EXCLUSIVE: Budget Rule Jeopardizes Supplemental Pell Grant Funds

In May we wrote that the Pell Grant program for low income college students has been weighing on Democratic Congressional leaders’ minds. Supplemental funding for the program under the American Recovery and Reinvestment Act of 2009 is running out and Congress is now faced with the costly challenge of maintaining the maximum grant level of $5,550 in future years. We also reported that the House Appropriations Committee intended to include $5.7 billion in supplemental funding for Pell Grants in its version of the fiscal year 2010 emergency supplemental appropriations bill. If this funding were approved, Democratic leaders would only need to fund Pell Grants at $17.5 billion instead of $23.2 billion when they draft the fiscal year 2011 budget allocations and appropriations in the coming weeks – an easier sell to deficit conscious lawmakers (though $23 billion will be appropriated for the program either way). The strategy, in other words, is to “pre-fund” part of the 2011-12 academic year Pell Grant as a fiscal year 2010 emergency.

If that sounds like a budget gimmick… well it is. In fact, this gimmick is about to bump up against a budget rule for Pell Grants and is producing a rather bizarre scenario. The Senate has already passed its version of the supplemental appropriations bill (with no Pell Grant funding). But House Democratic leaders, including Appropriations Committee Chairman David Obey, haven’t secured the votes for their version because of deficit spending proposed in an early draft (i.e. Pell Grant and other funding) that goes beyond funding for Iraq and Afghanistan military operations.

It appears that if the House considers the supplemental appropriations bill after June 30th, any Pell Grant funding in the bill will be “scored” by the Congressional Budget Office as $23.2 billion. If the bill is considered by Congress before June 30th, it will be scored as is — at whatever funding amount is provided — most likely $5.7 billion. If Democratic leaders are having trouble winning votes due to the cost of the supplemental appropriation, a $23.2 billion score for Pell Grants certainly won’t help.

But don’t blame CBO for this crazy scenario. This is what happens when Congress tries to hide the true cost of the Pell Grant program by dividing up funding among multiple appropriations bills.

Back in 2005, Congress adopted a new rule that governs how CBO must report Pell Grant funding on an appropriations bill. Before the rule, the appropriations committees in the House and Senate knowingly underfunded the program year after year so they could spend money on other programs or give the appearance of fiscal restraint. To counteract this gaming, the rule requires that CBO “score” any appropriations bill that funds Pell Grants with the full cost of the program (as estimated in March) for the upcoming award year, even if the bill provides insufficient funding. In other words, the rule removes the incentive to underfund the program.

Here’s the kicker. The “upcoming award year” stated in the rule starts each July 1. Any Pell Grant appropriation taken up before this July 1st will, according to the rule, be funding the 2010-11 award year Pell Grant — which has already been funded, so CBO will score the funding at whatever it actually is. But on July 1st the upcoming award year becomes 2011-12, and Congress hasn’t gotten around to appropriating funds for that year yet. Normally, Congress would fund Pell Grants for that year through the appropriations bill for the upcoming fiscal year, which isn’t usually completed until the fall.

The upshot is that any Pell Grant funding bill taken up after July 1st will be scored with the full cost of the 2011-12 Pell Grant, which is $23.2 billion (plus a $7.4 billion share of the one-time funding from the Heath Care and Education Reconciliation Act enacted earlier this year).

Democratic leaders in Congress should take this bizarre scenario as a sign. It’s time to stop hiding the full cost of the Pell Grant program through multiple bills. If the Pell Grant program needs $23.2 billion to support student grants, provide it all at once. And do it through the regular appropriations process.

Will the Members of Congress who won’t vote for a single $23.2 billion Pell Grant appropriation but will vote for two separate appropriations of $5.7 billion and $17.5 billion to fund the same program in the same year please stand up?