Most of today's headlines related to the White House's annual summertime reassessment of the federal government's budget picture Tuesday focused on the ever-expanding budget deficit and its implications for the health care debate.
But buried within the Office of Management and Budget's "mid-session review" (see Page 21) is a startling figure that arguably has both good news and bad news for President Obama's higher education strategy.
The budget document shows that federal spending on the Pell Grant Program will be $27 billion higher over the next decade than the administration estimated as recently as February. At that time, the cost of making Pell Grants an entitlement and having it increase automatically each year was estimated at $117 billion over 10 years.
The good news (such as it is) for President Obama and Education Secretary Arne Duncan is that the budget office attributes the shortfall to sharp increases in the number of students using federal aid to enroll in college this fall -- a typical result when the economy nosedives, but also arguably a sign that Americans are responding to the president's call for every American to have at least a year of higher education.
"This increase is driven almost entirely by technical revisions to reflect historic increases in the demand for Pell Grants as more individuals choose to go to college in a weakened labor market," the budget office wrote in the budget document.
This increased estimate, Office of Management and Budget officials explained in response to questions, is "primarily due to increases in projected enrollment that far exceed historical growth rates. Specifically, the President's Budget assumed year-over-year applicant growth for the 2008/2009 and 2009/2010 award years would be just over 11%. Actual enrollment in the 2008/2009 award year was over 13%, and projected enrollment in the 2009/2010 award year is expected to be higher than that." Many colleges, especially regional public, two-year nonprofit, and for-profit colleges, have been reporting significant increases in enrollments this fall.
The enrollment numbers may hearten administration officials. But the new budget figures are probably prompting more consternation than celebration at the Education Department and among Congressional Democrats, because they would appear to threaten, or at least complicate, President Obama's plan to end lending through the guaranteed student loan program and use the savings to increase Pell Grant spending and address a slew of other education priorities. That's because the estimate would seem to increase the cost of the president's Pell Grant plan sharply over 10 years.
The increase estimated by the budget office represents a rise of about 23 percent in the anticipated cost of the president's proposal. It's not entirely clear how much more expensive that would make the slightly different Pell Grant changes that the House included in its higher education legislation last month, which would not turn Pell into a mandatory program but would assure that the maximum grant increased at more than the rate of inflation each year. The Congressional Budget Office estimated the House's Pell proposal to cost $40 billion over 10 years (far less than the $117 billion estimate for the White House plan), but the enrollment increases envisioned by the White House would presumably jack up the cost of the House proposal, too. (Note: This paragraph has been updated from an earlier version of this article to correct incorrect information.)
The practical impact of the new OMB estimate on the legislative process is also a little unclear, since the Congressional Budget Office does not alter its formal "score" (or estimate of budgetary impact) based on the administration's Mid-session Review.
But it seems possible, if not likely, that the increased costs of Pell Grants could eat significantly into the other goals that the administration hopes to accomplish with the $87 billion that its student loan restructuring proposal would reportedly save.
In addition to the $40 billion envisioned for Pell Grants, the House legislation that Rep. George Miller (D-Calif.) drafted to carry out the president's higher ed agenda would also distribute billions to a laundry list of Democratic education priorities: about $10 billion for various community college initiatives, nearly $8 billion for early childhood education, $4.1 billion to modernize and repair school facilities, $3.25 billion to limit student loan interest rates, and $1.25 billion to expand the Perkins Loan Program.
The Pell Grant costs' ballooning, combined with the $10 billion in deficit reduction savings that Congressional Democrats have agreed to carve out of any budget reconciliation legislation they produce for higher education, would leave just $10 billion for anything and everything else that the White House sought to achieve by ending the guaranteed loan program.
The readjusted budget numbers also intensified concerns from Congressional Republicans about the administration's student aid plan and the parallel House bill. "The deficit is soaring, a substantial portion of the so-called savings in this bill may never materialize, and now we learn it will spend billions more than expected," Rep. John Kline (R-Minn.), the senior Republican on the House Education and Labor Committee, said via e-mail. "The more we learn about this bill, the more obvious it becomes that there is nothing 'fiscally responsible' about it. These new figures are yet another reason Democrats should slow down and consider the consequences of the plan they're recklessly rushing through Congress."