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 Federal Legislative Update 


It has been a busy year so far in Washington, although not much legislation has been enacted. As in 2011, the congressional agenda continues to be dominated by funding issues, which overshadow most policy discussions. If possible, 2012 may be even more contentious than 2011. But it is not expected that the truly combustible mix of looming issues—the expiring Bush tax cuts, pending Budget Control Act (BCA) sequestration, debt limit extension, and tax and, possibly, entitlement programs reform—will be acted upon, if at all, until after the election.

More specifically, the prospect of the BCA sequestration will color all of Congress’s funding discussions in 2012. Most legislators from both parties want to avoid the 8–9% across-the-board sequestration cut that is scheduled to take place in January 2013, and would prefer to achieve deficit reduction with specific policy decisions. However, there remain huge, highly partisan differences about how this deficit reduction should be achieved. As these discussions take place, community college officials should be wary of proposals that would avert reductions in defense spending by cutting domestic programs even more than occurred in 2011.

Outside of funding issues, few authorization bills are expected to pass in 2012. This includes the overdue reauthorizations of the Workforce Investment Act (WIA) and the Elementary and Secondary Education Act, more commonly known as No Child Left Behind. Other important bills like the Higher Education Act (HEA) and Carl D. Perkins Career and Technical Education Act are scheduled for reauthorization in the coming years. Nevertheless, there is important ongoing legislative and regulatory activity in all of these areas.

The following are the latest developments on some of the more important issues facing community colleges and their students.

FY 2013 Budget and Appropriations

Pell Grants

The Pell Grant program continues to face major funding challenges. At a time of severe constraints being placed on domestic discretionary spending, the program more than doubled in size between 2008 and 2012, and now represents more than one-third of the Department of Education’s entire budget. Some 3.45 million community college students received a Pell Grant in the 2010-11 award year, totaling $11.3 billion. In 2010–11, 48% of all full-time, first-time community college students received a Pell Grant. Pell Grants are where the money, as well as access and success, is for community college students.

In an effort to shore up the program’s finances, the Health Care and Education Reconciliation Act of 2010 (which included the Student Aid and Fiscal Responsibility Act (SAFRA) as well as the second of the two “Obamacare” bills) provided $13.5 billion for Pell Grants. Last summer’s Budget Control Act provided another $17 billion for FYs 2012 and 2013. However, even these tremendous sums were not sufficient to prevent cuts in FY 2012. Changes made to save the almost $1.3 billion needed to maintain the maximum grant at $5,550 included

• Decreasing the auto-EFC income threshold from $30,000 to $23,000.
• Denying Title IV aid to ability-to-benefit (ATB) students (i.e., those who lack a high school diploma or G.E.D.).
• Reducing the number of full-time equivalent semesters a student is eligible for a Pell Grant from 18 to 12, effective immediately.
• Removing eligibility for the minimum Pell amount for students whose eligibility was less than 10% but greater than 5% of the Pell Grant maximum.

Of these cuts, community colleges were most directly impacted by the loss of Title IV eligibility for ATB students. AACC is working with a number of other organizations to restore Pell Grant eligibility for these students. For-profit institutions also are lobbying for restored ATB eligibility, as they are the other sector of postsecondary education most impacted by this change. Given the funding outlook for the program, however, restoring this is a challenge.

For the upcoming FY 2013 funding cycle, the Pell Grant program has a $1.8 billion surplus. This assumes that Congress level-funds the program in FY 2013. Furthermore, as part of the 2010 Health Care and Education Reconciliation Act, if Congress maintains a $4,860 discretionary (appropriated) base, the FY 2013 maximum grant will increase by $95, to $5,645 (as a result of the statutorily-prescribed inflationary adjustment added in 2010).

This FY 2013 scenario could be viewed as the calm before the storm, because in FY 2014 the discretionary portion of the Pell Grant will need to be increased by almost 50%, to $30.1 billion, to maintain the maximum grant, leaving a roughly $7.5 billion shortfall. This projected shortfall represents about 20% of the total program cost. There is already much discussion in Washington as to how to achieve the savings necessary to plug this shortfall and otherwise put the Pell Grant program on a more sustainable path. Program cuts as deep as those that underlie the House FY 2013 budget resolution (see below) are unlikely to become law, but at the same time there are no easy savings to be achieved in the program that would not have a dramatic negative impact on financially needy students.

President Obama’s Budget Proposals

In his State of the Union address and subsequently in the administration’s FY 2013 budget, President Obama, following in the spirit of the American Graduation Initiative, has once again shone the spotlight on community colleges. These proposals would provide substantial financial support to AACC’s members. The president’s budget also contains a number of proposals aimed at all of higher education, which seek to support state and institutional efforts to reform higher education and hold down college costs.

The president’s proposals clearly have been made with an eye to his re-election campaign. Given that most of his proposals would require congressional authorization and/or funding, they are unlikely to be enacted as proposed. Obama’s broader higher education affordability proposals have been greeted tepidly by the higher education community, in part because they have not been elaborated in detail. But the continued focus on community colleges by the president is hugely beneficial for AACC’s members and influences the debate on related issues, such as the Workforce Investment Act (WIA) reauthorization.

President Obama’s primary community college-focused proposal is the 3-year, $8 billion Community College to Career Fund that builds on the Trade Adjustment Assistance Community College and Career Training (TAACCCT) grants program. It is designed to train 2 million workers with skills that lead directly to employment, by infusing funding to job training programs. The proposal also includes bonus funds for especially effective programs, money for state and local governments to help them attract businesses and jobs to America, and funding for entrepreneurship training programs. Like the TAACCCT program, the Fund would be administered jointly by the Departments of Labor and Education. House Democrats have included an authorization of the Fund in their version of WIA reauthorization legislation, H.R. 4227.

The president’s budget also contains five proposals aimed, in general, at limiting the cost and improving the efficiency/value of the nation’s colleges:

  • Race to the Top: The centerpiece of these proposals is a new $1 billion program for higher education, modeled after the K–12 program of the same name. The competitive grant program would encourage states to revamp their higher education funding structures, better align K–12 education with higher education, and maintain “adequate” levels of support. States would be rewarded for systemic changes in their higher education policies and for containing tuition increases.
  • Campus-Based Programs: Federal Work-Study, Supplemental Educational Opportunity Grants, and Perkins Loans would be distributed to campuses (who in turn award funds to eligible students) according to a new formula based on setting responsible tuition policy, providing good value to students and families and serving low-income students. These changes are strongly opposed by 4-year colleges.
  • First in the World Competition to Model Innovation and Quality: A new $55 million competitive grant program for colleges and nonprofit organizations would be created to boost productivity and enhance quality. A scaling up and enhancement of many institutional activities currently underway is anticipated.
  • College Scorecard: The scorecard, required for all degree-granting institutions, is designed to provide essential information about college costs, graduation rates, and potential earnings, in an easy-to-read format. AACC has provided input to the Administration on this initiative.
  • Federal Support to Students: The Administration has proposed forestalling the doubling of the interest rate on federal student loans, from 3.4% to 6.8%, which is set to take effect on July 1. This could well become a major political issue as student debt surpasses any other form of consumer debt. The president also is proposing to make the $2,500 American Opportunity Tax Credit permanent. This is a top AACC priority.

Obama’s budget would increase discretionary funding for the U.S. Department of Education (ED) by $1.7 billion, or 2.5%, over the fiscal year 2012 level. Clearly prioritizing education in an otherwise flat budget, the Administration proposes to preserve the current discretionary funding for the Pell Grant program, which when combined with mandatory funding will boost the Pell maximum to $5,645 in award year 2013–14. Many other community college priority programs would be funded at current levels.

At the U.S. Department of Labor, funding for WIA programs would receive level funding under the budget proposal, maintaining levels that have been cut by Congress over the last two years. The principal exception to that rule is the request for increased funding for the Workforce Innovation Fund, up $50 million from last year for a total of $100 million.

The president has requested a funding increase to stay on target to double National Science Foundation (NSF) funding. Funding would increase for the NSF’s Education and Human Resources Directorate by about 6%, to $875.6 million. The flagship NSF community college program, the Advanced Technological Education program, would hold steady at $64 million.

The attached funding chart contains more detailed information about the Obama budget proposal’s requests for key community college programs.

House Budget Resolution

The House has approved its FY 2013 budget resolution, which sets broad overall spending policy based on a variety of program assumptions. No Democrats voted for the resolution. While it is not clear if the Senate will pass a budget resolution this year or simply rely on last summer’s BCA as a guide for the FY 2013 funding levels, the House resolution will guide a variety of spending decisions to be made by the House majority. This will set the stage for a high-profile, high-stakes conflict on Capitol Hill later this year, in all likelihood after the elections.
The House budget resolution cuts non-defense discretionary spending by more than $1 trillion over 10 years below the Budget Control Act (BCA) spending caps agreed to last summer. This category of spending encompasses virtually all the programs of interest to community colleges and their students. The budget calls for a $19 billion reduction in discretionary funding in FY 2013 (roughly a 2% cut), as well as reducing individual and corporate tax rates, increasing defense spending, and restructuring a number of the large entitlement programs, including Medicare and Medicaid.

According to the Committee report accompanying the budget resolution, funding for defense programs would increase while funding for a number of education programs would be reduced sharply. Key changes that are recommended include the elimination of:

  • In-school interest subsidies for undergraduate student loans.
  • Student aid eligibility expansions made by the College Cost Reduction and Access Act of 2007, including the automatic zero EFC and income protection allowance increases (IPA) that helped many students qualify for larger Pell Grants.
  • Pell Grant eligibility for less-than half-time students.
  • Automatic increases in the Pell Grant maximum above $5,550 that were instituted by the Health Care and Education Reconciliation Act of 2010.
  • All mandatory funding for the Pell Grant program (currently estimated at $105.8 billion from SAFRA, BCA and prior year appropriations bills—this is roughly three times the size of the entire Pell Grant program).
  • Administrative fees for the Pell Grant and campus-based aid programs.
    • Mandatory funding for the College Access Challenge Grants ($150 million in FY 2013).

The bill also proposes

  • Increasing the interest rate on subsidized Stafford loans to double on July 1, from 3.4% to 6.8%. Legislation has been introduced in both the House and Senate (H.R. 3826 and S. 2051, respectively), to prevent this from happening.
  • Eliminating current, guaranteed funding for the TAACCCT grants ($500 million each in FYs 2013 and 2014). AACC is particularly disappointed to see that the TAACCCT grant program has been targeted for elimination.

These cuts to education and job training programs would be in addition to the 8% to 9% cut that is already scheduled to go into effect as a result of the 2011 BCA sequestration agreement, in light of the inability of the Congressional “Supercommittee” to achieve its deficit reduction objectives.

FY 2013 Appropriations

While Congressional action on the FY 2013 budget continues, House and Senate appropriations activity has commenced. The House Appropriations subcommittees have convened hearings with the various federal agency heads and have begun reviewing annual funding requests. AACC’s funding priorities for the Labor-HHS-Education Appropriations Subcommittee are as follows:

  • Pell Grants: Community colleges strongly support the Pell Grant program, which each year enables more than 3.4 million of their financially disadvantaged students to pay for tuition, books, transportation, and living expenses. Congress should preserve the appropriated base of $4,860, which combined with mandatory funding will produce a maximum award of $5,645 in award year 2013-14.
  • The Strengthening Institutions Program: The Strengthening Institutions program (Title III-A of the Higher Education Act) provides critical support for colleges that have few resources and serve high proportions of low-income and historically underrepresented populations. Given the enormous competition for these grants, AACC is requesting more funding for the Title III-A program, an increase from the current $80.6 million to $100 million.
  • Perkins Career and Technical Education (CTE): The Carl D. Perkins Career and Technical Education Act programs are the largest source of federal institutional support for community colleges, helping them improve all aspects of cutting-edge CTE programs. The Perkins Basic State Grants give postsecondary institutions the flexibility to address local priorities and fund innovative occupational education programs. Grants may be used for a variety of purposes, including for the training of first responders; helping students meet challenging academic, vocational and technical standards; improving curricula; purchasing equipment; fostering better links between the colleges and the business community; and new technology. AACC urges Congress to increase investments in Perkins CTE to $1.27 billion in FY 2013.
  • Other Education and Workforce Training Priorities: Community colleges strongly support funding for the Hispanic-Serving Institutions (Title V-HEA), Predominantly Black Institutions, Asian American and Native American Pacific Islander-Serving Institutions, Adult Basic and Literacy Education State Grants, Child Care Access Means Parents in School Program, international education, and the TRIO and GEAR UP programs. Funding for the Workforce Investment Act is essential for job training services.

Workforce Investment Act Reauthorization

Workforce Investment Act (WIA) reauthorization remains on the Congressional “to-do” list, where it has been since 2004. While 2011 saw more Congressional activity around this issue than there had taken place in recent years, and 2012 has already seen significant developments with more to come, few expect final legislation to be passed this year. In the meantime, funding for WIA and other job training programs continues to be under fire.

After several years of no bipartisan or majority WIA reauthorization bills being introduced in either the House or Senate, the Senate Health, Education, Labor and Pensions (HELP) Committee distributed draft bipartisan legislation last year. The Senate bill seeks to increase program alignment by setting up a more unified framework for WIA programs. The bill also emphasizes coordination with economic development activities, career pathways, regional service delivery, and other changes to the current system. However, Republican support for the bill beyond its authors eroded, because the bill did not consolidate any training programs and would end the requirement that state workforce investment boards be business-led and have a majority of business representatives. The Senate draft bill has yet to be introduced.

In late 2011, House Education and the Workforce Committee Republicans introduced two new WIA reauthorization bills to augment the legislation already introduced by Rep. Buck McKeon (R-CA), former chairman of the Committee on Education and the Workforce. The primary purpose of the more sweeping of the two new bills, the Streamlining Workforce Development Programs Act of 2011 (H.R. 3610), is to consolidate workforce training programs. Introduced by the Chair of the Subcommittee on Higher Education and Workforce Training, Rep. Virginia Foxx (R-NC), H.R. 3610 would combine 33 current training programs into four basic funding streams: adult and dislocated workers, youth, special populations, and veterans. In addition to the consolidation of programs at the federal level, the bill also would allow governors to roll several other programs into a state unified workforce plan, including the Perkins Career and Technical Education program.

The other new House Republican WIA bill (H.R. 3611), the Local Job Opportunities and Business Success Act of 2011, focuses primarily on modifying the makeup and activities of the local workforce investment boards to be more responsive to businesses. Introduced by Rep. Joseph Heck (R-NV), this bill would eliminate required seats on the boards for most of the categories now represented (including community colleges), while requiring that local boards consist of at least two thirds business representatives.

On March 29, the House Republicans introduced a new bill, the Workforce Investment Improvement Act (H.R. 4297), which builds from their three previous bills. It would consolidate 27 current programs into one Workforce Investment Fund that would flow by formula to states and local areas. The option for governors to consolidate additional programs into the Fund at the state level would remain, including secondary and postsecondary Perkins CTE programs.
On March 20, House Education and the Workforce Committee Democrats introduced their WIA reauthorization bill, the Workforce Investment Act of 2012 (H.R. 4227). The bill would leave the basic structure of the WIA system intact, though it would require regional cooperation and planning in the delivery of workforce services. The bill also contains an emphasis on career pathways and sector partnerships, and seeks to streamline the reporting requirements for institutions of higher education and registered apprenticeship programs that want to be eligible to serve WIA participants. Notably for community colleges, the bill adds a new subtitle that authorizes President Obama’s Community College to Career Fund proposal. As outlined in this legislation, the program would provide $7 billion of the $8 billion total to grants for community colleges to develop workforce training programs in partnership with local businesses and other key stakeholders. The remaining $1 billion would be dedicated to “pay for performance,” money for localities and states to attract jobs back to America, and online entrepreneurship programs components of the President’s proposal.

The House Committee on Education and the Workforce plans to mark up H.R. 4297 in late spring or early summer.

State Authorization and Credit Hour Regulations

Earlier this year, the U.S. House of Representatives passed the Protecting Academic Freedom in Higher Education Act (H.R. 2117). This legislation would repeal ED regulations that make Title IV (student aid) eligibility contingent on an institution’s ability to demonstrate compliance with state authorization laws, and define the term “credit hour,” which previously had not been placed into regulation.

The state authorization regulations are controversial because they more directly insert the federal government in the role of enforcing state laws and because they explicitly require institutions to comply with authorization statutes in all the states in which their distance education students reside. Recognizing the complexities involved in complying with these regulations, ED initially delayed their effective date by three years, to July 1, 2014. Subsequently, the regulatory provision dealing specifically with distance education programs was thrown out by a federal court on procedural grounds. H.R. 2117 would repeal these regulations altogether. However, even if repealed, in one sense the regulations have had their desired effect by raising states’ awareness to noncompliance with their authorization laws by out-of-state institutions, and increasing their enforcement of those laws. Hopefully, the regulations will also lead to greater harmonization of state policy in this area.

Similarly, the higher education community has argued that the credit hour rules are very difficult to implement in some cases and an overreach of federal authority in any case. Because of this, H.R. 2117 would not only repeal these regulations, but prohibit ED from ever promulgating rules that define “credit hour.”

H.R. 2117 is opposed by Senate Democrats, and therefore is not expected to make any progress beyond the House.

Veterans and Military Issues

The higher education community has been working to influence parallel administrative and legislative initiatives to protect and inform members of the armed services and veterans using their educational benefits at institutions of higher education.

In early 2011, the U.S. Department of Defense (DOD) issued a Memorandum of Understanding (MOU) that all institutions that wished to participate in the military’s Tuition Assistance program must sign. The original deadline for signing the MOU was December 31, 2011. Many institutions signed the MOU, but many others raised significant concerns about its terms, particularly large universities. Objectors to the MOU complained that it intruded on institutional prerogatives, particularly credit transfer policies, and created a variety of operational difficulties. Many of the issues arose from the fact that DOD and higher education do not always speak the same “language.” 

In response to these concerns, 51 senators wrote a letter to DOD asking them to modify the MOU. The DOD pushed back the deadline to sign the MOU until March 31 and pledged to work with the higher education community to improve the document. These discussions resulted in many positive changes to the MOU, hopefully resulting in a document that most, if not all, institutions will be willing to sign. At the time this document was written, the DOD was still finalizing its plans for rolling out the new MOU, but the DOD staff has indicated that institutions would have ample time to review the new document.

Senate Democrats have picked up where the MOU has left off and have authored multiple bills that would provide the same protections and information as the MOU, and more, to veteran students using their GI Bill benefits. Senator Patty Murray (D-WA) has introduced the GI Bill Consumer Awareness Act (S. 2241), which would require the Veterans Administration to provide substantial amounts of information about institutions of higher education and individual programs to veteran students. Wherever possible, the VA is directed to obtain from the Department of Education (ED) any information it does not already have, but in cases where ED lacks the information, it would come from the institutions themselves. As introduced, the bill requires disclosure of much information that ED does not possess. This information generally falls into the area of student outcomes, job placement and earnings, as well as many other data points about institutions and programs. In many cases, the information sought is similar, but not the same as, information already provided to ED by institutions, thus adding to institutional reporting burden. In some of instances, the bill seeks disclosure of information that in many cases colleges do not have, such as transfer of veterans from one program to another within a given institution. AACC and other higher education groups have worked with the bills’ sponsors to align the information to be provided to veterans with the information ED already possesses, but work remains to be done.

S. 2241 would also stipulate that GI Bill funds be limited to Title IV eligible programs in cases where veterans are enrolled in certificate or degree programs. This is also a central provision of Senator Jim Webb’s (D-VA) Military and Veterans Educational Reform Act (S. 2179). Both bills also seek to ensure that institutions that enroll a minimum number of veterans provide adequate services to these students in areas such as financial aid, counseling, career advising, etc.

Prospects for these bills are unclear at this time, but they do enjoy the support of a number of veterans organizations.

Department of Education’s Committee on Measures of Student Success and Related Accountability Efforts

The increased attention being paid to community colleges has carried with it the recognition that, all other factors aside, the institutions share a collective responsibility to graduate more of their students. The completion agenda represents a paradigm shift, and it has national policy implications that will be felt for years.
At the same time, some of the traditional prisms through which community colleges are viewed—including the very definition of completion—continue to be examined and refined. Related to this is the fact that new sources of acquiring data on performance are emerging. These developments are of critical importance. A few recent developments deserve review and discussion:

Department of Education’s Committee on Measures of Student Success Final Report

In late January, the Department of Education’s Committee on Measures of Student Success submitted its final report to Secretary Duncan. The committee was created by the 2008 amendments to the Higher Education Act, with strong backing from AACC. Among other things, the committee was charged with evaluating the appropriateness of the existing “Student Right to Know” graduation rate for community colleges; campus officials have long and loudly asserted that it poorly represents their performance, leading to unfortunate public perceptions. Therefore, AACC was pleased that the committee found that the existing completion rate calculation was deeply flawed and needed significant alteration. Critical among them was its position that transfers from community colleges should be included in the completion/success calculation. Since that time, AACC has pressured the Department of Education (ED) to implement this recommendation. The committee also recommended that institutions report part-time students as part of their regular IPEDS submissions and the Education Department is beginning what is sure to be a long implementation process.

Gainful Employment Measures

The federal government is embarking upon a dramatic new method of assessing the performance of career-related training programs through its “gainful employment” (GE) regulations. These regulations cover most certificate programs offered at community colleges that are eligible for Title IV assistance. The GE framework entails generating program-specific information about the earnings of graduates through matching completers’ Social Security numbers with their earnings as reported to the Social Security Administration. These earnings data are then used in the generation of performance metrics. Few, if any, community college programs will run into jeopardy because of their performance, but the gathering of hundreds of thousands of matches between educational program completion and subsequent earnings opens many potential avenues for related policy approaches. In a related development, the second round of the TAACCT competition assigns a bonus point to applicants who propose using this matching framework to evaluate the performance outcomes of their training programs. For these and other reasons, developments in this area merit close ongoing scrutiny.

Wyden/Hunter Legislation on State Longitudinal Data Systems

In both the House and Senate, companion (identical) bills have been introduced—interestingly, by members of different parties—Senator Ron Wyden (D-OR) and Representative Duncan Hunter (R-CA)—that would replace key elements of the federal IPEDS reporting for institutions with a state-based system. Titled the “Student Right to Know Before You Go Act,” (S. 2098) the legislation aims to expand the ability of institutions to gather information about their students through the use of interoperable state longitudinal data systems. In particular, the systems would be designed to enable colleges to gain access to state wage data records. Many other data items could be part of these systems. The legislation is, in part, a response to the prohibition in the Higher Education Act against a national unit record data system. The legislation is modeled partly by a Lumina Foundation-funded grant in Virginia that is designed to generate labor market information about all higher education programs in that state, including liberal arts programs at 4-year colleges. Although the odds for enactment of this legislation appear long, its emergence and conceptual underpinnings merit attention. 

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