Manna From Heaven (er, Washington)

House economic stimulus package would provide as much as $20 billion for students, $8 billion for scientific research, $9 billion for academic facilities, and $39 billion for states to soften blow of education budget cuts.
January 16, 2009

WASHINGTON -- As colleges and students around the country struggle with the effects of the worldwide economic downturn, help appears to be on the way from the nation's capital. And plenty of it, to judge from a draft of a massive, $825 billion stimulus package released by Democratic leaders in the House of Representatives Thursday.

Calculating exactly how much of the proposed money -- $550 billion in new spending and $275 billion in tax breaks over two years -- could (if enacted) flow to postsecondary institutions, and to students and potential students, is difficult because many of the proposals in the package lack detail. It would also be premature for anyone in higher education (or any other potential recipients of stimulus funds) to start spending it, since (1) budget hawks in Congress and elsewhere blanched at the size and scope of the package, (2) this is just the House's version, with the Senate reportedly drafting its own, and (3) multiple steps remain in the process.

Still, none of those factors are likely to dampen interest in what's in the legislation, and a rough estimate by Inside Higher Ed suggests that tens of billions of dollars could flow to colleges and their students, in the following broad categories:

  • Nearly $30 billion in financial support for students, including $15.6 billion to increase the maximum Pell Grant by $500, to $5,350, in 2009-10; $490 million in additional federal work study funds; $12.5 billion to replace the Hope tax credit created in the Clinton administration with a tax credit worth up to $2,500 a year and structured in a way that is more helpful to students from low-income families; and a $2,000 increase in federal limits on unsubsidized loans.
  • Some share of the $39 billion that would flow to state governments to "help restore cuts to critical education programs" in both elementary/secondary education and higher education. While it is impossible to know exactly how much of this pool of money would go to two-year and four-year public colleges and universities, as opposed to public elementary and secondary schools, language in the legislation says that governors are supposed to "provide the amount of funds to public institutions in the state that is needed to restore state support for postsecondary education to the fiscal year 2008 level."
  • At least $8 billion in increased funding of research and researchers, including $2 billion for the National Science Foundation, $2 billion in research on energy efficiency and renewable energy, $1.9 billion in basic energy studies, $1.5 billion for biomedical research through the National Institutes of Health, and $400 million for climate change research through the National Aeronautics and Space Administration. That number could grow if other R&D funds -- $11 billion for research and development and other advances related to the electricity grid, $900 million for cyber security and pandemic R&D -- flow in some form to university researchers.
  • About $8.7 billion in infrastructure support at public and private colleges and universities, including $6 billion to help modernize their facilities and make them environmentally friendly, $1.5 billion through the National Institutes of Health to help renovate biomedical research facilities, as much as $900 million through the National Science Foundation to build or renovate facilities or upgrade equipment, and $300 million for college science facilities through the National Institute of Standards and Technology.
  • A portion of $4 billion in grants for adult education and job training, a significant amount of which could flow to community colleges and for-profit institutions that provide career-related training. (Two-year colleges typically receive about a third of all funds under the Workforce Investment Act, though it is distributed through one-stop job centers and state boards.) It's also possible that some money for job training and education could emerge from the bonds the stimulus package would provide to states or municipalities to create "recovery zones" in areas with significant unemployment, home and business foreclosures, or poverty.
  • An array of other monies that could flow to postsecondary institutions and would-be students, including $600 million to train primary health care workers and $200 million in funds for additional AmeriCorps national service grants.

Reading through the long list of new spending proposed by the House Appropriations Committee and new and expanded tax breaks suggested by the House Ways and Means Committee, it was hard to escape the feeling that Democrats, in putting together a plan to apply electroshock to jolt the economy out of its stupor, were taking advantage of the opportunity to satisfy the wish lists of many constituents. Indeed, to take the example of higher education, groups that represent a wide range of interests -- and don't always see eye to eye on what should take priority -- all found a great deal to like in what House lawmakers (in collaboration with the incoming Obama administration) offered.

The Association of American Universities, which represents major research universities, noted in a prepared statement praising the stimulus plan that "[m]any of these provisions reflect suggestions made by AAU and other higher education as well as business organizations." The Institute for College Access and Success, which especially represents the interests of low-income students, said in its statement that the plan was consistent with its own recommendations that the stimulus plan "would help make college more affordable for America’s students and families," by emphasizing grant funds and proposing that tax credits be restructured to make them available, at least partly, to students whose families do not pay taxes.

The fact that the plan seems to check off items from so many wish lists was not lost on the Congressional Republicans who tend to be much more skeptical about the wisdom of significant government spending, even though many right-leaning economists have endorsed the notion that a hefty economic stimulus package is needed to keep the country from falling into an even deeper recession.

McClatchy Newspapers quoted Rep. John Boehner, a House Republican leader, as saying "Oh, my God," to describe his reaction to the Democrats' plan. "I just can't tell you how shocked I am at what we're seeing.... Everything all these agencies want to do is in here. I don't know how this is going to stimulate the economy."

Something for Everyone

The full text of the stimulus legislation (at least the spending piece of it) was released late in the day Thursday, and while it shed light on many of the proposals in the bill, it left an unclear picture of exactly how much money might flow to colleges and students under the legislation.

The biggest pool of education spending would be in the newly created fund that the legislation calls the "State Fiscal Stabilization Fund," totaling $79 billion over two years. The money would be allocated to states based on their populations, though it would be tilted toward those states with the most people aged 5 to 24. The legislation directs that governors spend 61 percent of the pot of money they receive in each of the two years to restore their K-12 and higher education budgets to their 2008 levels. Governors can use the other 39 percent for "public safety and other government services, which may include assistance for elementary and secondary education and public institutions of higher education."

The stimulus bill dictates that public colleges that receive money through the stabilization fund must use the money "for education and general purposes, and in such a way as to mitigate the need to raise tuition and fees for in-state students." A college may not, the legislation notes, use the money for "construction, renovation, or facility repair" or "to increase its endowment" -- the latter a clear nod to recent Congressional concerns that elite colleges are hoarding money while ramping up their tuitions.

Given the pounding that many state budgets have taken so far in 2009 -- with further cuts threatened -- the prospect of some relief is likely to be extremely welcome to community and public colleges that have encountered major reductions and are facing bigger ones.

Student Aid. The legislation would offer significant help to students and parents. Not only would it increase the maximum Pell Grant by $500 this year, aiding an estimated 800,000 more students, but it would also eliminate a $1.4 billion shortfall expected in the program through 2010-11.

The legislation would also increase the annual (by $2,000) and aggregate (by $8,000) limits on how much undergraduates can borrow in federal unsubsidized loans. And it would combine the current Hope tax credit and an existing tax deduction for college expenses into a new tax credit, proposed by Democratic Reps. Lloyd Doggett of Texas and Tom Perriello of Virginia, which could for the first time be used to cover textbooks and other course materials.

And perhaps most importantly, up to $1,000 of the $2,500 annual amount of the new tax credit would be refundable, which means that families that pay less than that amount in federal taxes could still be reimbursed for the funds they spent on college. Many advocates for low-income students have viewed tax credits as flawed, among other reasons, because they are not available to students from families too poor to pay taxes.

Higher education infrastructure. The college leaders who lobbied hard for significant funds for college facilities, citing tens of billions of dollars of backlogged projects, may be disappointed by what's in the legislation. The bill would provide $6 billion in for "higher education modernization, renovation and repair," to be distributed to states in proportion to their share of full-time undergraduates.

The funds could be used for "health and safety repairs, facility modifications to provide access for disabled students, and educational technology infrastructure upgrades, as well as energy efficiency projects," and priority would be given in distributing the money to colleges that "serve high numbers of minority students, institutions impacted by a major disaster" -- a boon to the Gulf Coast institutions affected by Hurricane Katrina and, probably, to the University of Iowa -- "and institutions proposing to improve energy efficiency."

The bill would also inject significant funds into science facilities through various federal agencies, providing money for a National Science Foundation program (which was created but never funded) designed to modernize science and engineering labs and for a program at the National Institute for Standards and Technology that, according to the Association of American Universities, received 93 proposals last year and was able to fund just three.

Academic research. The stimulus legislation would be a boon, at least in the short term, to advocates for research who have been concerned that federal support for the biomedical sciences has stagnated and that the government has not kept pace on its plan to double funding for the physical sciences.

In describing the legislation, Congressional supporters seem to be somewhat self-consciously describing the proposed research funds as economic drivers. A news release from the House Appropriations Committee describes proposed NASA funds as "$400 million to put more scientists to work doing climate change research" and $1.5 billion in funds for the National Institutes of Health as "expanding good jobs in biomedical research." The legislation does not specify whether those funds should be used for research grants, fellowship support or other purposes.

The legislation also includes one other potential gift, this time for lenders. It contains language that would change the way the government calculates the subsidies it pays to student loan providers, as pointed out by the New America Foundation's blog Higher Ed Watch.

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