-the-board spending cuts loom in January; and so on. The bill is even less newsworthy because the Pell Grant program is temporarily on sound financial footing and no year-end funding crisis is in play as in past years. That’s why many might miss that the Senate bill solves next year’s Pell Grant funding crisis—well, just about.

First off, recall why this year is an easy one for Pell Grant funding and why fiscal year 2014 and each year thereafter are not.

For the past four years, Congress has provided both regular annual appropriation and temporary funding for Pell Grants. The temporary funding is available through fiscal year 2013, but not beyond. If Congress doesn’t renew that funding next year at $7.8 billion, lawmakers must cut the maximum grant size and/or tighten eligibility rules. Let’s call this $7.8 billion the funding cliff.

In other words, this year’s funding bill (fiscal year 2013) is the last one before the cliff, taking a lot of pressure off of lawmakers for this year. Moreover, past funding bills actually overfunded Pell Grants by a cumulative $2.1 billion, and that money is available for Congress to spend on the fiscal year 2013 funding bill. It’s as if Congress reached into its pocket and unexpectedly found a wad of cash worth $2.1 billion just for Pell Grants. That “found money” means Congress could provide $1.8 billion less in the fiscal year 2013 appropriations bill than they provided last year while still supporting a maximum grant of $5,645.

That’s where the Senate bill makes an unexpected move to address next year’s $7.8 billion funding cliff. The bill doesn’t provide less for the regular appropriations in 2013, even though it could without cutting grants. It provides the same amount as in 2012. That effectively allocates the $2.1 surplus to the fiscal year 2014 grant and reduces the funding cliff by $1.8 billion. (It’s less than $2.1 billion because the costs of the program are higher compared to the prior year.)

Next, the Senate bill wrings savings from the federal student loan programs—as the president recommended in his fiscal year 2013 budget request—by cutting off the in-school interest subsidy on Subsidized Stafford loans after a student is enrolled beyond 150 percent of the normal time to complete a program and by reducing fees the Department of Education pays to guaranty agencies to rehabilitate federal student loans. The bill also would continue to award Pell Grants to eligible students attending distance learning program, but exclude room and board costs in calculating the grant.

According to a Congressional Budget Office estimate, those changes would make $3.5 billion available for Pell Grants in fiscal year 2014, reducing the funding cliff by the same amount. Indeed, the Senate reallocates those funds into the fiscal year 2014 Pell Grant.

Based on our math, that means the Senate bill closes the fiscal year 2014 funding cliff for Pell Grants by $1.8 billion, plus $3.5 billion, or $5.4 billion in total. Put another way, only about $2.4 billion of the cliff would remain when Congress begins drafting the fiscal year 2014 appropriations bill this time next year. That number is small enough that Congress could feasibly increase the annual appropriation at that time to reach the necessary $25.3 billion.

Of course, that is still only a one year fix. The fiscal year 2015 the funding cliff is still there.

As was mentioned earlier, Congress has a long way to go in completing the fiscal year 2013 Labor, Health & Human Services, and Education Appropriations bill. Even so, the version of the bill that the Democratic majority on the Senate subcommittee passed last week shows how lawmakers can take a few steps that would have a minimal impact on students while also addressing the 2014 Pell Grant funding cliff.

Last week, President Obama made a somewhat controversial comment about the need to support jobs in the struggling public sector. Then this weekend in his weekly address, the president called on Congress to do just that by passing the American Jobs Act, a $450 billion bill that would help states support public sector jobs. For education jobs the proposal would create a Teacher Stabilization Fund to provide $30 billion directly to school districts to help pay for employment-related expenses like salaries and benefits. The program is quite similar to the existing Education Jobs Fund of 2010, which provided $10 billion to support such expenditures, though that funding expires on September 30^th, 2012. Surprisingly, many states have yet to draw down all of their available funds despite the tight state and local budget climate.

As of June 1, 2012, nearly two years after Congress passed the Education Jobs Fund, states and territories had drawn down 86.9 percent of the available $10 billion. Five states and territories have used all of their funds – Guam, Missouri, Northern Mariana Islands, South Dakota, and the Virgin Islands – and another 11 are close to that point, including Florida, Pennsylvania, and Washington State.

But significant portions of obligated funds remain for many states. In total, 15 states have drawn down 80 percent or less of their available funds.  Alaska, New York, Puerto Rico, Vermont, Virginia, and West Virginia all have 30 percent or more of their funds remaining. This means that New York, for example, has about three months to draw down nearly $240 million before the funds expire.

Texas, which has drawn down 72.6 percent of its funds, has $231 million to spend between now and the end of the fiscal year.

And many of the states with low draw-down rates faced significant budget shortfalls in 2012. According to the Center on Budget and Policy Priorities, New Jersey, which has drawn down 73.2 percent of its $272 million in Education Jobs Funds, faced a $10.5 billion (36.0 percent) budget gap in fiscal year 2012. And despite a budget gap of $3.8 billion (20.3 percent), Minnesota has only drawn down 76.2 percent of its funds.

Even states that have less than 20 percent of their funds remaining may have trouble spending them all in time.  Ohio, for example, has drawn down 85.6 percent of its Education Jobs Funds. However, that remaining 14.4 percent accounts for nearly $53 million, a sizeable chunk of change to spend over three months. This is particularly the case when those months are over the summer, when education expenditures are typically lower than during the school year.

To be sure, these unobligated funds do not indicate that states and school districts are in better financial shape than first thought or that President Obama’s $30 billion Teacher Stabilization fund would be unwelcome. However, the unspent Education Jobs Funds do suggest that Congress should do further analysis before providing more federal funding for education employment costs—especially given that the president has requested three times as much as was provided in the 2010 Education Jobs Fund. Such an analysis would ideally help ensure that those funds are sufficient and properly targeted to the states that need it the most.

Of course, this whole conversation could be moot. Congress was not particularly enthusiastic about the American Jobs Act back in September of 2011 when it was first proposed. After all, $450 billion is a massive amount of funding, equal to half the cost of the American Recovery and Reinvestment Act of 2009. Even more so, it seems unlikely that lawmakers will take to it now as other education topics, such as student loan interest rates, monopolize their attention.

Click here to see data on Education Jobs Funds outlays for all states and territories.

In a vote earlier this month, the House of Representatives passed a budget bill, 218-199, that provides a look at how, and if, Congressional Republicans would fund early education programs.  

The deadline for sequestration—the automatic, across-the-board spending cuts that were triggered last fall when the “supercommittee” failed to reach a deficit reduction agreement—is drawing near. It takes effect January 2013, part-way through fiscal year 2013. Experts and onlookers have been trying to figure out if and how lawmakers will cancel sequestration before that deadline. The Republican-led House of Representatives now has its answer.

First, a refresher on how Congress got here: As part of an agreement to increase the limit on the national debt last summer, legislators passed the Budget Control Act of 2011, which sets up a framework by which lawmakers are to enact policies to reduce future budget deficits. If they don’t, the law automatically cuts spending through sequestration and sets limits on future appropriations.

Much of the deficit reduction outlined in the law was supposed to come from a bipartisan bill drafted by a joint House-Senate committee, known as the “supercommittee.” Supercommittee members were never able to agree on a bill, triggering the sequestration and spending caps. Unless Congress and the president now agree to override them, the cuts and caps will proceed as outlined in the law. The sequester will automatically cut fiscal year 2013 appropriations by about $93 billion, of which $55 billion comes out of defense programs and $39 billion comes out of non-defense programs. Within those amounts, the cuts will be distributed evenly across all non-exempt programs. (Pell Grants are the only exempt education program.)

Last week, the House passed a bill that, if signed into law, would cancel the sequester that applies to fiscal year 2013 appropriations. The bill includes policies that would reduce spending across a range of non-education programs funded outside the appropriations process. House lawmakers say those cuts would take the place of the automatic spending cuts that would have come through sequestration.

Nevertheless, education programs—nearly all of which are funded through the annual appropriations process—have not yet escaped unscathed in the House-passed bill. The bill leaves in place a cap on total appropriations funding for fiscal year 2013 that the House adopted earlier this year. That cap is $1.028 trillion, $15 billion below the total appropriations level enacted for fiscal year 2012.

The lower spending cap does not guarantee that lawmakers will cut funding for any or all education programs when they finalize fiscal year 2013 appropriations funding (fiscal year 2013 starts October 1, 2012), but education programs will compete with other programs for funding within a smaller pie. Even if the House bill becomes law, Congress must still determine funding levels for education programs during the appropriations process. Thus there is no meaningful way to predict how the House appropriations limit would affect education programs. Moreover, Congress has actually increased total appropriations for Department of Education programs in recent years even when it has cut appropriation funding across all agencies in aggregate.

It should also be noted that the House-passed bill leaves sequestration in place for programs funded outside of the appropriations process, so-called mandatory programs. This won’t mean much for education programs, since almost all are funded through the appropriations process. Some funding for Pell Grants is mandatory, but it is exempt from sequestration by law. That leaves student loans. The sequester would cut funding for student loans by increasing the origination fee borrowers pay when they take out new loans. That increase is likely to be about a half a percentage point, meaning the fee on a $5,000 loan will cost an additional $25.

To be clear, the Senate isn’t likely to take up the House bill. And the Senate shows no signs of adopting an alternative to cancelling the pending sequester.

In other words, if and how Congress will cancel the sequester is still anyone’s guess. Despite the action in the House, a definitive answer isn’t likely until after November elections.

This year, the president and the Department of Education (ED) have taken on a new challenge — re-imagining the teaching profession through the Recognizing Educational Success, Professional Excellence, and Collaborative Teaching (RESPECT) program. The White House rolled out RESPECT on February 15 of this year with the mission of transforming the teaching profession into a highly respected, effective, and well-paid career. Last week, ED released additional details about RESPECT, focusing on strategies to elevate teachers, which were developed after consulting teachers, school leaders, analysts, and policymakers.

The newly released details about RESPECT read like a manifesto, full of lofty ideas and aspirations that would, ideally, dramatically alter the teaching profession. Proposed strategies include:  reorganizing classrooms, schools, and the school year to allow for more flexibility in serving students; shared responsibility for student achievement between teachers and principals; an overhaul of teacher training programs; greater opportunities for professional advancement; teacher evaluations; and higher teacher and principal compensation.

To further this agenda, the White House has requested $5 billion from Congress. But instead of including the program in its ten year budget request, the administration proposed it outside of the regular 2012 appropriations. This would effectively mean that the spending would not have to be offset.

As proposed, ED would distribute the funds to states and consortia of school districts through a competitive grant process. Winning states and districts would be selected based on applications they submit proposing work based on the strategies outlined above.

While existing research supports these strategies, the real question is whether or not states have the capacity to tackle such a wide-reaching reform program amid budget cuts and personnel reductions. One need not look any further than the School Improvement Grant (SIG) program. As we discussed in a previous post, states distributed millions of dollars in SIG grants to districts to turnaround the lowest-performing 5 percent of schools. According to the Government Accountability Office, many states and districts ultimately lacked the capacity to successfully implement the required reforms. As a result, progress on school improvement has stalled while districts spend their time developing data systems or competing with other districts to re-staff their schools.

If states struggled to find the capacity to support their districts during SIG implementation, how will these same states build the capacity to re-envision the entire teaching profession, from training to evaluation to compensation? While crafting a competitive grant program that relies on states to shape the direction of the efforts and provide capacity provides states with greater control over education, it could  set up states to flounder or fail once again.

Both RESPECT and SIG have the potential to foster innovation and push bold reform agendas. But ED should consider the challenges that states have faced in implementing SIG grants, including the fact that capacity is not established overnight, regardless of available funds. Of course, RESPECT is far from a done deal – it seems unlikely that Congress will pony up $5 billion for a new education initiative during tough fiscal times.  But if RESPECT is implemented, the Obama administration should be wary of the limitations of state capacity. It is likely that the Department of Education will have to provide states and districts with significant support to ensure the funds are spent wisely and in a way that has a real impact on students.

Hawaii teachers union leader wants to revisit contract members rejected earlier this year

Who would pay for proposed Michigan free-tuition plan with annual price tag in the billions?

University of Wyoming trustees hear that Gov. Mead’s request for 8 percent budget cuts will cost $15.6M

Louisiana panel rejects testing bill

Hawaii teachers union leader wants to revisit contract members rejected earlier this year
Facing the threat of losing $75 million in Race to the Top funds this year, the Hawaii State Teachers Association (HSTA) is asking teachers to reconsider a proposal for a new teacher evaluation system that incorporates student test scores in teacher ratings. HSTA members rejected the measure in January, citing that they didn’t have enough information or time to review the plan to make an informed decision. Without a comprehensive evaluation plan, the U.S. Department of Education is likely to rescind the state’s remaining Race to the Top funds. Hawaii governor Neil Abercrombie noted that a new “clear, current, and correct” agreement must be crafted and voted on because the original agreement is no longer valid. This time, HSTA will be invited to assist with development of the new teacher evaluation tools. More here.

Who would pay for proposed Michigan free-tuition plan with annual price tag in the billions?
This week, Democrats in the Michigan State Senate introduced legislation that would allow Michigan high school graduates to attend state colleges and universities for free. The proposal would be costly—an estimated $1.8 billion annually—and would be paid for with increased revenue from closing unspecified tax loopholes. Lou Glazer, founder of the think tank Michigan Future, testified that an investment in higher education is an investment in the economy. James Hohman from the Mackinac Center free-market think tank disagreed with Glazer’s analysis and contended that jobs, not better higher education, would strengthen the state’s economy. Based on the lack of support from Senator Jack Brandenburg (R-Harrison), the Finance Committee Chairman, the bill is unlikely to pass. More here.

University of Wyoming trustees hear that Gov. Mead’s request for 8 percent budget cuts will cost $15.6M
According to an order from Governor Matt Mead, Wyoming must make steeper cuts to its fiscal year 2013 budget than anticipated. The culprit is the drop in natural gas prices from an expected $3.25 to $2 per thousand cubic feet. For each dollar reduction in natural gas prices, the state loses $200 million in revenue. As a result, state agencies—who were already preparing for a 4 percent cut in their budgets—must now brace themselves for an 8 percent cut. The University of Wyoming, which is the only four-year public university in the state, will see its budget cut by $15.6 million in the 2013 fiscal year. Because approximately 80 percent of the university’s budget accounts for personnel costs, the university will likely have to make cuts to staff in addition to athletic recruiting, student services, class sizes, and scholarship money. More here.

Louisiana panel rejects testing bill
Louisiana’s House Education Committee rejected a Democrat- proposed bill that would allow students—with parental permission—to opt out of taking state academic assessments. The measure was rejected by a vote of three in favor to twelve against. Representative Patricia Smith (D-Baton Rouge), the bill’s sponsor, defended the bill by calling it a vehicle to increase parental choice. Erin Bendily, an assistant deputy superintendent for the state Department of Education, attacked the legislation and noted that testing requirements are mandated at the federal level, not the state level. More here.

Ever since the Department of Education (ED) released guidance on the Elementary and Secondary Education Act (ESEA) waivers, policymakers have debated the merits and problems surrounding the new accountability systems that states proposed. The waivers, if ED approves them, allow states to replace the accountability system Congress put in place under No Child Left Behind (NCLB) – Adequate Yearly Progress – with their own rules.  ED just released letters from their peer reviewers to each of the 27 states that submitted waiver applications in the second round. After comparing these letters to the first round of approved waivers, it looks like ED is not holding states to the reviewers’ recommendations.

Thanks to EdWeek, 13 of these letters are publicly available. Among the many shortcomings the reviewers identified, states’ treatment of student subgroups (students with disabilities, English language learners, minority students, and students living in poverty) in their school accountability grades featured prominently in the letters. It is not surprising that the reviewers were concerned about the treatment of subgroups in the waivers – many stakeholders have expressed similar concerns. Indeed, even the Department of Education’s guidance on how it will evaluate ESEA waiver applications explicitly requires states to address subgroup achievement. Has ED changed its tune after recognizing the challenges this created for the majority of schools?

For example, reviewers dinged Kansas’ waiver application for proposing to measure the achievement gap by comparing the performance of the top- and bottom-performing 30 percent of students instead of separating out student subgroups. Kansas also proposed using alternative assessments for subgroups and failed to demonstrate how they would collect data on individual subgroups over time to identify trends. The reviewers concluded that as it stands, the state’s new accountability framework could potentially mask the performance of struggling subgroups.

This is not the first time that reviewers have been concerned about subgroups. We recently examined three state waivers—from Colorado, Florida, and New Mexico—approved in the first round of waiver applications. ED approved Florida’s and New Mexico’s applications even though their school grade frameworks did not include the achievement of individual subgroups.

From our read of Florida’s original waiver application and the reviewer feedback on the proposal, reviewers criticized Florida’s application because, like Kansas, the state did not include individual subgroup achievement in school grades. Specifically, Florida’s plan ditches traditional ESEA subgroups and instead accounts for the performance of the 25 percent of students with the least test score growth from year to year, assuming that this 25 percent captures most of the students in these subgroups.

Florida’s response to the comments? Not much. Florida did concede by adding that they would use school improvement plans to intervene in schools in which any subgroup of students failed to meet the state’s achievement goals for two years in a row. But as far as we can tell, Florida made no changes to its school grade system in its approved waiver plan. Instead, Florida justified its use of the lowest-performing 25 percent of students by claiming that many schools did not have enough students in each subgroup to be properly measured under NCLB’s accountability system.

So the real question is—is ED taking the reviewers’ feedback about subgroups seriously? In the case of Florida, the Department approved the waiver even though the state made no substantive changes to its inclusion of subgroups in school grades. Will ED take a firmer hand with this second round of waivers? Or will states be allowed to obscure the performance of their neediest students in their school accountability grades? 

Congress made some first moves last week toward approving a budget for fiscal year 2013, but it is still far from certain that legislators will even pass a budget this year or at least before the November elections. Both the House and Senate Appropriations Committees have now released their overall funding targets for fiscal year 2013, as well as appropriations subcommittee allocations.

Washington is gearing up for the fiscal year 2013 appropriations process, and lawmakers face major obstacles to completing the process before the new fiscal year begins on October 1, 2012. Republicans in the House want lower overall spending limits than those they passed in the debt ceiling agreement reached less than a year ago. And for their part, Senate Democrats have proposed a slightly smaller budget for the Labor-Health and Human Services-Education Appropriations Subcommittee to divide across the agencies under its jurisdiction. Nearly all federal education programs are funded one year at time through the annual appropriations process, and the developments of the past few weeks will affect the final outcome.

The Budget Control Act of 2011 (the debt ceiling agreement) that Congress passed in August 2011 set limits for discretionary spending (subject to annual appropriations) at $1.047 trillion for fiscal year 2013. The Senate has already skipped the traditional budget resolution process and agreed to stick to that limit. But the Republican-controlled House passed its own budget resolution with a spending limit (called a 302(a) allocation) of $1.028 trillion. That is $19 billion below the amount signed into law last summer. That leaves an already-substantial gap between the House and Senate as they work to reach an agreement.

Congress took another key step in the fiscal year 2013 appropriations process starting last week when the Senate Appropriations Committee released its 302(b) subcommittee allocations. The subcommittee allocations divide the 302(a) allocation – the spending limit applied to the entire appropriations process – across 12 subcommittees.  The Senate would provide $157.7 billion to the Labor-Health and Human Services-Education subcommittee. That is $3 million below the subcommittee’s fiscal year 2012 allocation of $158.0 billion.

Although the 302(b)s don’t specify how individual programs will be funded, or even the total amount that the Department of Education will receive, they demonstrate the direction in which Congress may move throughout the appropriations process.

Then yesterday, the House Appropriations Committee passed its 302(b) subcommittee allocations for 2013. The House 302(b) allocation to the Labor-HHS-Education subcommittee is $150.0 billion, $7.7 billion below the Senate’s allocation. However, the House 302(b) actually provides nearly $11 billion more to the Labor-HHS-Education subcommittee than House Republicans first proposed for last year’s fiscal year 2012 allocation ($139.2 billion). Note that enacted funding for programs covered by the bill was higher, $156.8 billion, after the House and Senate negotiated a final bill.

The fiscal year 2013 process is especially complicated by the fact that automatically-triggered cuts (called ‘sequestration’) are set to reduce the fiscal year 2013 appropriations by $94 billion in January 2013 unless Congress passes and the president signs a law averting the cuts. So unless that happens, the spending limits outlined above are moot.

Keep in mind that the fiscal year 2013 budget process is nowhere near complete. Even after each chamber passes its 302(b) allocations, both must assemble and pass detailed appropriations bills and then reconcile the two to create a final bill.

This process has not gone smoothly in recent years and is unlikely to this year considering that sequestration looms. Given Congress’s preoccupation with the presidential election, not to mention members’ own elections, the president is unlikely to sign a budget into law before the start of the fiscal year on October 1 (more likely, it will come after the end of campaign season in November). In the meantime, another series of continuing resolutions may be in store.