Used under Creative Commons license. Originally posted on Flickr by Josh Mazgelis.
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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: Increase in Appropriation Necessary to Sustain Current Policy - Comparison of 2013 and 2014 (Preliminary) Congressional Budget Office Estimates

 
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2013 Est. ($bn)0.00.75.84.55.05.45.86.56.77.1n/a
2014 Est. ($bn)0.00.01.03.43.94.34.85.76.26.87.4
Note: Funding cliff calculation based on $22.8 billion regular annual appropriation. Assumes Congress applies the accumulated surplus to fiscal years 2015 and 2016 and maintains a $22.8 billion annual appropriation each fiscal year. The funding cliff is the additional amount of funding Congress must provide over the $22.8 billion to maintain current policy. Source: New America. Based on Congressional Budget Office May 2013 and February 2014 baselines.