Fiscal Year 2005 Budget Summary — February 2, 2004

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Our reforms insist on high standards because we know every child can learn. Our reforms call for testing because the worst discrimination is to ignore a school's failure to teach every child. And our reforms identify underperforming schools because we need to direct our help to the schools that need it most.

President George W. Bush

Section I. Summary of the 2005 Budget

Two years ago President George W. Bush launched the most important reform of public education in a generation by signing into law the No Child Left Behind Act (NCLB Act), which reauthorized the Elementary and Secondary Education Act (ESEA). The new law was based on stronger accountability for results, more choices for parents and students, greater flexibility for States and school districts, and the use of instruction proven effective through scientifically based research.

In response, State officials, administrators, and teachers across the country worked hard to strengthen accountability systems, identify low-performing schools and make the changes needed to improve, and provide new options to parents, such as the opportunity to transfer to a better performing school or to obtain supplemental educational services from the provider of their choice. The overall goal is to ensure that by 2013-2014, every student who attends an American school will be proficient in reading and mathematics.

The early results of these changes are promising. All 50 States and the District of Columbia developed accountability plans, under which each State creates its own assessments and sets its own levels for student achievement, school and district accountability, and teacher quality. Under these plans, high average achievement by a school can no longer mask low scores by poor and minority students, English language learners, or students with disabilities. Districts and schools can meet adequate yearly progress (AYP) goals only if individual student subgroups—not just all students as a whole—reach the same academic proficiency targets.

States have identified more than 5,000 schools for improvement, and placed another 20,000 on "watch lists" for not making AYP for one year. These schools need to address weaknesses that, in many cases, were identified for the first time under the NCLB Act, and President Bush is committed to providing the resources needed to help these schools improve.

For 2005, the President is requesting $57.3 billion in discretionary appropriations for the Department of Education, an increase of $1.7 billion or 3.0 percent over the 2004 level. The 2005 request would build on the substantial Federal investment in education over the past five years, raising discretionary appropriations from $35.6 billion in fiscal year 2000 to $57.3 billion in fiscal year 2005, an increase of 61 percent.

These funds support educational opportunity and excellence at all levels of America's education system. In particular, under No Child Left Behind, they reflect an effort to leverage the nearly $500 billion that our Nation spends annually on elementary and secondary education. Despite the size of this overall investment—more than we spend on national defense, and more per-pupil than any other nation in the world except Switzerland—educational achievement has improved little over the past decade, and achievement gaps between minority students and their non-minority peers remain unacceptably large.

Total Department of Education Appropriations
(in billions of dollars)

For this reason, President Bush has focused new education investments on programs with a demonstrated record of success in improving educational outcomes, and on programs that have been fundamentally reformed by the NCLB Act. The President also has targeted new resources to programs that help to close the achievement gaps that persist among racial, ethnic, and socioeconomic groups across the country.

The 2005 budget request for the Department of Education includes the following significant increases: $1 billion for Title I Grants to Local Educational Agencies, $1 billion for Special Education Grants to States, $823 million for Pell Grants, $333 million to support the President's Jobs for the 21st Century initiative, $113 million to expand choices for students and parents, and $101 million for Reading First State Grants.

In particular, the Department's share of the Jobs for the 21st Century initiative reflects President Bush's understanding of the challenges faced by young people in preparing for future careers, and his determination to help them get the skills and training they need to compete successfully in today's changing economy.

New money funds Jobs for the 21st Century, but other increases are offset in part by reductions that reflect the President's priorities for the Department, including the elimination of categorical programs and low-priority activities in favor of funding through the flexible State grant programs created by the NCLB Act. In addition, the Department used findings from the government-wide Program Assessment Rating Tool, or PART, to redirect funds from ineffective programs to more effective activities, as well as to identify reforms to help address program weaknesses. Increases for 2005 also are offset in part by the completion of one-time projects.

In addition to the discretionary priorities described above, the request includes funding for mandatory programs, such as Vocational Rehabilitation State Grants and the student loan programs. Mandatory costs fluctuate from year to year due to changes in inflation, interest rates, and other factors. For 2005, new student loans provided under the Federal Family Education Loans and Federal Direct Loans programs will grow from $52.2 billion to $56.9 billion, an increase of $4.7 billion or 9 percent.

The 2005 request is complemented by significant tax-related investments in education, such as the Administration's proposal to expand from $250 to $400 the above-the-line deduction for qualified out-of-pocket classroom expenses incurred by teachers. Other existing tax-related benefits include education savings accounts (Coverdell IRAs) that permit up to $2,000 in annual contributions and tax-free withdrawals to pay educational expenses from kindergarten through college, as well as tax-free withdrawals from qualified State tuition savings plans. In addition, the Administration is proposing to revise and simplify rules for three higher education tax benefits—the Lifetime Learning credit, the HOPE credit, and the above-the-line deduction for higher education expenses.

The combination of discretionary and non-discretionary resources in the President's budget is focused on the following areas:

SUPPORTING STATE AND LOCAL IMPLEMENTATION OF THE NCLB ACT

States, school districts, and schools are meeting the challenge of successfully implementing the No Child Left Behind Act. They are recognizing and addressing achievement gaps that for too long were largely ignored. They are identifying schools for improvement, and making the changes needed to turn these schools around. They are giving parents new information—such as online data about school performance and teacher credentials—and new choices such as the option to transfer their child to a better school, or to obtain supplemental educational services from more than 1,700 approved providers.

To help States and school districts to stay the course and continue delivering on the promise of No Child Left Behind, the President's 2005 request includes the following:

• $13.3 billion for Title I Grants to Local Educational Agencies, an increase of $1 billion or 8 percent over the 2004 level, to give States and school districts additional resources to turn around low-performing schools, improve teacher quality, and expand choices for students and parents. States would reserve approximately $520 million of these funds for assistance to school districts with the greatest need for improvement efforts. If enacted, the request would result in an overall increase of $4.6 billion, or 52 percent, in Title I Grants to LEAs funding since the passage of the NCLB Act.

• $1.1 billion for Reading First State Grants, an increase of $101 million, or 10 percent, to expand the nationwide effort to support comprehensive reading instruction for children in grades K-3. The request would help school districts and schools provide professional development in reading instruction for teachers and administrators, adopt and use reading diagnostic assessments for students in kindergarten through third grade to determine where they need help, implement reading curricula that are based on recent findings of the 2000 National Reading Panel report, and provide reading interventions for young school children reading below grade level.



• $132 million for Early Reading First, an increase of $38 million, or 40 percent, for the pre-school component of the Reading First initiative, which funds competitive grants to develop and support the school readiness of preschool-aged children in high- poverty communities.

• $333 million in new funding to initiate or expand activities that help meet the goals of the President's new Jobs for the 21st Century initiative by ensuring that all students are prepared to succeed in postsecondary education and the workforce. Specific proposals include the following:

  • $100 million for a secondary school reading initiative, Striving Readers, that would focus on developing and implementing research based interventions to improve the skills of teenage students that are reading below grade level;

  • $120 million for a new Secondary Education Mathematics Initiative under the Mathematics and Science Partnership program that will make 100-140 competitive grants to ensure that secondary-school mathematics teachers are highly qualified and help mathematics teachers meet the needs of struggling students;

  • $40 million for an Adjunct Teacher Corps Initiative to support approximately 60 to 100 awards to partnerships to create and implement arrangements for utilizing well-qualified individuals from business, technology, industry, and other areas as teachers in secondary schools on an adjunct basis;

  • $33 million for Enhanced Pell Grants for State Scholars to provide an additional Pell Grant award of up to $1,000 to low-income students who participate in the State Scholars program by taking a rigorous high school curriculum.

  • $12 million under the Administration's reauthorization proposal for "Secondary and Technical Education State Grants" to increase the number of States implementing State Scholars programs that encourage high school students to complete a rigorous four-year course of study.

  • $28 million for the Advanced Placement program to ensure that teachers in low-income schools are well-trained to teach AP and International Baccalaureate courses and to increase the rigor of the high school curriculum.

• $100 million to double funding for the Mentoring program to support the development, expansion, and strengthening of exemplary school-based mentoring programs that meet the needs of at-risk middle school students. The initiative draws on the expertise and resources of the USA Freedom Corps to encourage citizen service to help improve public education outcomes.

• $10 million for a Military Families Initiative to address the challenges faced by students from military families that frequently change duty stations, promote smoother transitions to new schools, enable them to continue their education without disruption, and graduate on time.

• $185 million for Research, Development, and Dissemination, an increase of $19 million to further our understanding of how students learn and to develop effective practices for improving student achievement through investments in research on reading comprehension, mathematics and science education, and teacher quality.



• $410 million for State Assessment Grants to maintain statutorily required levels of support for State-level development and implementation of annual reading and math assessments in grades 3 through 8 by the 2005-2006 school year. The request would make available $10 million for new competitive grants focused on improving the assessment of limited English proficient students and students with disabilities.

• $681 million for English Language Acquisition to support flexible, performance-based formula grants to help ensure that limited English proficient (LEP) students learn English and meet the same high academic standards as all other students. The NCLB Act replaced a complex series of categorical grants to school districts and institutions of higher education with a flexible program that enables States to design and implement statewide strategies, grounded in scientifically based research, for meeting the educational needs of LEP and immigrant students.

EXPANDING OPTIONS FOR PARENTS

Expanding educational options for parents was a key achievement of the No Child Left Behind Act and remains one of the President's highest priorities. No Child Left Behind requires school districts to offer students attending schools identified for improvement, corrective action, or restructuring, the opportunity to transfer to a better-performing school, or to obtain supplemental educational services from a public- or private-sector provider, which may include a faith-based organization. President Bush also has provided strong support for the expansion of charter schools, and championed the creation of a scholarship program for low-income students in the District of Columbia, particularly those enrolled in low-performing schools.

The reality, however, is that in most school districts there are too few options for parents seeking a quality education for their children. To help overcome this problem, the 2005 request includes the following proposals designed to ensure that parents have meaningful choices:

• $50 million for a new Choice Incentive Fund that would provide competitive awards to States, school districts, and community-based nonprofit organizations to provide parents the opportunity to transfer their children to a higher-performing public, private, or charter school. A major objective would be to fund applicants proposing to provide large numbers of students with expanded choice opportunities.

• $27 million for Voluntary Public School Choice grants to give families better education options by encouraging States and school districts to establish or expand public school choice programs, including those across a State or across districts. Grants support planning, transportation, tuition transfer payments, and efforts to increase the capacity of schools to accept students exercising a choice option.



• $219 million for Charter Schools Grants, which would support approximately 1,200 new and existing charter schools. The request includes $19 million for the Per-Pupil Facilities Aid program, which assists charter schools in obtaining facilities by matching funds from State programs that make payments, on a per-pupil basis, to finance charter schools facilities.

• $100 million for the Credit Enhancement for Charter School Facilities program, an increase of nearly $63 million, to assist charter schools in acquiring, leasing, and renovating school facilities. A major obstacle to the creation of charter schools is their limited ability to obtain suitable academic facilities. This program supports competitive grants to public and nonprofit entities to help charter schools finance their facilities through such means as providing loan guarantees, insuring debt, and other activities to encourage private lending.

INCREASING FLEXIBILITY AND REDUCING BUREAUCRACY

No Child Left Behind provided unprecedented flexibility for States and school districts to combine resources from selected State formula grant programs to pursue their own strategies for helping all students reach proficiency in reading and mathematics. For example, school districts may transfer up to 50 percent of the funding they receive under four major formula grant programs to any one of the programs, or to Title I. Covered formula grant programs include Improving Teacher Quality, Educational Technology, Innovative Programs, and Safe and Drug-Free Schools and Communities. The following programs support this flexibility:

• $2.9 billion for Improving Teacher Quality State Grants, which gives States and school districts flexibility to select the research-based strategies that best meet their needs for improved teaching that will raise student achievement in the core academic subjects. In return for this flexibility, districts are required to demonstrate annual progress in ensuring that all teachers teaching in core academic subjects within the State are highly qualified.



• $692 million for Educational Technology State Grants to support State and local efforts, particularly in high-poverty districts, to improve student achievement through the effective integration of technology into classroom instruction. Funds may be used, for example, to train teachers to use technology, to develop courses in information technology, and to purchase technology-based curricula.

• $441 million for Safe and Drug-Free Schools and Communities State Grants, which fund a variety of activities in school districts and communities to foster a safe and drug-free learning environment that supports academic achievement.

• $297 million for State Grants for Innovative Programs, the most flexible of the Department's State formula grant programs, to help States and school districts implement innovative strategies, including expanded school choice options, and other reforms to improve student achievement. Innovative Programs funds may be used by States, for example, to support charter schools or pay for urgent school renovations, as well as to augment funding available for supplemental educational services for students attending schools identified for improvement, corrective action, or restructuring under Title I.

SPECIAL EDUCATION AND VOCATIONAL REHABILITATION

President Bush has demonstrated a strong commitment to improving educational opportunities for children with disabilities, both by requesting significant annual increases for Special Education Grants to States and in his determination to apply the same rigorous accountability demanded by the NCLB Act to the upcoming reauthorization of the Individuals with Disabilities Education Act (IDEA). Drawing on the principles of the NCLB Act, as well as from the recommendations of his Commission on Excellence in Special Education, the President will work with Congress to make changes to IDEA designed to strengthen accountability and improve student outcomes, improve identification practices and promote early intervention, and reduce administrative and paperwork requirements.

The President also is committed to the wide-ranging reform of the Federal government 's overlapping training and employment programs. This multi-year reform effort targets resources to programs with documented effectiveness, and eliminates funding for ineffective, duplicative, or overlapping programs. As part of this effort, the 2005 request renews the Administration's proposal to consolidate three secondary vocational rehabilitation programs (Supported Employment State Grants, Projects With Industry, and the Migrant and Seasonal Farmworkers program) within the Vocational Rehabilitation State Grants program.

The 2005 request for these activities includes the following:

• $11.1 billion for Special Education Grants to States, an increase of $1 billion over the 2004 level, and the fourth consecutive $1 billion increase requested by the President, for a total increase of $4.7 billion, or 75 percent, since 2001. The request would provide an estimated $1,612 per student for some 6.9 million individuals with disabilities ages 3-21. The 2005 budget also would raise the Federal contribution to about 20 percent of the national average per pupil expenditure for all children—the highest level of Federal support ever provided for children with disabilities.

• $2.7 billion for Vocational Rehabilitation State Grants, an increase of $113 million or 4.4 percent, to help State VR agencies increase the participation of individuals with disabilities in the labor force. The increase includes $51.7 million to satisfy the statutory requirement to increase funding for the program by at least the percentage change in the CPIU for the 12-month period completed in October 2003 as well as $61.8 million in consolidated funds.

VOCATIONAL AND ADULT EDUCATION

Decades of Federal investment in vocational and adult education programs have produced little in the way of measurable benefits either in improved vocational outcomes or significant improvement in reading and math skills that can lead to job placements. To ensure that this educational investment produces measurable results, the Administration is proposing a stronger emphasis on high levels of academic achievement in vocational education programs and increased accountability in adult education programs. The following requests will support the Administration's strategy in this area:

• $1 billion for a new Secondary and Technical Education State Grants program would create a coordinated high school and technical education improvement program in place of the current Vocational Education State Grants program. The new program would support and complement the achievement and accountability goals of No Child Left Behind by requiring States and school districts to focus more intensively on improving academic achievement and outcomes in career and technical education programs, as well as ensuring that students are being taught the necessary skills to make successful transitions from high school to further education and training and into the workforce. States would use most of their formula allocations to make competitive grants to partnerships between school districts and community and technical colleges. The request includes $12 million to expand the number of States supporting State Scholars programs, which encourage high school students to complete a rigorous curriculum needed to succeed in postsecondary education and the workforce.

• $590 million for Adult Basic and Literacy Education, including State formula grants, national leadership activities, and the National Institute for Literacy. The request assumes reauthorization of the Adult Education and Family Literacy Act to support a stronger focus on building skills in basic reading, math, and English acquisition for adults who need to improve their literacy or who want to earn their high school diploma or its recognized equivalent (the GED). Key changes to be sought by the Administration during reauthorization include assessment-based accountability measures and expanded use of research-based instructional practices.

POSTSECONDARY EDUCATION

The Administration's 2005 request would expand overall student aid available for postsecondary education to more than $73 billion, an increase of $4.4 billion, or 6 percent, over the 2004 level. The number of recipients of grant, loan, and work-study assistance would grow by 426,000 to 10 million students and parents, reflecting both an increase in the amount of student aid available and growth in postsecondary enrollment, which is expected to jump about 20 percent between 1998 and 2010.

The request also increases support for institutional development at colleges and universities serving large percentages of minority students, funds opportunities for students to gain international expertise and training as language and area specialists, and promotes access to postsecondary education through outreach and student support services. Highlights of the President's 2005 request include the following:

• An $856 million increase for the Pell Grant program, for a total of $12.9 billion, to fully fund the cost of maintaining a $4,050 maximum award for over 5.3 million students in award year 2005-2006, and to support new Enhanced Pell Grants for State Scholars. Since 2000, the number of Pell recipients has grown by nearly 25 percent, thanks in part to the overall boom in college enrollment.

  • Although funding for Pell Grants has increased since fiscal year 2000 by $4.4 billion, or nearly 60 percent, in recent years both insufficient Pell appropriations and a surge in the number of Pell Grant recipients is expected to result in a $3.7 billion funding shortfall at the end of the 2004-2005 award year. The Administration is committed to working with Congress to address this problem and put the program on firm financial footing.

• Within the Pell Grant total, $33 million for Enhanced Pell Grants for State Scholars to encourage States to offer and students to take demanding high school courses by increasing Pell Grants by up to $1,000 for first-year, full-time students who complete a rigorous State Scholars program of study in high school. This proposal is part of the President's Jobs for the 21st Century initiative.

• $419 million for the Aid for Institutional Development (HEA Title III) programs, an increase of $18.8 million or 4.7 percent, to help close achievement and attainment gaps between minority students and their non-minority peers by assisting institutions that enroll a large proportion of minority and disadvantaged students, including Historically Black Colleges and Universities and Historically Black Graduate Institutions.

• $96 million for Developing Hispanic-serving Institutions, an increase of $1.9 million, to maintain support for postsecondary education institutions that serve large percentages of Hispanic students. This program is a key part of Department efforts to increase academic achievement, high school graduation, postsecondary participation, and life-long learning among Hispanic Americans.

• $104 million for the International Education and Foreign Language Studies (IEFLS) programs to help meet the Nation's security and economic needs through the development of expertise in foreign languages and area and international studies. The increased complexity of the post-Cold War world, the events surrounding the September 11 terrorist attacks on the United States, and the war on terrorism underscore the importance of maintaining and expanding American understanding of other peoples and their languages.

• $833 million for the Federal TRIO Programs and $298 million for Gaining Early Awareness and Readiness for Undergraduate Programs (GEAR UP), which provide educational outreach and support services to help an estimated 1.8 million disadvantaged students to enter and complete college.

STUDENT LOAN REAUTHORIZATION

The Administration's 2005 request for postsecondary education also includes a package of loan program proposals for the upcoming reauthorization of the Higher Education Act of 1965. These proposals are intended to make college more affordable for students and their families and to strengthen the financial stability of the student loan programs. These reforms would:

• Increase loan forgiveness for mathematics, science, and special education teachers serving poor communities;

• Reduce interest rates for most borrowers, under the current interest rate environment, by retaining the variable interest rate structure after July 1, 2006;

• Increase loan limits for first-year students from $2,625 to $3,000. The current loan limits have remained essentially unchanged since the early 1970s;

• Broaden the availability of extended repayment options;

• Phase out higher special allowance payments to lenders for loans funded with the proceeds of certain tax-exempt securities;

• Allow low-default schools more flexibility in disbursing loan funds;

• Clarify that student aid applicants who are convicted of a drug-related offense are ineligible for Federal student aid only if the offense was committed while they were receiving Federal student aid and enrolled in a postsecondary institution;

• Strengthen the financial stability of the FFEL system by requiring guaranty agencies to collect the currently optional 1 percent insurance premium on all loans guaranteed or disbursed after October 1, 2004; and

• Reserve $3 billion in future years for additional student benefits. These additional proposals—which could include reduced fees, default prevention activities, or additional loan limit increases—will be developed in consultation with Congress as part of the HEA reauthorization process.

DEPARTMENT MANAGEMENT

The Department continues to implement its Blueprint for Management Excellence, a long-term action plan for improving Department management that incorporates key features of the President's Management Agenda. The Blueprint sets priorities for management improvement designed to facilitate effective monitoring of Department programs, eliminate financial management deficiencies, and prevent fraud, waste, and abuse of taxpayer dollars. The 2005 request for Department Management would support the following priorities:

• Improving financial integrity/management and internal controls. The Department demonstrated continued progress in the area of financial management and integrity by receiving a "clean" opinion on the audit of its fiscal year 2003 financial statements—its second consecutive "clean" audit. The 2005 request will support efforts to further strengthen management and internal controls, as well as to implement an action plan for correcting remaining weaknesses in management systems and processes.

• Ongoing modernization of student aid systems. The Department is implementing a 5-year plan aimed at improving system integration and strengthening default management strategies. Recent accomplishments include the new Common Services for Borrowers contract, which will consolidate loan servicing and default collection activities currently performed under four separate contracts. The Department estimates that costs over the 10-year contract period will be as much as $1 billion below projected levels under the antecedent contracts.

• Consolidation of student aid administrative funding. To improve accountability and ensure the efficient, cost-effective delivery of over $100 billion in Federal student aid, the Administration is again proposing to consolidate nearly $935 million in administrative funding, currently split between two separate accounts, into a new discretionary Student Aid Administration account. Most of these funds support payments to private-sector contractors or guaranty agencies that help administer the student loan programs.

• Competitive sourcing. The Department is using its "One ED" plan—a blueprint for finding the best way to perform its mission—to identify new opportunities to improve Department performance while lowering costs, such as reengineering of business processes or outsourcing. The Department recently announced competitions for its Human Resources and Payment Processing functions, and expects to announce additional competitions in the coming year.

 Elementary and Secondary Education

For further information contact the ED Budget Service.

This page last modified—February 2, 2004 (mjj).