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CBO 2014 Estimate: Pell Grant Surplus Still Growing, Costs Revised Lower

The Congressional Budget Office provided a preliminary look at its 2014 budget estimates for the Pell Grant program today. Last year's surprise funding surplus is still here, and it's trending larger. That's the key takeaway.

The CBO sees Pell Grant costs coming in about $1.7 billion lower than originally expected for fiscal year 2014. It also revised costs in future years lower than what it projected last year by about $1 billion a year. All of those figures assume that Congress keeps the current eligibility rules for the program, including the maximum grant, as they are today.

The downward cost revisions have a two-part effect on the program's budget. First, accumulated surpluses in the program from prior years of over-funding are slightly larger than first estimated. Second, those surpluses will last longer, assuming Congress appropriates the same amount of funding as it did in fiscal year 2014 for the next two fiscal years. Taken together, those effects mean that Congress won't hit the Pell Grant funding cliff full on until the fiscal year 2017 appropriation. Furthermore, the funding cliff isn't as large as estimated last year.

The funding cliff is the increase in the annual appropriation Congress needs to provide to keep the program going in its current form. It came about because lawmakers have been funding the program since 2009 with both regular appropriations and temporary supplemental funding. But eventually the program will exhaust the supplemental funding, forcing Congress to find more of it, appropriate the full cost of the program, or cut benefits and restrict eligibility. The funding cliff measures how much supplemental funding is needed. More background information on the history of Pell Grant funding is available here.

The table below shows how the funding cliff shrunk from CBO's May 2013 estimate to its preliminary 2014 estimate. For example, the small cliff in fiscal year 2015 is now gone, and the fiscal year 2016 cliff is a more manageable $1 billion now, compared to $5.8 billion in last year's estimate. To be sure, these are preliminary estimates, and CBO won't issue issue its official and final estimates until March.

Pell Grant Funding Cliff