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 Overview of President Obama's FY 2010 Budget Impacting Community Colleges 

5/8/2009

On May 7, President Obama released his full fiscal year (FY) 2010 budget request.  For community colleges, the cornerstone of the Obama budget is to make the Pell Grant program an "entitlement" and move to 100% institutional participation in Direct Lending, thereby ending the Federal Family Education Loans (FFEL). The Administration is also proposing to restructure and expand the Perkins Loan program. A new $2.5 billion incentive grants program would be created to spur states to promote college success and completion, and the $2,500 American Opportunity Tax Credit would be made permanent.

For Pell Grants, the budget would increase the maximum grant to $5,550, from $5,350, for the 2010-11 award year. After that, increases would be at a rate equal to the consumer price index plus one percent. The Department of Education projects that more than 7.5 million students will qualify for Pell Grants next year; community college students currently receive about 35% of all Pell Grant funds. The increased cost of making the Pell Grant program "mandatory" (budget parlance) would be offset by some $94 billion of savings generated by eliminating the FFEL program.

The president's budget also calls for significant changes in the Federal Perkins Loan program. His plan would provide $6 billion a year in new loan volume for up to 2.7 million students, and expand the number of eligible institutions by approximately 2,700. The same 5 percent rate would continue, but in-school interest subsidies would be eliminated and Perkins Loan forgiveness provisions would only apply to outstanding loans. The Department of Education would assume responsibility for servicing the Perkins Loans along with the other federal student loans. Under this scheme, many more community colleges could receive Perkins loans funds.

The proposed College Access and Completion Fund would provide $2.5 billion in mandatory funding over a 5-year period to create federal-state-local partnerships that promote college completion. The emphasis is on helping increase college success for disadvantaged student populations. States and national organizations would be eligible to participate in this new program. The program would emphasize research-based approaches to helping students complete postsecondary education.

Spending on other major student aid programs would be frozen. The Supplemental Educational Opportunity Grants ($757.5 million), Federal Work-Study ($980.5 million), and Leveraging Educational Assistance Partnerships ($63.9 million) would remain at the FY 2009 funding levels, as would TRIO ($848.1 million) and GEAR UP ($313.2 million).

Institutional aid funding fares better in Obama's budget. The Strengthening Institutions (Title III-A of the HEA) program would receive an increase of $4 million, to $84 million. The Strengthening Tribally Controlled Colleges and Universities would receive $24.3 million, or $1 million more than in FY 2009. The Administration also requested funding for a number of new HEA programs, including $2.6 million and $7.9 million, respectively, for the Native American-serving (non-tribal) institutions and Predominantly Black Institutions (PBI). AACC strongly supported the PBI in last Congress's HEA reauthorization process. Funding for Developing Hispanic-Serving Institutions would be increased from $93.3 million to $97.9 million. The Strengthening Asian American and Native American Pacific Islander-serving Institutions would get a modest increase from $2.5 million to $2.6 million.

The president is also proposing to level-fund the Carl D. Perkins Career and Technical Education (CTE) State Grants and Tech Prep programs. The CTE State Grants would receive $1.16 billion while Tech Prep would get $102.9 million. However, the budget calls for an increase in Adult Basic and Literacy Education State Grants from $554.1 million to $628.2 million. According to the Department of Education, a significant portion of this would be used to compensate some states for errors made in calculating the formula grant awards between fiscal year 2003 and fiscal year 2008. In other words, this represents a one-time adjustment for prior state over-awards.

Much of the request for Department of Labor programs remains at the FY 2009 level, excluding substantial job training funding in the American Recovery and Reinvestment Act (stimulus legislation). In a significant policy shift, the Administration proposes to replace the Community-Based Job Training Grant (CBJTG) program with a new Career Pathways Innovation Fund. The new program will continue to focus on supporting community colleges but funding will be directed to career pathway programs. The president's FY 2010 budget calls for $135 million in the Career Pathways Innovation Fund, $10 million more than the CBJTG program currently receives. Two other new DOL programs included in the budget release are the Green Jobs Innovation Fund ($50 million) and Workforce Data Quality initiative ($15 million).

Lastly, the budget proposes making the American Opportunity Tax Credit (AOTC) permanent. The AOTC was created in February's stimulus legislation and phases out after 2010. The new credit is a significant improvement over the Hope Scholarship tax credit, which it replaced. However, AACC supports some changes to the AOTC, to better target it on low-income students attending low-cost colleges.

For additional information, please contact David Baime or Laurie Quarles.

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