Education Funding Issues for FY89

Congress considers annually the funding level for all programs administered by U.S. Department of Education (ED). The debate in this process has focused on how much the Federal Government should spend on education , and what, if any, program changes might be necessary to achieve these levels.

Issue Brief Order Code I B 8 8 0 3 6 EDUCATION FUNDIMG ISSUES FOR Updated A p r i l 1 5 , 1 9 8 8 SUMMARY ISSUE DEFINITION BACKGROUND AND ANALYSIS Overview ( w i t h funding t a b l e ) H i g h l i g h t s o f t h e p r e s i d e n t ' s FY89 Budget R e q u e s t Recommended Changes t o C u r r e n t Law P r o p o s e d N e w Programs P r o p o s e d FY88 Program Changes F e d e r a l Education Expenditures i n t h e Context of t h e F e d e r a l Budget a n d S t a t e a n d L o c a l E x p e n d i t u r e s C o n g r e s s i o n a l Budget Budget R e s o l u t i o n LEGISLATION CONGRESSIONAL HEARINGS, REPORTS AND DOCUMENTS CHRONOLOGY FOR ADD1 TIONAL READING EDUCATION FUNDING ISSUES FOR FY89 The P r e s i d e n t ' s o v e r a l l FY89 b u d g e t r e q u e s t f o r t h e U.S. D e p a r t m e n t of' E d u c a t i o n i s $21.2 b i l l i o n , 4.2% a b o v e t h e amount a p p r o p r i a t e d by C o n g r e s s f o r FY88, b u t .5% below t h e Gramm-Rudman-Holl i n g s e s t i m a t e d b a s e l i n e f o r FY89. D e s p i t e some i n d i v i d u a l programs r e d u c t i o n s , t h e FY89 b u d g e t i n c r e a s e s f u n d i n g f o r most m a j o r e l e m e n t a r y , s e c o n d a r y and h i g h e r e d u c a t i o n programs. The l a r g e s t i n c r e a s e s ( a b o v e t h e FY88 a p p r o p r i a t i o n ) a r e recommended f o r t h e P e l l G r a n t program ($750.6 million), the G u a r a n t e e d S t u d e n t Loan program ($170.6 m i l l i o n ) , C h a p t e r 1 ( $ 2 3 8 . 1 m i l l i o n ) , C h a p t e r 2 ($66.6 m i l l i o n ) , and t h e magnet s c h o o l p r o g r a m ($43.2 million). F u n d i n g would b e e l i m i n a t e d f o r "3b" payments u n d e r t h e i m p a c t a i d program ( ~ a p e n t s b a s e d on c h i l d r e n whose p a r e n t s l i v e o r work on F e d e r a l p r o p e r t y ) , new c a p i t a l c o n t r i b u t i o n s u n d e r t h e P e r k i n s l o a n p r o g r a m , S t a t e S t u d e n t I n c e n t i v e G r a n t s , v o c a t i o n a l e d u c a t i o n ' s consumer a n d homemaking e d u c a t i o n , t h e n o n - h i s t o r i c a l l y b l a c k c o l l e g e s p o r t i o n of t h e d e v e l o p i n g i n s t i t u t i o n program, t h e LEAD program, t h e S t a r S c h o o l s program, and s e v e r a l r e l a t i v e l y small d i s c r e t i o n a r y g r a n t p r o g r a m s l i k e t h e Women's E d u c a t i o n a l E q u i t y ' p r o g r a m , e d u c a t i o n programs f o r t h e h o m e l e s s , and m i g r a n t e d u c a t i o n . Unlike t h e ~ d m i n i s t r a t i o n ' s past r e q u e s t s , a p p r o p r i a t i o n s a r e recommended f o r t h e v o c a t i o n a l e d u c a t i o n and t e a c h e r t r a i n i n g programs. The FY89 b u d g e t a l s o assumes t h a t H.R. 5 ( t h e omnibus e l e m e n t a r y and s e c o n d a r y e d u c a t i o n r e a u t h o r i z a t i o n b i l l c u r r e n t l y i n conference H.R. 5 c h a n g e s t h e c u r r e n t C h a p t e r 1, c o m m i t t e e ) w i l l be e n a c t e d . b i l i n g u a l e d u c a t i o n , and t h e s c i e n c e and m a t h e m a t i c s p r o g r a m s , a s w e l l a s i n i t i a t e s new t e a c h e r and s c h o o l r e f o r m and p a r e n t a l c h o i c e p r o g r a m s . Formal s u b m i s s i o n o f t h e FY89 b u d g e t f o r t h e s e p r o g r a m s i s w i t h h e l d p e n d i n g t h e e n a c t m e n t o f H.R. 5. Some o f t h e most s i g n i f i c a n t c h a n g e s recommended f o r c u r r e n t l a w i n v o l v e s t u d e n t a i d r e f o r m s , such a s s i m p l i f y i n g t h e need a n a l y s i s system used t o determine e l i g i b i l i t y f o r student a i d , r e s t r i c t i n g e l i g i b i l i t y f o r a P e l l G r a n t t o s t u d e n t s who h a v e a h i g h s c h o o l d i p l o m a o r i t s e q u i v a l e n t , a n d i n s t i t u t i n g l e g i s l a t i v e and r e g u l a t o r y c h a n g e s t o t h e GSL program. The House p a s s e d i t s v e r s i o n o f t h e F i r s t C o n c u r r e n t R e s o l u t i o n on t h e Budget f o r FY89 (H. Con. Res. 2681, which assumes t h a t a l l e d u c a t i o n programs would r e c e i v e f u n d i n g t h a t would be e q u a l t o a t l e a s t t h e C o n g r e s s i o n a l Budget o f f i c e ' s 1989 p o l i c y b a s e l i n e and t h a t t h e r e would be f u r t h e r i n c r e a s e s f o r p a r t i c u l a r programs i n c l u d i n g C h a p t e r 1 a n d t h e P e l l C ~ P - t program. The S e n a t e amended and p a s s e d i t s v e r s i o n of t h e b u d g e t r e s o l u t i o n , which would i n c r e a s e FY89 ED f u n d i n g by $1.2 b i l l i o n a b o v e t h e FY88 a p p r o p r i a t i o n . ISSUE DEFINITION Congress c o n s i d e r s a n n u a l l y t h e f u n d i n g l e v e l s f o r a l l programs a d m i n i s t e r e d by U.S. D e p a r t m e n t o f E d u c a t i o n (ED). The d e b a t e i n t h i s p r o c e s s h a s b e e n f o c u s e d on how much t h e F e d e r a l Government s h o u l d s p e n d on e d u c a t i o n , a n d w h a t , i f a n y , program c h a n g e s m i g h t b e n e c e s s a r y t o achieve these levels. BACKGROUND AND W L Y S I S Overview The f o l l o w i n g o v e r v i e w t a b l e compares FY87 and FY88 a p p r o p r i a t i o n s l e v e l s w i t h t h e A d m i n i s t r a t i o n ' s FY89 r e q u e s t f o r ED p r o g r a m s . All a m o u n t s u s e d i n t h e i s s u e b r i e f a r e c u r r e n t d o l l a r s and n o a t t e m p t i s made t o e v a l u a t e t h e i m p a c t o f i n f l a t i o n on a c t u a l p r o g r a m o p e r a t i o n l e v e l s . The U.S. O f f i c e o f Management and Budget (OMB) e s t i m a t e s t h a t t h e i n f l a t i o n r a t e f o r FY89 w i l l be 3 . 3 % and t h e C o n g r e s s i o n a l Budget O f f i c e e s t i m a t e s t h a t t h i s r a t e w i l l be 4%. R e a d e r s s h o u l d be a w a r e t h a t t h e Omnibus Budget R e c o n c i l i a t i o n Act o f 1987 a s s u m e s a 2% o v e r a l l i n c r e a s e i n FY89, a b o v e t h e FY88 a p p r o p r i a t i o n s l e v e l s , f o r n o n d e f e n s e d i s c r e t i o n a r y budget a c c o u n t s , w h i c h would i n c l u d e most ED p r o g r a m s . However, t h i s 2% o v e r a l l i n c r e a s e must b e a c h i e v e d a t t h e a g g r e g a t e b u d g e t l e v e l and may v a r y among i n d i v i d u a l p r o g r a m s . T h e FY89 b u d g e t r e q u e s t a l s o c o n t a i n s a c r e d i t r e f o r m p r o p o s a l t h a t a f f e c t s d i r e c t and g u a r a n t e e d l o a n p r o g r a m s government-wide. The e s t i m a t e d FY89 new b u d g e t a u t h o r i t y and o u t l a y s t h a t a r e r e p o r t e d i n OMB'S b u d g e t d o c u m e n t s f o r t h e D e p a r t m e n t o f E d u c a t i o n a n d F u n c t i o n 500 -E d u c a t i o n , T r a i n i n g , Employment and S o c i a l S e r v i c e s ( o n e o f t h e l a r g e r i n c l u d e t h e c o s t s of i m p l e m e n t i n g t h e program c l u s t e r s i n t h e b u d g e t ) c r e d i t reform proposal. T h i s p r o p o s a l would c h a n g e t h e way F e d e r a l c r e d i t p r o g r a m s a r e t r e a t e d i n t h e b u d g e t by r e q u i r i n g F e d e r a l a g e n c i e s t o s e e k a p p r o p r i a t i o n a m o u n t s e q u a l t o t h e e s t i m a t e d s u b s i d y component o f d i r e c t a n d g u a r a n t e e d l o a n s t h a t t h e y p r o p o s e t o make e a c h y e a r . The a g e n c i e s would t h e n make o u t l a y s of t h i s amount t o c e n t r a l f u n d s i n t h e U.S. T r e a s u r y . The c r e d i t r e f o r m p r o p o s a l would r e q u i r e a n a d d i t i o n a l $3.1 b i l l i o n i n b u d g e t a u t h o r i t y and a n e s t i m a t e d $ 2 . 5 b i l l i o n i n o u t l a y s f o r FY89 f o r t h e G u a r a n t e e d S t u d e n t Loan program ( t h e o n l y ED p r o g r a m A p p r o p r i a t i o n s f o r t h e c r e d i t r e f o r m program a f f e c t e d by t h i s r e f o r m ) a n d t h e o u t l a y s t h a t would r e s u l t from t h e s e a p p r o p r i a t i o n s d o n o t represent benefits f o r program recipients, but represent an i n t e r g o v e r n m e n t a l t r a n s f e r t o t h e U.S. T r e a s u r y . Therefore, t h i s i s s u e bri-f does not include t h e c r e d i t reform funding e s t i m a t e s i n any of i t s d i s c u s s i o n s on f u n d i n g l e v e l s . -- . The h i g h l i g h t s o f t h e FY89 r e q u e s t a r e d i s c u s s e d f o l l o w i n g t h e t a b l e a s i s a b r i e f h i s t o r i c a l o v e r v i e w o f F e d e r a l f u n d i n g f o r ED p r o g r a m s . TABLE 1. Appropriations f o r U.S. Department of Education Programs, FY87-EY89 ( $ in thousands) Compensatory education Chapter 1 Migrant education a/ Impact aid Special programs Chapter 2 Drug free schools Science and mathematics Other special programs b_/ B i 1ingual education c/ Education of the handicapped Vocational rehabilitation Indian education Vocational education d_/ (Includes Smith-Hughes) Adult education Scudent financial assistance Pel1 grants Supplemental grants College work-study Perkin's direct loans Income contingent loans State student incentive grants Guaranteed student loan =/ Higher education Institutional development Special programs for the disadvantaged International education Other f/ See footnotes at end of table.- 76,000 2,717,000 147,208 176,370 33,050 184,250 TABLE 1. (continued) Appropriations for U.S. Department of Education Programs, FY87-FY89 Continued ($ i n thousands) - FY8 7 Higher education f a c i l i t i e s l o a n and i n s u r a n c e FY88 FY89 ( req. -0 9 - 19,205 -0- 132,500 135,089 76,000 294,070 299,118 314,701 College construction loan insurance E d u c a t i o n r e s e a r c h and statistics Libraries Programs f o r s p e c i a l institutions D e p a r t m e n t a l management Total Department of Education $19,687,697 $20,314,175 $21,164,824 a_/ T h e s e programs a r e t h e m i g r a n t e d u c a t i o n programs o f h i g h s c h o o l e q u i v a l e n c y and c o l l e g e a s s i s t a n c e , n o t t h e C h a p t e r 1 m i g r a n t p r o g r a m s . b_/ T h i s c a t e g o r y o f programs i n c l u d e s t e a c h e r t r a i n i n g p r o g r a m s , F o l l o w T h r o u g h , E l l e n d e r F e l l o w s h i p s , women's E d u c a t i o n a l E q u i t y , magnet s c h o o l s , LEAD p r o g r a m , a i d t o t h e h o m e l e s s , t r a i n i n g a n d a d v i s o r y s e r v i c e s , and a i d t o t h e V i r g i n I s l a n d s . d These amounts i n c l u d e funds f o r t h e B i l i n g u a l Education Act, t h e Emergency I m m i g r a n t E d u c a t i o n program and t h e R e f u g e e E d u c a t i o n G r a n t s . d/ The Smith-Hughes i s a permanent a p p r o p r i a t i o n o f $7.148 m i l l i o n provided f o r vocational education. e_/ The GSL f i g u r e d o e s n o t i n c l u d e e s t i m a t e d a p p r o p r i a t i o n s f o r t h e c r e d i t reform proposal. S e e t h e "Overview" s e c t i o n o f t h i s i s s u e b r i e f f o r a more d e t a i l e d d i s c u s s i o n o f t h e c r e d i t r e f o r m p r o p o s a l . f/ T h i s c a t e g o r y of programs i n f l u d e s m i n o r i t y i n s t i t u t i o n s s c i e n c e i m p r o v e m e n t , f u n d f o r t h e imprc.zment o f p o s t s e c o n d a r y e d u c a t i o n , coope r a t i v e e d u c a t i o n , v e t e r a n s ' e d u c a t i o n , g r a d u a t e programs, and s p e c i a l grants. Source: C o n g r e s s i o n a l a p p r o p r i a t i o n s d o c u m e n t s , U.S. E d u c a t i o n FY89 b u d g e t b r i e f i n g d o c u m e n t s . D e p a r t m e n t of H i g h l i g h t s of t h e p r e s i d e n t ' s FY89 Budget Request f o r E d u c a t i o n The P r e s i d e n t ' s FY89 budget recommends $21.2 b i l l i o n i n new budget T h i s i s $850.1 m i l l i o n ( o r 4.2%) a b o v e t h e a u t h o r i t y f o r ED programs. FY88 a p p r o p r i a t i o n . Below a r e some key f e a t u r e s o f t h e FY89 b u d g e t r e q u e s t f o r ED. o M a i n t a i n s t h e c u r r e n t F e d e r a l p r o p o r t i o n of a l l e x p e n d i t u r e s 6.1% f o r e l e m e n t a r y and s e c o n d a r y , 12.5% f o r f o r education p o s t s e c o n d a r y , and 8.7% o v e r a l l . o I s $7 b i l l i o n more t h a n t h e P r e s i d e n t r e q u e s t e d i n 1988, o r a 50% i n c r e a s e o v e r t h e FY88 r e q u e s t . o Programs w i t h are: -- the largest Pel1 Grants GSLs Chapter 1 Chapter 2 Magnet S c h o o l s o $750.6 $170.6 $238.1 $66.6 $43.2 i n c r e a s e s o v e r FY88 a p p r o p r i a t i o n s million million million million million +17.6% + 6.7% + 5.5% +13.0% +60. OX R e q u e s t s no FY89 a p p r o p r i a t i o n s f o r s e l e c t e d programs; l a r g e s t of t h e s e programs and FY88 a p p r o p r i a t i o n s a r e : ---- --- P e r k i n s l o a n s (new c a p i t a l ) Impact Aid "3b1' payments S t a t e Student Incentive Grants Consumer and Homemaking Ed. S t a r Schools o Funds most level. o Programs w i t h t h e l a r g e s t s h a r e of a p p r o p r i a t i o n s f o r FY89 a r e : -- -- other -$185.7 -$134.0 -$ 72.8 -$ 32.7 -$ 19.1 ED programs the FY88 a p p r o p r i a t i o n the total requested P e l l Grants GSLs (Together t h e s e budget r e q u e s t . ) two programs -- C h a p t e r 1 E d u c a t i o n o f t h e Handicapped -- V o c a t i o n a l R e h a b i l i t a t i o n -- at million million million million million represent 21.6% 9.1% 7.7% 36.6% of ED'S total o Maintains programs : the current Program distribution X Share ( FY88 Elementary & secondary education 31% S t u d e n t Aid 40% Vocational 6 adult education 5% of appropriations among X Share (F~89,r e q . ) 42% Special education & vocational rehabilitation Other Total o 1 7X 72 100% 5% 100% R e p r e s e n t s o v e r 50% of t h e t o t a l e s t i m a t e d FY89 b u d g e t a u t h o r i t y a n d o u t l a y s f o r F u n c t i o n 500 ( E d u c a t i o n , T r a i n i n g , Employment, and S o c i a l S e r v i c e s programs 1. Recommended Changes To C u r r e n t Programs The r e q u e s t a s s u m e s t h a t new programs w i l l b e i n i t i a t e d a n d t h a t s t a t u t e s a u t h o r i z i n g c u r r e n t programs w i l l be c h a n g e d . The p r i n c i p a l p r o g r a m c h a n g e s t h a t a r e r e q u e s t e d i n t h e b u d g e t a r e d i s c u s s e d below. Elementary and Secondary Education. The b u d g e t a s s u m e s t h a t t h e c h a n g e s made t o t h e C h a p t e r 1 b a s i c and c o n c e n t r a t i o n g r a n t p r o g r a m s , t h e b i l i n g u a l e d u c a t i o n program, and t h e s c i e n c e a n d 5 , t h e omnibus e l e m e n t a r y a n d m a t h e m a t i c s program by H.R. s e c o n d a r y e d u c a t i o n r e a u t h o r - i z a t i o n b i l l , w i l l be e n a c t e d and w i l l a f f e c t t h e FY89 a p p r o p r i a t i o n s . Since t h i s b i l l i s c u r r e n t l y i n c o n f e r e n c e comrni t t e e , t h e d e t a i l s of t h e p r o g r a m c h a n g e s a n d t h e i m p l i c a t i o n s o f t h e s e c h a n g e s f o r FY89 a p p r o p r i a t i o n s a r e not a v a i l a b l e . ( S e c r e t a r y Bennett announced d u r i n g House a p p r o p r i a t i o n s h e a r i n g s on t h e FY89 b u d g e t r e q u e s t t h a t t h e P r e s i d e n t would s u b m i t a r e v i s e d b u d g e t r e q u e s t f o r p r o g r a m s a f f e c t e d by H.R. 5 a f t e r i e s e n a c t m e n t . ) Some o f t h e most s i g n i f i c a n t c h a n g e s P o s t s e c o n d a r y S t u d e n t Aid. t h a t a r e reconnnended f o r c u r r e n t law i n v o l v e r e f o r m i n g s t u d e n t a i d programs, such a s t h e following: (a) s i m p l i f y i n g t h e c u r r e n t need a n a l y s i s s y s t e m u s e d t o d e t e r m i n e e l i g i b i l i t y f o r s t u d e n t a i d by e l i m i n a t i n g non-liquid a s s e t s (e.g. home, f a r m , r e a l e s t a t e , b u s i n e s s ) from t h e t e s t ; ED e s t i m a t e s t h a t t h i s c h a n g e would i n c r e a s e P e l l G r a n t program c o s t s by a b o u t $200 m i l l i o n ; and (b) r e q u i r i n g a high school diploma o r i t s e q u i v a l e n t t o be e l i g i b l e f o r s t u d e n t a i d and d e l e t i n g t h e ' ' a b i l i t y t o b e n e f i t " m e a s u r e t o d e t e r m i n e e l i g i b i l i t y ; ED e s t i m a t e s t h a t t h i s c h a n g e would d e c r e a s e P e l l G r a n t program c o s t s by $187 m i l l i o n . . The r e q u e s t G u a r a n t e e d S t u d e n t Loan (GSL) f o l l o w i n g c h a n g e s be made t o t h e GSL program: recommends the (a) r e q u i r i n g l e n d e r s t o c h e c k c r e d i t h i s t o r i e s and r e q u i r i n g c r e d i t - w o r t h y c o - s i g n e r s f o r GSL a p p l i c a n t s who have p o o r c r e d i t ; (b) deleting the current prohibition t h a t the National S t u d e n t Loan D a t a System n o t be u s e d f o r e n f o r c e m e n t of b o r r o w e r . e l i g i b i l i t y r u l e s ; / (c) r e q u i r i n g schools t o conduct an " e x i t interview" w i t h e a c h b o r r o w e r t o o b t a i n i d e n t i f i c a t i o n and a d d r e s s i n f o r m a t i o n upon t h e b o r r o w e r ' s g r a d u a t i o n ; (dl requiring loan purchasers t o notify whenever o w n e r s h i p o f t h e l o a n c h a n g e s ; (el r e d u c i n g l e n d e r ' s F e d e r a l i n s u r a n c e l e v e l from 100% t o 90% t o encourage l e n d e r s t o pursue g r e a t e r c o l l e c t i o n e f f o r t s b e f o r e f i l i n g d e f a u l t c l a i m s ; and (£1 lowering the Federal reinsurance of made by g u a r a n t e e a g e n c i e s . borrowers default claims The A d m i n i s t r a t i o n i s a l s o p r o p o s i n g r e g u l a t o r y c h a n g e s t h a t would i n c r e a s e t h e d e f a u l t prevention r e s p o n s i b i l i t i e s of postsecondary i n s t i t u t i o n s . The s p e c i f i c s o f t h e s e c h a n g e s a r e not yet available. I m p a c t Aid. Payments b a s e d on "3b" c h i l d r e n ( c h i l d r e n whose p a r e n t s l i v e o r work on F e d e r a l p r o p e r t y ) would be e l i m i n a t e d , and "3a" payments ( b a s e d on c h i l d r e n whose p a r e n t s l i v e a d work on F e d e r a l p r o p e r t y ) would be s l i g h t l y i n c r e a s e d a b o v e t h e FY88 a p p r o p r i a t i o n and f o c u s e d on d i s t r i c t s w i t h h i g h p r o p o r t i o n s o f t h e s e c h i l d r e n ; and payments t o a n y l o c a l d i s t r i c t t h a t c o u l d n o t q u a l i f y f o r a t l e a s t a $5,000 g r a n t would b e e l i m i n a t e d . H i s t o r i c a l l y Black Colleges. The r e q u e s t f o c u s e s FY89 a p p r o p r i a t i o n s on i n s t i t u t i o n s t h a t e n r o l l l a r g e numbers o f e c o n o m i c a l l y d i s a d v a n t a g e d s t u d e n t s and f u n d i n g on a c t i v i t i e s d e s i g n e d t o improve management a n d o p e r a t i o n of t h e c o l l e g e s . Libraries. The c u r r e n t l i b r a r y program would b e c h a n g e d t o f o c u s F e d e r a l s u p p o r t on r e s o u r c e s h a r i n g , t o expand l i b r a r y s e r v i c e s t o t h e d i s a d v a n t a g e d and h a n d i c a p p e d , and t o s u p p o r t r e s e a r c h and a s s e s s m e n t . Vocational Education. The b u d g e t recommends t h a t S t a t e s basic s k i l l s , d e v e l o p measures f o r s t u d e n t achievement (e.g., j o b placement a t g r a d u a t i o n , c o n t i n u i n g e n r o l l m e n t i n e d u c a t i o n , a n d m i l i t a r y e n l i s t m e n t ) ; f u n d i n g f o r l o c a l p r o g r a m s would t h e n d e p e n d on how t h e l o c a l i t y met t h e s e S t a t e m e a s u r e s ; a l s o e l i m i n a t e s f u n d i n g f o r some c a t e g o r i c a l programs s u c h a s c o n s u m e r a n d homemaking e d u c a t i o n and r e a l l o c a t e s t h e s e f u n d s t o t h e b a s i c g r a n t a n d n a t i o n a l programs. Income C o n t i n g e n t Loans. The r e q u e s t would e x p a n d t h i s p r o g r a m by a l l o w i n g 9 0 a d d i t i o n a l i n s t i t u t i o n s o r consortia of i n s t i t u t i o n s t o a p p l y f o r f u n d s and would a l l o w g r a d u a t e a n d p r o f e s s i o n a l s t u d e n t s t o be e l i g i b l e f o r p a r t i c i p a t i o n . Annual F e d e r a l a l l o c a t i o n s would d e p e n d o n Campus-Based Aid. e a c h s c h o o l ' s s u c c e s s i n m e e t i n g i t s own i n s t i t u t i o n a l l y d e t e r m i n e d , f e d e r a l l y - a p p r o v e d s t u d e n t outcome m e a s u r e s i n s u c h a r e a s a s j o b p l a c e m e n t and program c o m p l e t i o n . For-prof i t e n t e r p r i s e s c o u l d n o t b e u s e d a s C o l l e g e Work-Study e m p l o y e r s , a n d t h e e m p l o y e r s ' m a t c h o f s t u d e n t wages e a r n e d u n d e r w o r k s t u d y would g r a d u a l l y i n c r e a s e f r o m t h e c u r r e n t 20% t o 50% by t h e 1991-1992 a c a d e m i c y e a r . The b u d g e t would r e q u i r e t h a t I m n i g r a n t and R e f u g e e E d u c a t i o n . F e d e r a l funds be used f o r e d u c a t i o n programs meeting t h e s p e c i a l n e e d s of i m m i g r a n t and r e f u g e e c h i l d r e n r a t h e r t h a n f o r t h e g e n e r a l o p e r a t i n g c o s t s of t h e r e c i p i e n t s c h o o l d i s t r i c e s . C o u n t i n g t h e same c h i l d r e n t o g e n e r a t e f u n d s u n d e r b o t h o f c h e s e p r o g r a m s would be p r o h i b i t e d . Proposed New Programs The b u d g e t r e q u e s t s a p p r o p r i a t i o n s f o r new p r o g r a m s t h a t a r e n o t y e t authorized. Some a r e i n t h e S e n a t e v e r s i o n of H.R. 5 , and i n c l u d e t h e following: -- $40.0 m i l l i o n f o r a n e x p a n d e d magnet s c h o o l program t h a t i s not t i e d t o desegregation; -- $23.9 m i l l i o n f o r a d r o p o u t p r e v e n t i o n program; -- $10.0 m i l l i o n f o r t h e c r e a t i o n of a Fund f o r Improvement and Reform o f S c h o o l s and T e a c h i n g ; a n d the -- $5.0 m i l l i o n f o r p a r e n t a l c h o i c e open e n r o l l m e n t program. New budget a u t h o r i t y f o r t h e s e programs i s under .5% o f t h e t o t a l new budget a u t h o r i t y r e q u e s t e d f o r t h e Department. O t h e r new programs a r e p r o p o s e d , b u t t h e d e t a i l s of t h e s e p r o p o s a l s a r e n o t y e t a v a i l a b l e . For example, t h e A d m i n i s t r a t i o n i s r e q u e s t i n g t h a t p a r e n t s o r s t u d e n t s b e a l l o w e d t o u s e i n t e r e s t f r e e s a v i n g s bonds t o h e l p pay f o r t h e c o s t s of c o l l e g e . I n t h e o r y t h e s e bonds would b e l i k e c u r r e n t U.S. S a v i n g s Bonds, e x c e p t i n t e r e s t on t h e s e bonds f o r p o s t s e c o n d a r y e d u c a t i o n would n o t be s u b j e c t t o F e d e r a l t a x a t i o n . Tax e x e m p t i o n s would be phased o u t f o r h i g h e r income f a m i l i e s . The S e c r e t a r y o f E d u c a t i o n i s a l s o recommending t h a t " c h a l l e n g e g r a n t s " would be awarded under c e r t a i n d i s c r e t i o n a r y g r a n t a u t h o r i t i e s i n t h e Department t o a s s i s t r e c i p i e n t s g e n e r a t e p r i v a t e s e c t o r s u p p o r t . N e i t h e r t h e r e q u e s t n o r accompanying budget documents d e f i n e t h e p u r p o s e of t h e s e g r a n t s o r what d i s c r e t i o n a r y programs would b e a f f e c t e d by t h i s type of grant. Proposed FY88 Program Changes I n a d d i t i o n t o r e q u e s t i n g a p p r o p r i a t i o n s f o r FY89, t h e b u d g e t a l s o c o n t a i n s a p r o p o s a l t h a t would a f f e c t t h e FY88 P e l l G r a n t program. The FY88 a p p r o p r i a t i o n f o r t h e program i s $99 m i l l i o n s h o r t ; t h a t i s , t h e program r e q u i r e s a n a d d i t i o n a l $99 m i l l i o n t o p r o v i d e e a c h P e l l G r a n t r e c i p i e n t w i t h t h e award amount f o r which h e l s h e i s e l i g i b l e t o r e c e i v e . The P e l l G r a n t s t a t u t e c o n t a i n s p r o v i s i o n s t h a t would r e d u c e e a c h P e l l G r a n t p r o p o r t i o n a t e t o i t s s i z e when a p p r o p r i a t i o n s a r e i n s u f f i c i e n t t o award e a c h s t u d e n t t h e P e l l Grant amount h e / s h e i s e l i g i b l e f o r . (Those w i t h t h e h i g h e s t awards would l o s e t h e l e a s t , t h o s e w i t h t h e l o w e s t awards would l o s e t h e most.) I f t h i s were implemented, t h e Department e s t i m a t e s t h a t 53,000 s t u d e n t s would l o s e t h e i r award and a n o t h e r 1.2 m i l l i o n would have t h e i r awards r e d u c e d by an a v e r a g e of $63. The A d m i n i s t r a t i o n i s r e q u e s t i n g t h a t , i n s t e a d of implementing t h e s t a t u t o r y r e d u c t i o n , e a c h P e l l G r a n t award be reduced by $31. Federal Education Expenditures i n t h e Context o f t h e Federal Budget and S t a t e and Local Expenditures S i n c e 1980, F e d e r a l f u n d i n g f o r ED h a s d e c r e a s e d i n r e a l t e r m s ( a f t e r a d j u s t i n g f o r i n f l a t i o n ) by 7.7%. L i k e w i s e , F e d e r a l o u t l a y s f o r ED h a v e d e c r e a s e d a s a p e r c e n t o f t h e Gross N - - i o n a l P r o d u c t from .6% i n FY80 t o an e s t i m a t e d .4X i n FY88. T h e r e a l s o h a s been a s t e a d y d e c l i n e i n t h e p r o p o r t i o n of t o t a l a n n u a l F e d e r a l o u t l a y s t h a t were made f o r ED programs, d e c r e a s i n g from a h i g h of 2.5% ( i n FY80) t o e s t i m a t e s of 1.8% ( i n FY88). Not o n l y h a s ED's p r o p o r t i o n of t o t a l F e d e r a l o u t l a y s d e c r e a s e d o v e r t h e l a s t s e v e r a l y e a r s b u t i t h a s a l s o d e c r e a s e d when compared t o t h e t o t a l F e d e r a l o u t l a y s made f o r human r e s o u r c e programs. (Human r e s o u r c e Education, programs are t h o s e w i t h i n a c l u s t e r of s i x budget f u n c t i o n s T r a i n i n g a n d Employment ( 5 0 0 ) , H e a l t h ( 5 5 0 1 , M e d i c a r e ( 5 7 0 1 , Income S e c u r i t y ( 6 0 0 1 , S o c i a l S e c u r i t y ( 6 5 0 1 , and V e t e r a n s ' B e n e f i t s and S e r v i c e s (700). T h e s e s i x f u n c t i o n s a c c o u n t f o r most F e d e r a l s p e n d i n g f o r s o c i a l p r o g r a m s , a n d n e a r l y h a l f of a l l F e d e r a l s p e n d i n g . ) I n FY80 F e d e r a l ED o u t l a y s r e p r e s e n t e d n e a r l y 5% of t h e t o t a l o u t l a y s t h a t w e r e made f o r human r e s o u r c e p r o g r a m s . This proportion has declined t o an estimated 3.9% i n FY88 and would i n c r e a s e s l i g h t l y t o 4.0% u n d e r t h e P r e s i d e n t ' s budget p l a n . -- S t a t e a n d Local E x p e n d i t u r e s P u b l i c e l e m e n t a r y and s e c o n d a r y s c h o o l s r e c e i v e r e v e n u e s p r i m a r i l y from t h r e e s o u r c e s S t a t e and l o c a l g o v e r n m e n t s and t h e F e d e r a l Government. S t a t e g o v e r n m e n t s c u r r e n t l y p r o v i d e t h e l a r g e s t p o r t i o n of t h e s e r e v e n u e s ( a n e s t i m a t e d 50% i n s c h o o l y e a r 1986-1987) m a i n l y t h r o u g h r e v e n u e s t h e S t a t e r e c e i v e s from income and s a l e s t a x e s . Local g o v e r n m e n t s c o n c r i b u s e 43.8% o f a l l p u b l i c e l e m e n t a r y and s e c o n d a r y s c h o o l revenues, p r i m a r i l y through property taxation. The F e d e r a l Government p r o v i d e s a p p r o x i m a t e l y 6.2% of t h e t o t a l r e v e n u e s r e c e i v e d by t h e s e s c h o o l s , p r i m a r i l y t h r o u g h g r a n t s and c o n t r a c t s awarded t h r o u g h t h e D e p a r t m e n t of E d u c a t i o n and c h i l d n u t r i t i o n p r o g r a m s f u n d e d by t h e Department o f A g r i c u l t u r e . Over t h e l a s t t e n s c h o o l y e a r s t h e F e d e r a l c o n t r i b u t i o n t o t h e t o t a l r e v e n u e s r e c e i v e d by p u b l i c e l e m e n t a r y and s e c o n d a r y s c h o o l s h a s s t e a d i l y d e c r e a s e d f r o m 8.8% (1977-1978) t o 6.2% (1986-1987). ( A h i g h was r e a c h e d i n 1979-1980 when t h e F e d e r a l s h a r e was 9.2% oE t h e t o t a l r e v e n u e s . ) The S t a t e s h a r e of t h e r e v e n u e s r e c e i v e d by p u b l i c e l e m e n t a r y and s e c o n d a r y s c h o o l s i n c r e a s e d o v e r t h i s same p e r i o d ( r i s i n g f r o m 44.3% t o 50%) w h i l e t h e l o c a l s h a r e d e c r e a s e d from 46.9% t o 43.8%. Over t h e l a s t s e v e r a l y e a r s , S t a t e g o v e r n m e n t s h a v e r e p l a c e d l o c a l governments i n assuming t h e primary r o l e i n f i n a n c i n g p u b l i c s c h o o l s . -- I n s t i t u t i o n s of h i g h e r e d u c a t i o n r e c e i v e r e v e n u e s from a somewhat d i f f e r e n t mix of s o u r c e s when compared t o p u b l i c e l e m e n t a r y and s e c o n d a r y schools. A l t h o u g h S t a t e s p r o v i d e a s u b s t a n t i a l s h a r e of r e v e n u e s t o p o s t s e c o n d a r y i n s t i t u t i o n s , p a r t i c u l a r l y S t a t e u n i v e r s i t y and c o l l e g e s y s t e m s ( a n e s t i m a t e d 30% i n 1986-1987), l o c a l governments p r o v i d e r e l a t i v e l y few r e v e n u e s t o t h e s e i n s t i t u t i o n s ( 2 . 4 2 i n 1986-1987). The l a r g e s t p o r t i o n of r e v e n u e s r e c e i v e d by t h e s e i n s t i t u t i o n s a r e f r o m t u i t i o n and f e e s and endowments. The E D ' s O f f i c e of E d u c a t i o n a l R e s e a r c h and Improvement e s t i m a t e s t h a t i n a c a d e m i c y e a r 1986-1987 t h e F e d e r a l Government (ED o n l y ) c o n t r i b u t e d 6.7% o f t h e r e v e n u e s of p u b l i c and p r i v a t e postsecondary i n s t i t u t i o n s . T h e s e d a t a a r e l i m i t e d , however, i n s e v e r a l i m p o r t a n t ways; f o r example, ( 1 ) t h e y d o n o t i n c l u d e t h e p o r t i o n p a i d by s t u d e n t s t o p o s t s e c o n d a r y of t u i t i o n a n d f e e s t h p * a;e i n s t i t u t i o n s through F e d e r a l s t u d e n t f i n a n c i a l a i d programs, (thus u n d e r - r e p o r t i n g F e d e r a l f u n d s r e c e i v e d by p o s t s e c o n d a r y i n s t i t u t i o n s ) , a n d ( 2 ) t h e y d o n o t i n c l u d e t h e F e d e r a l c o n t r i b u t i o n t o e d u c a t i o n made t h r o u g h I t s h o u l d be n o t e d t h a t o t h e r F e d e r a l a g e n c i e s various tax expenditures. f i n a n c e p r o g r a m s and a c t i v i t i e s ( l i k e r e s e a r c h and d e v e l o p m e n t ) t h a t a r e not included i n t h i s discussion. Congressional Budget Budget Resolution The House passed its version of the First Concurrent Resolution on the Budget for FY89 (H. Con. Res. 268) and the Senate budget committee has begun its consideration of this resolution. The budget resolution establishes revenue and expenditure targets for the whole budget that are consistent with those established in the Omnibus Budget Reconciliation Act of '1987. For education, the House-passed budget resolution assumes that all education programs would receive funding increases that are at least equal to the Congressional Budget Office's current policy baseline for FY89, i.e., the FY88 appropriation plus a 3.91 increase due to inflation. In addition, particular education programs would receive funding above the baseline estimates that would add an additional $950 million in new budget authority for education. These particular programs and the additional funding amount assumed by the resolution are as follows: Pel1 Grants, plus $175 million; Chapter 1, plus $210 million; Education of the Handicapped, plus $170 million; Even Start (new program authorized by H.R. 5, which is currently in conference), plus $53 million; and an additional aggregate sum of $162 million for the Supplemental Educational Opportunity Grants, magnet schools, TRIO programs (special programs for the disadvantaged), and historically black colleges and universities programs. In addition, the House passed resolution assumes that there would be an overall 1% reduction in all discretionary programs in Function 500, with the exception of certain programs identified as high priority low income programs. Education programs in this category include compensatory education (Chapter 1 and migrant education), Indian education, handicapped education, postsecondary student financial assistance, TRIO, homeless, vocational rehabilitation, and historically black colleges and universities. The resolution is not clear when the 1% reduction is to be applied, i.e., before or after the various assumed funding increases are applied to the FY88 appropriation. The Senate passed its version of the budget resolution (H. Con. Res. 2681, incorporating the provisions of S. Con. Res. 113 (S. Rept. 100-3111, as amended. For ED programs the Senate resolution assumes an aggregate increase of $1.2 billion over the FY88 appropriation level to support certain "high priorityw programs such as Chapter 1, Indian education, education of the handicapped, vocational and adult education, drug-free schools, and postsecondary student aid. TABLE 2 below shows the President's FY89 budget request for ED in the context of a current policy baseline that is consistent with the Balanced Budget and Emergency Deficit Control Act of 1985 (popularly called th, Gramm-Rudman-Hollings Act, G-R-H) and in the context of the funding assumptions used in the House- and Senate-passed versions of the FY89 budget resolution. TABLE 2. President ~eagan's FY89 Budget Proposal Compared With OKB Gra-Budman-Holl ings (G-B-8) Budget Baseline and the House-and Senate-Passed Versions of theEa0DdEWkent Resolution on the Budget Estimated Budget Authority (BA) and Outlays ( 0 ) for ED (in billions) Budget authority Outlays G-H-H Budget Baseline* $21.3 New Budget authority Outlays $20 -8 House-Passed Resolution 23 .O NA Senate-Reported Resolution 21.5 NA * G-R-H baseline is defined in the Balanced Budget and Emergency Deficit Control Act of 1985 for calculating a budget deficit to determine whether automatic spending reductions are to be triggered. That ~ c t ' s 1987 amendments specified that the President's budget include a baseline estimate that uses these rules and the economic and technical assumptions consistent with current services estimates. Generally, a baseline estimates program costs for an ensuing fiscal year based upon anticipated costs of continuing Federal programs at present levels without policy changes. The G-R-H baseline for ED programs basically is the FY88 enacted appropriations adjusted for inflation and pay-related cost increases. ** These figures do not contain estimated budget authority or outlays that would result from the enactment of the President's credit reform proposals. - LEGISLATION P.L. 100-102, B.J. Res. 395 FY88 continuing appropriations resolution, provides funding for most Government programs in FY88. Passed House and Senate Dec. 22, 1987. Signed into law Dec. 22, 1987. 8. Con. Res. 268 (Gray) C o n c u r r e n t R e s o l u t i o n on t h e Budget f o r FY89. C o n t a i n s budget t a r g e t s and f u n d i n g a s s u m p t i o n s f o r FY89. For e d u c a t i o n programs, assumes t h a t FY89 new budget a u t h o r i t y would i n c r e a s e by $950 m i l l i o n . This i n c r e a s e would fund a l l e d u c a t i o n programs a t a n amount a t l e a s t e q u a l t o t h e FY88 a p p r o p r i a t i o n p l u s i n f l a t i o n and a d d i t i o n a l f u n d s would be p r o v i d e d f o r s e l e c t e d e d u c a t i o n programs. Reported by t h e C o n m i t t e e on t h e Budget, H . Rept. 100-523, Mar. 22, 1988. P a s s e d House unamended, Mar. 23, 1988. Passed S e n a t e amended, i n c o r p o r a t i n g t h e p r o v i s i o n s o f S. Con. Res. 113, Apr. 1 4 , 1988. S. Con. Res. 113 ( C h i l e s ) C o n c u r r e n t R e s o l u t i o n on t h e Budget f o r FY89. For ED programs assumes $1.2 b i l l i o n i n new FY89 budget a u t h o r i t y above t h e FY88 a p p r o p r i a t i o n f o e c e r t a i n "high p r i o r i t y 1 ' programs. R e p o r t e d by C o m n i t t e e on t h e Budget, S.Rept. 100-311, Mar. 31, 1988. Amended (amended p r o v i s i o n s i n c o r p o r a t e d i n t o H. Con. Res. 2 6 8 ) and p a s s e d S e n a t e , Apr. 1 4 , 1988. C O N C U S S ION1 AL HEARINGS, REPORTS, AND DOCWNTS U. S. U.S. Congress. House. Committee on t h e Budget. C o n c u r r e n t r e s o l u t i o n on t h e b u d g e t - f i s c a l y e a r 1989. Washington, U. S. Covt. P r i n t . Off., 1988. 147 p. ( 1 0 0 t h C o n g r e s s , 2nd s e s s i o n . House. R e p o r t no. 100-523) Congress. Senate. Committee on t h e Budget. Concurrent r e s o l u t i o n on t h e b u d g e t , FY89. Washington, U.S. Covt. P r i n t . O f f . , 1988. 340p. ( 1 0 0 t h C o n g r e s s , 2nd s e s s i o n . S e n a t e . Report no. 100-311) CHRONOLOGY 04/14/88 --- S e n a t e passed i t s v e r s i o n of H. Con. Res. 268. 03/23/88 --- House p a s s e d H. Con. Res. 268 02/18/88 --- P r e s i d e n t Reagan s u b m i t t e d h i s budget r e q u e s t f o r FY89. FOR ADDITIOMAL READING U. S. Department of Education. Department of E d u c a t i o n , t h e f i s c a l y e a r 1989 budget sumnary and background i n f orrnat i o n . (Washington) 1988. 6 4 p. p l u s appendix. U.S. L i b r a r y of p w g r e s s . C o n g r e s s i o n a l Research S e r v i c e . Impact of l e g i s l a t i v e changes on major programs a d m i n i s t e r e d by t h e Department o f E d u c a t i o n , f i s c a l y e a r s 1980-1988, by Paul I r w i n e t a l . [ W a s h i n g t o n ] 1986. 107 p. CRS Report 87-285 EPW