Programs of the Departments of Education, Labor, and Health and Human Services provide—or assist states and localities in providing—a variety of services to individuals. Those activities include developmental services for children in low-income families, programs for elementary and secondary school students, grants and loans for postsecondary students, and general job-training and employment services.

Outlays for function 500 will total about $92 billion in 2007, the Congressional Budget Office estimates, of which about $80 billion will be discretionary spending. Between 2002 and 2006, discretionary outlays increased by about 6.3 percent per year; little growth in spending is projected for 2007. Education spending consumes about 70 percent of the function's discretionary outlays.

Mandatory spending in function 500 is primarily for higher-education loan subsidies, the Social Services Block Grant program, and rehabilitation services and disability research. Mandatory spending varies greatly from year to year because of changes in loan volume (especially for consolidation loans), interest rates, revisions to previous estimates of subsidy costs, and other factors that affect the federal student loan programs. The large increase in outlays in 2006 reflects several of those factors.

The Impact Aid program, authorized under title VIII of the Elementary and Secondary Education Act, provides money to school districts that are financially burdened, for example, by the presence of military bases or Indian lands within the district. Those tracts of land have a financial impact because the district receives no property taxes from them yet is obliged to provide a free public education to the so-called federally connected students who live on them.

In 2007, approximately 1,300 local educational agencies will receive basic support payments from the Impact Aid program. For a school district to be eligible for those payments, a minimum of 3 percent—or at least 400—of its schoolchildren must be associated with activities of the federal government. How much money a school district receives is based on a formula that adds up the number of federally connected students in the district's population and then applies a weight to each that roughly indicates the impact of that student on the school district's revenues. For example, students who live on Indian lands receive a weight of 1.25, and those who live on federal land within the school district with a parent employed on federal land or on active duty in the uniformed services receive a weight of 1.0. A number of categories of federally connected students are assigned smaller weights. For instance, students from military families who live in off-base housing receive a weight of 0.2. Other students who have a parent employed on federal land within the same state are assigned a smaller weight. However, school districts do not receive payments for those categories of federally connected students unless they enroll at least 1,000 such students (or those students equal 10 percent of the district's total enrollment).

This option would focus Impact Aid on the school districts that federal activities most strongly affect by basing support payments solely on a district's enrollment of students who are assigned weights of 1.0 or greater. Eliminating support for students who are assigned smaller weights would reduce federal outlays by $116 million in 2008 and by $646 million from 2008 to 2012.

A rationale for this option is the appropriateness of paying Impact Aid only for students whose presence puts the greatest burden on school districts. An argument against the option is that eliminating payments for other types of students who are associated with activities of the federal government could significantly harm certain districts—for example, those in which large numbers of military families live in off-base housing but shop at military exchanges, which do not collect local sales taxes.

Grants to the states under the Safe and Drug-Free Schools and Communities Act (SDFSCA) support programs to discourage violence and the use of illegal substances—such as alcohol, cigarettes, and drugs—among young people in and around schools. States receive SDFSCA funding on the basis of their school-age population and number of poor children. In 2006, that funding totaled $346.5 million.

States distribute SDFSCA funds to school districts in the form of grants that must be used according to certain guidelines. Although the SDFSCA program stipulates that 93 percent of the funds states receive must go toward activities that address violence and drug abuse in schools, it offers little guidance about what constitutes an effective use of those funds.

This option, like the President's budget request for 2007, would eliminate payments to states under the SDFSCA, reducing federal outlays by $7 million in 2008 and by a total of about $1.3 billion through 2012.

An argument for cutting SDFSCA funding is that several evaluations of various programs supported by state grants have demonstrated that the programs do not reduce the incidence of violence and drug abuse at school. Furthermore, although violence and drug abuse in general are pressing societal issues, they are problems that rarely occur on school grounds. Despite the occasional well-publicized incident, studies show that children are more likely to be victims of violence or homicide while away from school, and drug abuse occurs infrequently on school property, although it is more widespread than violent crime.

An argument against this option is that individual efforts funded under the SDFSCA may serve a critical function by raising the public's awareness of the problems of drug abuse and violence. In addition, some prevention programs supported by SDFSCA grants have been successful in reducing drug abuse. If funding for such programs was eliminated, drug use and violence might accelerate and lead to even more costly interventions on the part of school systems and communities.

The Individuals with Disabilities Education Act (IDEA) authorizes the federal government to make grants to states to provide special education and related services to students with disabilities. In exchange for receiving that federal funding, states are required to provide a "free appropriate public education" that is designed to meet the needs of eligible students. All of the states participate in the program. For the 2006-2007 school year, an estimated 6.8 million children will receive IDEA-covered services at an average federal cost of $1,551 per student.

For more than two decades, the authorization for this program (which was originally made through the Education for All Handicapped Children Act) has been set to provide each state with a maximum grant of 40 percent of the national average per-pupil expenditure (APPE) times an estimate of the number of disabled children that the state educates.¹ The program has never been funded at a level sufficient to meet that goal. If it had been funded at that level in 2006, states would have received a payment for each disabled child of $3,538 rather than $1,551. Although funding for the program has more than doubled since 1999, the program's appropriation for 2006 provided only about 17.5 percent of the estimated national APPE of $8,846 for that year.

This option would provide funds to meet the original federal goal of 40 percent of the APPE, which would require an increase in budget authority of $14.9 billion in 2008 and a total of $80 billion over the 2008-2012 period. The option would increase outlays by $6 billion in 2008 and by a total of $67.9 billion through 2012. Under the option, the appropriation for IDEA grants to states for 2008 would be adjusted annually to reflect estimated changes in the national APPE, in the number of children ages 3 to 21, and in the number of those children living in families whose income is below the federal poverty line.

Supporters of this option argue that the original federal goal represents a commitment to the states that should be met. In their view, public school systems are obligated to provide all children with a free appropriate education—which in the case of children with disabilities often requires costly equipment and professional attention tailored to the needs of each student. Proponents of additional federal support contend that the funds are needed to ensure that school districts can meet those obligations.

Opponents of this option believe that educating children, including disabled children, is a responsibility of state and local governments and that the federal government's involvement should be minimal. They reject the claim that the original authorization represents a federal commitment, viewing that amount instead as a ceiling for appropriations. Moreover, critics argue that certain problems with how the current system operates—such as paperwork burdens imposed on school systems and incorrect identification of disabilities (such as learning disabilities) that are more difficult to diagnose—will not be solved simply by increasing federal funding.

Title I-A of the Elementary and Secondary Education Act of 1965 authorized grants to local school districts to fund supplementary educational services for children who are disadvantaged and achieving at low levels. The Improving America's Schools Act of 1994 added accountability measures to the Title I-A program that were significantly strengthened by the No Child Left Behind Act of 2001, or NCLBA. (Those measures establish annual goals for educational improvement and impose escalating sanctions when the goals repeatedly are not met.) The NCLBA authorized Title I-A grants that began at a total of $13.5 billion for 2002 and increased steadily to $25 billion for 2007. However, those grants have been funded below those authorized levels. (For example, the funding level requested for 2007 was $12.7 billion.)

This option would boost funding for Title I-A for 2008 and beyond to its authorized level for 2007—$25 billion, with subsequent adjustments for inflation—and thereby increase federal outlays by $5.6 billion in 2008 and by $53.8 billion through 2012.

The accountability measures in the NCLBA require that schools that start the farthest from the ultimate goal—that all children be proficient in reading and math by the 2013-2014 school year—make the greatest annual progress if they are to avoid sanctions. Included among those schools that have started the farthest behind are those with large concentrations of disadvantaged children. Thus, a rationale for the increase in funding under this option is that if disadvantaged children are to catch up to their more advantaged peers, unprecedented improvements in educational performance will be required. To close the gap, schools with high concentrations of disadvantaged children will probably have to dramatically increase both the quality and intensity of the supplemental educational services they provide. Those improvements will require very large increases in resources.

An argument against the funding increase is that experience with earlier reform plans shows that simply providing more resources may not solve the problem of closing the achievement gap between economically disadvantaged children and their better-off peers. Studies of what determines academic achievement among students often fail to find that the level of resources available to a school influences how well students learn. Academic achievement may be associated with qualities—such as school leadership and excellent teaching—that cannot be improved by additional resources alone.

The Even Start family literacy program provides educational and related services to parents who have not finished high school and to their young children. Those services include basic academic instruction and help with parenting skills for the parents and early childhood education for their children, along with supplementary services such as child care and transportation. Under the program, the Department of Education makes grants to states to provide assistance through eligible entities (a local education agency operating in collaboration with a community-based or other nonprofit organization). During the 2006-2007 school year, the program supported 647 projects that served roughly 25,000 children and provided approximately $3,900 per child. The most recent national evaluation of the program found that roughly one-third of funding supported adult and parenting education and associated support services and another one-third supported early childhood education. The remainder paid for case management, recruiting, evaluation, administration, and other activities. For 2006, federal funding for the program was $99 million, down from $225 million in 2005.

This option, like the President's 2008 budget, would eliminate grants to states under the Even Start program and redirect half of those funds to other federal programs that support early childhood education. That change would reduce outlays by $1 million in 2008 and by a total of $195 million over five years.

An argument for this option is that the most recent national evaluation of Even Start did not produce evidence that the program's approach of involving parents in the education of their children is effective. That evaluation included a study that tracked 18 local grantees that randomly assigned 20 new families to an Even Start program that provided the full range of services and 10 families to a control group. (Those 10 families were not allowed to participate in the Even Start program for one year but were free to seek other educational and social programs for which they qualified.) Although both groups made gains on literacy and many other measures, the parents and children in the Even Start program did not perform better than the parents and children in the control group. The national evaluation also found that maintaining families' participation in the program and use of its full range of services—which are at the core of the program's philosophy—was a continuing problem. Families in the Even Start program during the 2000-2001 school year used only a fraction of the services available to them. Also, about half of the families who joined Even Start between the 1997-1998 school year and the 2000-2001 school year left the program within 10 months, and by that time, fewer than one in five families had met their educational goals under the program.

An argument against this option is that other studies have shown that children who participate in programs that provide intensive high-quality services make larger cognitive gains while in the program and have better educational outcomes years after leaving the program than those who do not. In addition, research has repeatedly shown an association between family background, including level of education and income, and the educational achievement of children. So although direct evidence is not available, it seems plausible that children whose parents have low levels of literacy or education are more likely to be educationally successful if they receive early childhood instruction themselves and if their parents receive educational services and instruction to help their children learn. Also, those parents may be more motivated to participate in basic education programs for adults and improve their job prospects if one of the purposes of such programs is to support their children's educational development.

The Pell Grant program is the single largest source of federal grant aid for postsecondary education that is available to students from low-income families. A student's eligibility for a grant and the grant's size depend on a federal calculation of the student's and family's expected contribution to the cost of attending a postsecondary institution. The calculation depends on factors that include the student's income and assets and, for dependent students (in general, unmarried undergraduate students under the age of 24), the parent's income and assets and the number of other dependent children in the family who are attending postsecondary schools.

The amount of the grant that a student is eligible for depends on the relationship of the family's expected contribution to the maximum grant. If the expected contribution is zero, the student generally qualifies for the maximum grant; if the contribution is, for example, one-third of the maximum, the student generally qualifies for a grant equal to two-thirds of the maximum; and if the expected family contribution exceeds the maximum grant, the student is not eligible for Pell grant aid. For academic year 2006-2007, the maximum grant authorized for the program is $5,800. However, lawmakers specified a lower maximum amount—$4,050—in the program's appropriation for 2006, which provides funding for the 2006-2007 academic year.

This option would increase the appropriated maximum Pell grant by either $100 or $1,000, affecting both the size and number of grants awarded. (Most students who received a grant under current law would receive a larger one under the option, and some students who currently are not eligible for a grant would become eligible.) An increase of $100 in the appropriated maximum grant would raise federal outlays by $99 million in 2008 and by $1.8 billion over the 2008-2012 period. An increase of $1,000 would raise federal outlays by $1 billion in 2008 and by $18.1 billion during the five-year period.

An argument for increasing the maximum Pell grant by $100 or $1,000 is that the maximum award now covers only about one-third of average expenditures for in-state tuition, fees, room, and board at public four-year postsecondary institutions. Currently, fewer than 50 percent of students from low-income families enroll in college or trade school immediately after graduating from high school, compared with about 80 percent of students from upper-income families. Increasing the grant aid offered to students from low-income families might induce more of them to enroll in postsecondary education. It might also encourage some to remain in school longer.

An argument for not increasing the maximum Pell grant is that doing so would require a large increase in federal spending. Moreover, most of the additional aid that this option would provide would go to students who would attend a college or a trade school without being offered a larger grant. Other forms of aid, including federally subsidized student loans, are available to students from low-income families to help finance that part of the cost of attendance not met by Pell grants. And it could be argued that for students to bear the cost of repaying loans for their education is appropriate because they also receive significant benefits from that education.

Individuals who apply for federal student financial aid must complete the Free Application for Federal Student Aid, on which they report their income and, if they are dependent students, the income of their parents. Those amounts are among the key factors that determine the size of a federal Pell grant or subsidized loan—if any—that a student is eligible to receive. The Department of Education generally requires that postsecondary institutions verify a student's reported income and family size on at least 30 percent of the applications for federal aid that the schools receive; institutions do that by asking students to produce such documents as copies of income tax returns. Through that verification process, the department has found that a significant fraction of applicants understate their income, which can lead to awards of Pell grants and subsidized loans that are larger than those for which a student is eligible. (A smaller number of students overstate their income and are awarded less aid than the amount for which they are eligible.)

This option would direct the Internal Revenue Service to share information about income with the Department of Education and its contractors so that they can verify the amounts that all Pell grant awardees have reported on their aid applications. The option would also allow the department to disclose any discrepancies to postsecondary institutions—which administer the Pell Grant program—so that they can adjust the amounts of students' awards. If the current maximum award of $4,050 continued to apply over the next 10 years, reducing Pell grant overpayments would shrink federal outlays by $12 million in 2008 and by $625 million over the 2008-2012 period. Those estimates incorporate the assumption that the Department of Education will first focus on large Pell grant awards and gradually extend the verification program to all awards. A small reduction in outlays under this option would also come from decreasing the amounts of federally subsidized loans received by Pell grant awardees who underreport their income.

An argument for this option is that the verification of Pell grant awardees' income would ensure that such recipients of federal student aid received only the amount they were eligible for under the government's student aid formulas and that applicants who had the same income and family circumstances were treated similarly. Income verification might also give students and families an incentive to provide more accurate information on the aid application. Another benefit of implementing the option would be to centralize the location of sensitive information about family income. The Department of Education's current verification system requires that students present copies of tax returns to their postsecondary institutions, which means such information can be found in financial aid offices all over the country.

An argument against this option is that the income verification process could disrupt some students' educational plans. If colleges were required to delay financial aid awards until after the information on aid applications was verified through filed tax returns, students whose parents did not file their returns well before the start of an academic year might see the disbursement of their grant award postponed, which in turn might delay their enrollment. Another argument against this option is that some people might perceive income verification by the Internal Revenue Service as an infringement on taxpayers' privacy.

Federal student loan programs give students and their parents the opportunity to borrow funds to pay for postsecondary education. Those programs offer Stafford loans to students and PLUS loans to parents of dependent students and (more recently) to graduate students who have exhausted their eligibility for Stafford loans. (PLUS loans take their name from the original Parent Loans to Undergraduate Students program.) Two programs provide both Stafford and PLUS loans: the Federal Family Education Loan Program, in which the federal government guarantees loans made by private lenders; and the William D. Ford Federal Direct Loan Program, in which the government makes the loans by using federal funds. The interest rate on Stafford loans is the same under both programs—6.8 percent on loans made after July 1, 2006. However, the interest rate on PLUS loans made after July 1, 2006, differs: it is 8.5 percent under the guaranteed loan program and 7.9 percent under the direct loan program.

This option would standardize the interest rate on PLUS loans offered under the two programs by either reducing the rate on guaranteed loans (to 7.9 percent) or raising it on direct loans (to 8.5 percent). Reducing the rate on guaranteed student loans would increase federal outlays by $140 million in 2008 and by $850 million over the 2008-2012 period. (Outlays would rise because the government guarantees lenders an interest rate and pays them the difference between that rate and the rate that borrowers pay.) Raising the interest rate on direct loans would reduce federal outlays by $30 million in 2008 and by $175 million over the 2008-2012 period. (Outlays would decline because the government would receive larger interest payments from borrowers in the direct loan program.)

An argument for the alternative of reducing the interest rate is that the lower rate (7.9 percent) is already well above the interest rate on Stafford loans (6.8 percent). However, an argument against the alternative is that it would increase federal outlays.

A rationale for the alternative of raising the interest rate is that PLUS loans are available to parents and graduate students regardless of their income and assets and, for many borrowers, an 8.5 percent rate may be less than the interest rate on alternative private loans available to them. However, by raising the interest rate, policymakers would increase the cost of financing postsecondary education for parents and graduate students who already face high levels of expenditures.

Federal student loan programs allow students and their parents to borrow funds to pay for students' postsecondary education. Those programs offer subsidized loans to students who have proven financial need and unsubsidized loans to students regardless of need. Two programs provide both types of loans: the Federal Family Education Loan Program, in which the federal government guarantees loans made by private lenders; and the William D. Ford Federal Direct Loan Program, in which the government makes loans by using federal funds. Borrowers benefit because the interest rates that they are charged are lower than the rates that most of them could secure from alternative sources. Borrowers who receive subsidized loans benefit further because the federal government forgives interest on those loans while students are in school and during a six-month grace period after they leave school.

This option would end new subsidized loans to graduate students in 2007. Under the assumption that those students would then take out unsubsidized loans instead, this option would reduce federal outlays by $1.1 billion in 2008 and by $8.2 billion over the 2008-2012 period. (Under the Federal Credit Reform Act of 1990, the federal budget records all costs and collections associated with a new loan on a present-value basis in the year in which the loan is obligated.)

An argument for restricting subsidized loans to undergraduate students is that it would focus student aid funding on what some people believe is the federal government's primary role in higher education—to make a college education available to all high school graduates. According to that rationale, graduate students have already benefited from higher education. An argument against such a shift in funding, however, is that supporting graduate students is an equally important role of the federal government because those students are most likely to make scientific, technological, and other advances that will benefit society as a whole.

Under this option, graduate students who lost access to subsidized loans could take out unsubsidized federal loans for the same amount and still benefit from below-market interest rates. Nevertheless, graduate students often amass large student loan debts because of the number of years of schooling required for their degrees. Without the benefit of interest forgiveness while they were enrolled in school, their debt would be substantially larger when they entered the repayment period because the interest on the amounts they had borrowed over the years would be added to their loan balance. However, the federal student loan programs have several options for making repayment manageable for students who have high loan balances or difficult financial circumstances.

Under the Federal Family Education Loan Program, private lenders make loans to students and their parents that are guaranteed by the federal government. The program provides two types of loans to borrowers: Stafford loans and PLUS loans. (PLUS originally referred to the Parent Loans to Undergraduate Students program, but the loans are now available to graduate students as well as parents.) Stafford loans are better for borrowers because their terms are more favorable than those of PLUS loans. However, students cannot always finance enough of the cost of attending school with the maximum Stafford loan available to them, so some parents and graduate students may take a PLUS loan to finance the remainder. PLUS loans have an advantage for lenders: The government guarantees an interest rate on those loans that is 0.3 percentage points higher than the rate on Stafford loans. For the fourth quarter of 2006, for example, the rate that lenders received on recent Stafford loans was 7.72 percent. By comparison, the rate they received on PLUS loans was 8.02 percent.

This option would reduce the guaranteed interest rate that lenders receive on PLUS loans to equal the guaranteed rate they receive on Stafford loans. Because the federal government pays lenders the difference between the guaranteed interest rate and the borrower's interest rate, that change would reduce federal outlays by $70 million in 2008 and by $425 million over the years 2008 to 2012.

Whether lenders should receive a higher interest rate on PLUS loans than on Stafford loans hinges, in part, on whether they incur higher costs or risks for PLUS loans. On the one hand, the loan-servicing requirements that the government imposes are the same for both kinds of loan, and the government guarantees both. Furthermore, PLUS loans, on average, are much larger than Stafford loans, which may allow lenders to service the loans more efficiently. On the other hand, under the government's requirements for PLUS loans, lenders must check the borrower's credit history, a step that is not required for Stafford loans and that imposes a small additional cost on lenders.

Under the Federal Family Education Loan Program, private lenders make loans to students, and those loans carry a federal guarantee that is administered by several dozen guaranty agencies. When a borrower defaults on a student loan, a guaranty agency pays the lender what it is owed and is then responsible for collecting the unpaid amount (plus any collection fee) from the borrower. If the guaranty agency is successful and the borrower begins to make payments or repays the loan in full, the agency may retain a portion of those payments.

Under the William D. Ford Direct Education Loan Program, the government lends money to students directly by using federal funds. Contractors, selected by the Department of Education through a competitive process, provide collection services for the program that are analogous to those provided by guaranty agencies. Like those agencies, the contractors are permitted to retain a portion of the payments they collect; however, that portion is smaller than the one that a guaranty agency may retain.

The amount that a guaranty agency or contractor may retain depends on how a loan payment is obtained. For payments received directly from borrowers, a guaranty agency may retain 23 percent, but the Department of Education's contractors retain an average of about 16 percent.

This option would reduce the amount that a guaranty agency may retain from payments on defaulted loans, lowering it to the amount that the Department of Education allows its contractors to retain. The option would reduce federal outlays for new loans made during the 2008-2012 period by $130 million in 2008 and by $730 million through 2012. The option would reduce federal outlays for loans made in earlier years by an additional $635 million. (Under the Federal Credit Reform Act of 1990, the federal budget records all costs and collections associated with a new loan on a present-value basis in the year in which the loan is obligated. The federal budget records modifications associated with an existing loan in the year in which the modifications are enacted.)

The primary argument for this option is that the guaranty agencies and the Department of Education's collection contractors provide analogous services and should be similarly compensated for them. A rationale for using the amount that contractors are paid is that it is determined through a competitive process in which the collection companies either accept prices and fees offered by the department or propose changes. In the latter case, the agency evaluates the prices to ensure that the rates are high enough to provide the contractor with an incentive to maximize its collections on the defaulted loans and low enough to give the government a reasonable return on the loans.

An argument against this option is that guaranty agencies are state-sponsored or nonprofit organizations whose mission is to help students finance their education. Any payments they receive that exceed their costs are not distributed as profits to owners (as is generally the case for the collection contractors) but are kept in the organizations' operating fund for future uses—which may include providing additional aid to students.

In several federal student aid programs, the government pays schools to administer the programs or distribute the funds, or both. One type of program, campus-based aid, includes the Federal Supplemental Educational Opportunity Grant Program, the Federal Perkins Loan Program, and the Federal Work-Study Program. The government distributes funds for those programs to institutions, which in turn award grants, loans, and jobs to qualified students. Under a statutory formula, institutions are allowed to use up to 5 percent of those program funds for administrative costs. In another program, the Federal Pell Grant Program, the law provides for a federal payment of $5 per Pell grant to reimburse schools for some of their costs of administering that program.

This option would prohibit schools from using federal funds from the campus-based aid programs to pay administrative costs, which would reduce budget authority by $160 million in 2008. Eliminating the $5 payment per grant to schools in the Pell Grant program would reduce budget authority by another $26 million. Together, those changes would reduce outlays by a total of $785 million over the 2008-2012 period.

Arguments can be made both for eliminating those administrative payments and for retaining them. On the one hand, schools benefit significantly from participating in federal student aid programs even without the payments because the aid makes attendance at those schools more affordable. For the 2006-2007 academic year, students at participating institutions will receive an estimated $15 billion in federal funds under the Pell Grant and campus-based aid programs. On the other hand, institutions incur costs to administer the programs. If the federal government does not pay those expenses, schools may simply pass along the costs to students in the form of higher tuition or less institutional student aid.

The Leveraging Educational Assistance Partnership (LEAP) program helps states provide grants and work-study assistance to financially needy postsecondary students while they attend academic institutions or vocational schools. States must match federal funds at least dollar for dollar and must also meet maintenance-of-effort criteria (minimum funding levels based on funding in previous years). Unless they are excluded by state law, all public and private nonprofit postsecondary institutions in a state are eligible to participate in the LEAPprogram.

This option, which was also included in the President's 2008 budget, would eliminate the LEAP program, reducing federal outlays by $13 million in 2008 and by $286 million over five years. The extent to which financial assistance to students declined would depend on the responses of the states, some of which would probably make up at least part of the lost federal funds.

A rationale for this option is that the LEAP program is no longer needed to encourage states to provide more student aid. When the program was first authorized, in 1972 (as the State Student Incentive Grant Program), only 28 states had student grant programs; now, all but one state have such need-based assistance. Moreover, states currently fund the LEAP program far in excess of the level to which federal matching funds apply.

An argument against eliminating the LEAP program is that some states might not increase their student aid appropriations to make up for the lost federal funds and some might even reduce them. In that case, some of the students who received less aid might not be able to enroll in college or might have to attend a less expensive school.

The federal government subsidizes various activities related to the arts and humanities. For 2007, combined funding for several programs totals nearly $1.5 billion; it comprises federal spending for the Smithsonian Institution ($632 million), the Corporation for Public Broadcasting ($465 million), the National Endowment for the Humanities ($141 million), the National Endowment for the Arts ($124 million), the National Gallery of Art ($111 million), and the John F. Kennedy Center for the Performing Arts ($31 million).

Cutting funding for those programs by 20 percent of their current outlays and holding spending at that nominal level would reduce federal outlays relative to the current funding level (after an adjustment for inflation) by $275 million in 2008 and by $1.9 billion over the 2008-2012 period. The actual effect on arts and humanities activities would depend in large part on the extent to which other funding sources—such as states, localities, individuals, firms, and foundations—changed their contributions.

Some proponents of reducing or eliminating funding for the arts and humanities argue that support of such activities is not an appropriate role for the federal government. Other advocates of cuts suggest that the expenditures are particularly unacceptable when programs that address central federal concerns are not being fully funded. Some federal grants for the arts and humanities already require nonfederal matching contributions, and many museums charge or suggest that patrons pay an entrance fee. Those practices could be expanded to accommodate a reduction in federal funding.

However, critics of cuts in funding contend that alternative sources will probably be unable to fully offset a drop in federal subsidies. Subsidized projects and organizations in rural or low-income areas might find it especially difficult to garner increased private backing or sponsorship. Thus, a decline in federal support, opponents argue, would reduce activities that preserve and advance the nation's culture and that introduce the arts and humanities to people who might not otherwise have access to them.

The Senior Community Service Employment Program (SCSEP) funds part-time jobs for people ages 55 and older who have low income and poor prospects for employment. To participate in the program in 2006, a person had to have annual income of less than 125 percent of the federal poverty level. (For someone living alone, that amount would be $12,250.) SCSEP grants are awarded to nonprofit organizations and state agencies. Those organizations and agencies pay SCSEP participants to work in part-time community service jobs.

This option would eliminate the SCSEP, reducing outlays by $75 million in 2008 and by $1.9 billion through 2012.

Participants in the SCSEP are paid the federal or state minimum wage or the local prevailing wage for similar employment, whichever is higher. They are also offered annual physical examinations, training, counseling, and assistance to move into unsubsidized jobs when they complete their projects. In 2006, approximately 100,000 people participated in the SCSEP, working in schools, hospitals, and senior citizens' centers and on beautification and conservation projects.

An argument for eliminating the SCSEP is that the costs of providing the services now supplied by the program's participants could be borne by the organizations that benefit from their work; under current law, those organizations usually must bear just 10 percent of such costs. Shifting the full costs of the services to the organizations would increase the likelihood that only the most highly valued services would be provided.

An argument against this option is that eliminating the SCSEP, which is a major federal jobs program aimed at low-income older workers, could cause serious financial problems for some people. In general, older workers are less likely than younger workers to be unemployed, but those who are unemployed take longer to find work.

The National and Community Service Act authorizes funds for the AmeriCorps Grants Program, the National Civilian Community Corps (NCCC), Learn and Serve America, and the Points of Light Foundation; AmeriCorps receives the bulk of the total appropriations. Students and other volunteers who participate in those programs provide assistance to their communities in the areas of education, public safety, the environment, and health care, among others. State and local governments and private enterprises contribute additional funds to AmeriCorps to carry out service projects that, in many cases, build on existing federal, state, and local programs. AmeriCorps and NCCC provide participants with an educational allowance, a stipend for living expenses, and, if needed, health insurance and child care. Participants in the Learn and Serve America program generally do not receive stipends or educational awards. The Points of Light Foundation is a nonprofit organization that promotes volunteer activities.

This option would eliminate federal contributions for programs funded under the National and Community Service Act, reducing outlays relative to current funding by $70 million in 2008 and by $1.6 billion through 2012 after an adjustment for inflation. (Those estimates include the costs associated with terminating the programs.)

An argument for the option is based on the view that the main goal of federal aid to students should be to provide access to postsecondary education for people whose income is low. Because participation in the programs is not based on family income or assets, funds do not necessarily go to the poorest students.

A major rationale for maintaining the programs is that they provide opportunities for participants to engage in national service, which can promote a sense of idealism among young people. In addition, participants provide valuable services to their communities.