‘Tough Choices’ Ahead on Federal Budget

Although federal spending on domestic programs will be flat in the upcoming fiscal year, advocates and higher education lobbyists say there’s still a chance to secure more money to increase the maximum Pell Grant award and to fund the Office of Federal Student Aid, among other priorities.

Yet, more money for those areas will mean cuts in other areas of the budget, leading to “dire challenges and some really tough choices” for Congress and the Biden administration, said Jared Bass, senior director of higher education policy at the left-leaning think tank the Center for American Progress.

“The spending levels that were set present some really big challenges for what we’re able to do and how we’re able to invest in education and health care, and then childcare, and so many other social services and public goods that communities across the country really rely on.”

In order to avoid defaulting on the nation’s debt, President Biden and Republican House Speaker Kevin McCarthy cut a deal to limit spending on nondefense discretionary programs to $703.65 billion and suspend the debt ceiling through Jan. 1, 2025. The deal—which passed both houses of Congress last week—allows for a 1 percent increase in fiscal year 2025.

Flat funding and that 1 percent increase won’t keep pace with inflation, so it becomes a cut for programs, said Jon Fansmith, senior vice president for government relations at the American Council on Education.

“We’ve seen this a few times when you have a zero percent increase in funding, the internecine wars among supporters of different programs get pretty intense because any possible increase comes at the expense of a cut somewhere else,” he said.

Fansmith said higher education groups will be “playing defense across the board” to protect programs’ funding.

“You really need to make a clear argument for the value of all these programs because everything is possibly up for cuts,” he said.

Advocates and lobbyists are waiting to see how that $703.65 billion pie gets split up among the 12 appropriations bills, which will indicate the priorities of House and Senate appropriators, and then how the money gets divvied up in each bill. The Education Department’s budget is part of the Labor and Health and Human Services bill, which means that any funding increases for the department will have to come out of that account.

“Are you cutting other education programs or cutting medical research? Are you cutting support for mental health programs?” Fansmith said. “It’s just a really bad place to have to find and balance those cuts. There’s lots of areas where we know there’s a strong need and where programs need additional funding.”

Pell Grant and Other Priorities

President Biden has proposed increasing the maximum Pell Grant award by $820—the third increase in as many years—for fiscal year 2024. Bass and others said that increase is not off the table yet. Congress could use money from the Pell Grant reserves to increase the maximum award. Lawmakers also could opt to use that pot of money for other priorities.

“They’re going to be challenged to really squeeze everything that they can to be able to provide increases where they want them,” Bass said.

The fiscal year 2023 budget boosted funding levels for a range of federal higher education programs, including $137 million more for historically underresourced institutions and an additional $40 million for the Postsecondary Student Success Program. Lawmakers did not give more money to the Office of Federal Student Aid—a decision that has created challenges for the agency and led to budget cuts.

Bass said additional money is “crucial for the operations of Federal Student Aid.”

The Biden administration also requested an additional $620 million for Federal Student Aid for the coming fiscal year to assist with restarting student loan payments later this summer, overhauling how federal student aid is disbursed and other projects.

Bass said Federal Student Aid is already behind because of the current funding levels and is having to play catch-up to meet the demands of this year and next.

“We’re going into [fiscal year] 2024 problems with [fiscal year] 2022 money,” Bass said.

Debbie Altenburg, associate vice president for research policy and government affairs at the Association of Public and Land-grant Universities, said she’s worried about the National Science Foundation’s budget.

The agency received an additional $1 billion in the current federal budget, but Altenburg said that funding was considered supplemental and won’t be included in NSF’s baseline budget for fiscal year 2024.

“So NSF will start in the House bill probably a billion dollars lower for FY ’24 than they got in ’23 because the Republicans are taking out all that supplemental money,” she said.

Altenburg said that in previous years, budget caps have meant a slower growth in federal programs, which is something she’ll be watching as the budget process moves forward.

“One of the challenges that we had during the Obama administration and the budget caps is that we kept growth of research budgets relatively flat,” she said. “That was when China significantly increased investments in R&D … We give our competitors a window to catch up if we are not willing to make these investments in the R&D that’s necessary for our national security.”

If the House and Senate don’t reach an agreement on the budget before January, both defense and nondefense programs will see a 1 percent cut across the board, according to the deal. Altenburg and others said that trigger gives both sides an incentive to pass a budget.

Flat federal spending will add to the pressures institutions are facing, Fansmith said, especially as states look to balance their budgets without the infusion of pandemic-relief funds.

“We’re in a high-inflationary environment,” he said. “We have low unemployment and declining enrollment … You can’t expect, as you have in previous times, that the federal government can be the stopgap to backfill what the states might be taking away.”