Budget Cut or Logical Inevitability?

May 18, 2009

The newspaper headlines have to sting: "Funding Cut Puts HBCU's on the Chopping Block." And the blog posts about how the Obama administration's 2010 budget would treat historically black universities and other colleges that serve minority students are even harsher: "After Destroying the DC Voucher Program, What Does Obama Do For An Encore? Defunds Historical Black Colleges."

Here's the trick: The administration is actually proposing a small increase, not a cut, to the annual budgets of the main programs for minority serving colleges, at a time when the Education Department is proposing to hold the budgets for most federal education programs flat at their 2009 levels. What the administration's budget does, however, is acknowledge the expiration of nearly half a billion dollars in temporary funds that Congress directed to the colleges in 2007.

The money, which was generated by a set of one-time changes to the federal student loan programs, was designed to use that windfall to supplement the amounts that lawmakers normally appropriate to programs for historically black, Hispanic, tribal and Alaskan/Native Hawaiian colleges each year. The Strengthening Historically Black Colleges and Universities program received $85 million on top of its usual allocation of federal funds in both 2007-8 and 2008-9, for instance.

"The mandatory funds that have become an issue were clearly temporary -- the authorizing language from Congress had them expire at the end of 2009," said Robert Shireman, the deputy under secretary of education. "From a budgeting standpoint, they are not in the baseline. While that may sound like budgetspeak, it means that they were not in the expected ongoing spending of the government. If the institutions were expecting it to continue, they misread the program and why it was there."

The recipients of the funds held "no expectation that they should automatically be extended," said Lezli Baskerville, president of the National Association for Equal Opportunity in Higher Education, which represents many of the nation's historically black colleges and universities. But by letting the money for historically black, Hispanic and tribal colleges vanish, Baskerville said, the Obama administration is sending a signal that it views the institutions as a low priority. "You allow those programs to sunset that are not aligned with your priorities," she said. "He could have signaled that it will be a priority for this administration."

The disagreement between minority colleges and the administration about the permanence of mandatory funds has relevance well beyond their particular situation, now more than ever. The Education Department has already signaled its intent to let two major student grant programs (the Academic Competitiveness and SMART Grant Progams) expire after 2010 and, more significantly, colleges and schools will lean heavily this year and next on tens of billions of dollars in economic stimulus funds. What happens then? If the economy hasn't recovered, are they likely to beg for the funds to continue?

Mandatory vs. Discretionary

Mandatory funds, for those of you whose last American government course (or the practical equivalent) is a distant reflection in the rearview mirror, are federal monies disbursed by Congress in special "budget reconciliation" laws rather than through the annual appropriations process that finances the federal government's normal operations. (Money allocated through the latter process is called "discretionary," as in at the discretion of Congress.)

Congress has gone to the "mandatory" side of the federal budget to benefit higher education twice in recent years: in 2006, when it carved nearly $18 billion out of subsidies for student loan providers and used some of the proceeds to create two new grant programs designed to lure low-income students into science fields, and in 2007, when the College Cost Reduction and Access Act squeezed another $22 billion out of lender subsidies and directed the revenue to steadily decrease student loan rates over four years, inject significant funds into Pell Grants for four years, and finance numerous smaller purposes.

Among them was $510 million over two years (fiscal 2007-8 and 2008-9) for minority-serving colleges for a variety of purposes, including to buy lab equipment and cover instructional costs. Most of the money was designed to go to existing programs for groups of institutions that are accustomed to such funds: $200 million in competitive grants for Hispanic-serving institutions, with an emphasis on increasing the number of low-income students in science and math fields; $170 million for historically black colleges and universities; $60 million for tribal colleges; and $30 million for Alaskan/Hawaiian Native institutions.

But the measure also created three entirely new classifications of colleges that educate students from minority groups, providing $30 million over two years for "predominantly black" colleges (those that do not have the "historical" designation of serving black students but have significant black enrollments), $10 million over two years for Asian/Pacific Islander serving colleges, and $10 million for Native American-serving nontribal colleges, where at least 10 percent of the undergraduates are American Indian.

The money, as described in the legislation that provided it, was designed to give a financial boost to institutions that play a unique role in educating students who have historically been underserved by traditional colleges.

The minority-serving colleges received their money for 2007-8 but had to fight to keep it last year, when President Bush's final budget proposal recommended subtracting from their annual appropriated funds amounts equivalent to what they were due to receive in mandatory funds. Minority college leaders, backed by Congressional Democrats, argued at the time that the temporary funds were designed to supplement, not supplant, the normal annual money for the institutions. “Our goal in providing funding for minority-serving institutions under the College Cost Reduction and Access Act was to make up for the severe funding shortfalls these institutions have faced at the hands of the Bush administration," a House Democratic spokeswoman said then.

Officials of historically black and other institutions reacted with comparable dismay when the Obama administration released the full details of its first proposed budget, for the 2010 fiscal year, this month. An Education Department budget that focused heavily on ensuring the financial future of the Pell Grant as the bedrock student aid program kept virtually all other education programs level. The administration proposed that Congress provide relatively small pots of discretionary money (ranging from $2.6 million to $7.9 million) for the programs the 2007 budget law created for predominantly black, Asian/Pacific Islander, and nontribal colleges, and small increases in discretionary funding for the three previously existing programs for minority serving institutions.

But the department's budget table includes big fat zeroes in the 2010 column where there were mandatory funds for the minority serving colleges in 2010, which Baskerville and others portray -- in a budget process that she describes as a "priority setting exercise" -- as a sign that the administration puts them low on the list.

What's included in the budget and not "is not only a choice," Baskerville said, "but it's an opportunity for the chief executive to set the climate, to set the tone, and to elevate in importance those programs that are most important to the administration."

Shireman disputed that view. "These are institutions that could use more support, and they can make a compelling case that they need help, which is why we've proposed 5 percent increases for them. We felt that we were being quite generous and demonstrating our support for minority serving institutions by increasing the discretionary funds for them at more than double the rate of inflation, while other programs across the budget receive no increases at all. That demonstrates our priorities in the context of discretionary appropriations," he said.

"But the money they're talking about was one time mandatory money that's not in the budget baseline, and there's no process for continuing it, except for further mandatory legislation."

Every spare dollar in the administration's higher education budget is going to "prevent a drop in the Pell Grant Program," Shireman said. The same law that added temporary mandatory funds for minority serving colleges, he noted, also boosted the size of the maximum Pell Grant, and when that money expires in 2012, he noted, "students will experience a $1,400 drop in their Pell Grant. We need to fill in that mandatory money, one way or the other, and have made a proposal to do that." (Administration officials point out that the Pell Grant increase will help historically black colleges enormously, as their students are twice as likely as the average undergraduate to qualify for the need-based grants.)

Shireman said that in letting the mandatory funds for historically black, Hispanic and tribal colleges lapse, the administration is endorsing a principle that "we are not continuing any program that is created on mandatory side"; the Education Department's 2010 budget blueprint also notes that the administration plans to let the Academic Competitiveness and SMART Grant programs end after next year, when their funding from 2006 runs out.

But to Baskerville and other supporters of minority serving colleges, the administration appears to be picking and choosing which mandatory money to let lapse and which to continue, noting that the 2010 budget includes some funds for the new programs created (in the 2007 budget reconciliation law) for predominantly black, Asian/Pacific Islander and Indian nontribal colleges. "There is no clear pattern that 'we are automatically going to let all of the mandatory programs lapse... .' " Baskerville said. (Those programs, Shireman points out, were authorized by Congress for a full five years, while the mandatory funds for HBCU, Hispanic and tribal colleges were clearly designated as two year grant programs.)

As the Democratic administration spars with some of its normally most avid supporters, some Congressional Republicans say the disagreement is proof of the dangers of the increasingly common use of budget legislation to create new social programs. In recent years, said one Republican Congressional aide, Democratic leaders in Congress have turned to off-budget money to cut student loan interest rates and expand Pell Grants in higher education, and for similar purposes in k-12. And now billions more are flowing in the stimulus package -- with a clear end date, creating an inevitable "cliff" when the money runs out.

"Creating temporary programs is often intended to make the longterm cost, and it's a dangerous budget gimmick to be playing with," the GOP aide said. "When the money runs out, you've got a real problem. When you've got a funding infusion into these budgets, they're adjusted accordingly, and they become reliant on it. Schools and students come to rely on these programs ... and people feel like promises were made.

"The money shouldn't have been provided in mandatory funding for precisely this reason: because at some point it is going to feel like a cut."

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