The shaping and adoption of a fiscal year 2026 budget resolution by congressional Republicans has huge implications for community colleges and their students.
Baked into the discussions of broad fiscal policy are assumptions about the amount of spending reductions that congressional committees must find to meet the resolution’s objectives. The American Association of Community Colleges (AACC) and its member colleges are involved in discussions with key committee leaders as various policy options are considered. Member advocacy is critical.
Budget resolutions
To review the bidding: At press time, the Senate has passed its budget resolution, while the full House was set Wednesday to debate the resolution cleared by its budget committee last week. Although the budget resolution is not signed into law by the president, it sets into motion the key “reconciliation” process in which legislation can be advanced in the Senate with a simple 51-vote majority. This process will allow Republicans to pass sweeping legislation without any Democratic support. Reconciliation legislation is limited only to changes to mandatory programs and all provisions must have the primary purpose of increasing or decreasing spending.
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Importantly, most key community college programs are “discretionary” programs funded through the annual appropriations process and are therefore not eligible for changes made through reconciliation. (Generally speaking, reconciliation would not include the Pell Grant program, which is “discretionary” and not subject to reconciliation rules, though this year may be an exception.)
The reconciliation process can be used to alter the student loan program and repayment options, tax policies related to higher education and other nonprofit entities, and public benefit programs that community college students depend on, including Medicaid, the Supplemental Nutritional Assistance Program, the Temporary Assistance for Needy Families program, and healthcare benefits offered through the Affordable Care Act.
Tax provisions
For reconciliation, AACC is focused largely on the House Education and Workforce Committee and Senate Health, Education, Labor and Pensions Committee, as well as the tax-writing House Ways and Means and Senate Finance Committees. The tax committees can make the Pell Grant fully tax-free as part of broad tax legislation designed primarily to extend tax cuts enacted in 2017. A policy change long championed by AACC, bipartisan bills on this topic are expected to be reintroduced soon in both chambers.
AACC’s sustained advocacy efforts on this issue have positioned it well for the upcoming debate: the legislation has historically been supported by both parties, and its cost, in the context of tax legislation, is extremely modest – just $1.9 billion over 10 years. However, there are also challenges: to put it mildly, higher education is not looked at favorably at this time, and any new provision costing money, however marginally, faces an uphill climb.
Looming cuts, possible opportunities
Unlike the tax committees, which are generally charged with providing tax benefits, the two education committees will be tasked with taking away – i.e., reducing spending for mandatory programs under their jurisdiction. Again, the ongoing budget resolution process will determine just how much savings each committee must find, but the amount could be massive, as the House committee-reported resolution assumes $330 billion in cuts over 10 years. (By way of comparison, the annual cost of the Pell Grant program is estimated to cost about $31 billion in the current fiscal year.)
Some of the cuts on the table include reductions to or the elimination of the Grad PLUS program, as well as the Public Service Loan Forgiveness program. Loan repayment plans are also subject to modification, with the Biden administration’s SAVE income-driven repayment plan likely to be eliminated (though some of this has already been done through court rulings or executive branch actions). Executive branch authority to change loan terms in a way that increases federal government spending is also expected to be limited through reconciliation legislation.
Outside of student loan provisions, community colleges have a tremendous amount at stake in these pending committee actions:
Risk-sharing: All indications are that the House Education and Workforce Committee will advance a version of the “risk-sharing” proposal contained in last Congress’ College Cost Reduction Act (CCRA). AACC opposed this legislation, in large part because of the risk-sharing provision. The version of risk-sharing contained in the CCRA was complex, but the bottom line was that it would have cost scores of community colleges hundreds of thousands of dollars, limiting colleges’ ability to best serve students.
While the CCRA put forth a carrot-and-stick approach that included new grants to colleges, the current House committee-reported budget resolution implies that these grants will not be included in a final budget reconciliation bill, leaving only the financial penalties. AACC has always opposed risk-sharing on principle and its opposition in this case is unchanged. The Senate majority members’ thinking on risk-sharing is unclear.
Workforce Pell grants: There is a chance that reconciliation will be used to authorize Pell grants for short-term programs, along the lines of last Congress’ Bipartisan Workforce Pell Act or the longstanding JOBS Act. While it would be against the grain to create new spending authority in legislation focused on reducing spending, this provision might make it through because of its broad congressional support (despite some notable opponents).
Pell Grant funding: As recently reported in the Community College Daily, the Pell Grant program is facing massive budget shortfall. Given the program’s popularity, and the fact that it is not clear how Congress would otherwise identify the funds needed to short up Pell’s finances, it seems possible that some of the savings generated from any changes to higher education programs might be reinvested to support Pell. AACC strongly supports this approach.
AACC’s top issues
As the reconciliation process unfolds, the association’s top priorities include:
- Enact the Tax-Free Pell Grant Act.
- Oppose risk-sharing in all forms.
- Enact new workforce Pell legislation.
- Ensure that the Pell Grant program remains adequately funded.
