The Fights that Loom Ahead for the Higher Ed Stimulus

This afternoon the Senate voted 61-37 to pass a slightly slimmer iteration of the American Recovery and Reinvestment Act than it initially proposed. Now, members of Congress will have some important decisions to make when they try to reconcile the two competing stimulus bills in conference committee. Today, Higher Ed Watch takes a look at some of the looming fights. Tomorrow, we will offer our suggestions for resolving the discrepancies between the two bills.

The following higher education issues will need to be resolved:

School Construction

House Bill: $6.0 billion | Senate Bill: $0.0 billion

The bill passed by the House of Representatives and the one reported out of the Senate Appropriations Committee both contained billions of dollars for postsecondary construction funds. The original Senate version also included language guaranteeing that community colleges would receive their fair share of funds. To appease a group of moderate Democrats and Republicans who were unhappy with bill’s overall price tag, however, the Senate replaced their bill with an amendment that eliminated all higher education construction money. Now, the conference committee will have to decide how much, if any, money should be left in for postsecondary construction. In addition, it will also have to decide whether to dedicate a certain percentage of these funds to community colleges.

State Fiscal Stabilization Fund

House Bill: $79 billion | Senate Bill: $39 billion

Both the House and Senate bills would create a State Fiscal Stabilization Fund. a pool of money that the federal government would give states to help them avoid making cuts to their kindergarten through higher education budgets. The bills would also provide incentive grants to states that improve their elementary and secondary data collection systems and assessments, and more equitably distribute teachers. In addition, the House version would allow states to use a portion of the fund ($24.8 billion) for other pressing priorities, such as public safety.

Overall, the Senate bill includes less funding for stabilizing states’ education budgets ($31.5-billion as opposed to $38.8-billion in the House version) and for the incentive grants ($6.9-billion as opposed to $14.4 billion). The conference committee will thus have to determine the appropriate spending levels for these activities, as well as whether to include money for other state priorities besides education. The conference committee will also have to decide whether to include a clause in the Senate bill that allows the Education Secretary to waive a spending requirement for states that benefit from the stabilization fund. Known as maintenance of effort, this part of the legislation requires states receiving stabilization funds to keep their kindergarten through higher education funding at or above the fiscal year 2006 level.

Pell Grants

House Bill: $17.1 billion total ($15.6 billion in discretionary money, $1.5 billion in mandatory) | Senate Bill: $13.9 billion (all discretionary)

The House would increase the maximum Pell Grant by $500 and retire the Pell Grant shortfall. It also includes additional mandatory money to ensure that the money provided by the College Cost Reduction and Access Act is enough to increase the award of every recipient by $490.[1] The net result is a maximum Pell award of $5,350, which is $619 higher than this year’s maximum of $4,731. The Senate Bill, meanwhile, also tries to retire the shortfall, but includes no mandatory money. It also says that the Pell money should be used to raise the maximum award by $281 in the 2009-10 school year and $400 for the following academic year. The conference committee will have to decide whether to include mandatory money; how much to increase the maximum awards; and whether it should set the maximum award for the 2010-11 academic year.

Student Financial Assistance Changes

House Bill: $2,000 annual loan limit increase, a retroactive change to lender subsidies, $490 million for work-study, and $50 million for Department of Education administration. | Senate Bill: $61 million for Perkins loans

The House bill contains a number of provisions affecting student financial assistance and programs, none of which are in the Senate version. These include: a $2,000 increase in federal loan limits on top of the one enacted last year as part of the Ensuring Continued Access to Student Loans Act (ECASLA); a change in the way lender subsidy payments are calculated; additional funding for the Department of Education to manage the student loan purchase programs created under ECASLA; and more money for the federal work-study program. The Senate bill, meanwhile, contains only a small increase in the capital contributions it provides colleges for Perkins Loans. The conference committee will have to decide which of the student aid proposals it wishes to keep and which to dump. Expect a particularly strong fight over the proposed loan limit increases.

American Opportunity Tax Credit

House Bill: $2,500 credit, 40 percent refundable | Senate Bill: $2,500 credit, 30 percent refundable

Both bills would temporarily replace the Hope Scholarship Tax Credit with the new American Opportunity Tax Credit — which is somewhat similar to one of President Obama’s campaign proposals. They have the same income phase outs and qualified expenses, but differ on how much of the credit is refundable — i.e. can be claimed by students and families that do not owe enough in taxes to benefit otherwise. The cost difference between the two proposals is about $800 million over 10 years, so this may not be much of a fight, given the overall bill’s size.

Teacher Quality Partnership Grants

House Bill: $100 million | Senate Bill: $50 million

Both bills include funding for partnership grants under the Teacher Quality Enhancement Grants program. These grants go to helping teachers’ academic, clinical, and field preparation and development. The relatively small amount of money under consideration also likely means this won’t be a major point of contention for the conference committee.

529 College Savings Accounts

House Bill: Nothing | Senate Bill: Allows for technology purchases under 529s

The Senate bill expands allowable uses of 529 college savings accounts for the next two years to include educational technology, such as a computer or Internet access. This is a fairly small change and also is unlikely to provoke much dissent.

Come back tomorrow when Higher Ed Watch will offer its suggestions for how the House and Senate can reconcile their differences in committee.

[1] The College Cost Reduction and Access Act provided a separate stream of mandatory money to give each Pell recipient a $490 increase in their award. This is determined by taking the total amount of mandatory money and dividing it by the number of Pell recipients. Due to an unexpectedly high Pell enrollment, however, the amount of mandatory money provided was not enough to give everyone a $490 boost. The House bill attempts to fix this problem with additional mandatory money. The Senate does not. Check out Ed Money Watch this week for a post that explains this issue in greater detail.