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The Department’s 1998 budget request for Salaries and Expenses (S&E) will pay the Federal costs of the staff, overhead, contracts, and other activities and items needed to administer and monitor some 200 educational assistance programs and continue to improve management and service to schools and students. The Department is requesting $491.6 million for its discretionary S&E budget in 1998, an increase of $25.1 million over the 1997 level, but still just 1.7 percent of the Department’s total discretionary request. Mandatory Federal administrative costs—primarily associated with the postsecondary student loan programs—will increase by $41.7 million. The increases are primarily for pay raises and benefits, technology improvements, and contracts—especially the data processing contracts required to provide nearly $47 billion in grants and loans to over 8 million postsecondary students. The major cost categories in the budget are shown in the accompanying chart.
Over 40 percent of the Department’s S&E budget is provided under a permanent mandatory appropriation that supports the operations of the student loan programs and other student financial aid management, with the largest single expense being the cost of the contractors that originate and service Direct Student Loans. In addition to paying for these contracts and the staff who manage the Direct Loan program, the permanent mandatory account supports all student aid programs through a variety of other contracts, such as the National Student Loan Data System, and payments for services to 36 non-Federal guaranty agencies operating in all States and territories. Both Direct Loan servicing costs and FFEL guaranty agency payments fluctuate with loan volume. Because student loan volume has grown—and is projected to continue to grow—significantly, loan-driven administrative costs will continue to increase.
Department employment has declined 6 percent since 1992. With a 1997 ceiling of 4,613 FTE, staffing levels are nearly 40 percent below the 1980 level of 7,528 FTE. The Department's reinvention and restructuring efforts, combined with technology and financial management systems improvements, attrition, and retirements, have resulted in a Department that works better, costs less, and operates efficiently with a decreasing staff level. Retirements have been especially important, with over 200 employees taking advantage of the "buyout" program in fiscal years 1996 and 1997. In addition, a decrease of another 20 staff will result from the transfer of Library Programs staff to the Institute of Museum and Library Services, as required by the Museum and Library Services Act. Under the Department's streamlining plan, prepared in response to the President’s commitment to reduce the Federal workforce, FTE will decline to 4,495 FTE by the year 2000. Of totalDepartment staff, 68 percent work in headquarters offices, with the remaining 32 percent in regional offices.
The 1998 staffing request for the Department is 4,560 FTE, a decrease of 53 FTE from the 1997 ceiling of 4,613 FTE. Reallocations of FTE within the Department will maintain the staff levels needed to manage the student aid programs and other priority programs, including initiatives such as the Technology Literacy Challenge and the America Reads Challenge, while permitting the overall decrease in staffing. A history of Department employment since 1980 and planned staffing levels through the year 2000 are shown in the following table.
The Department has maintained operations in spite of low staffing levels in part by relying heavily on automation and private contractors to handle such functions as awarding grants, processing student aid applications, and providing grants and loans to some 8 million college students. This has helped the Department achieve the highest efficiency of any Federal agency in terms of program obligations per employee, with a ratio of $6 million for each FTE. Already the smallest of the 14 Cabinet agencies, the Department continually seeks ways to minimize administrative tasks and privatize routine functions that can be handled more efficiently by private contractors. A prime illustration is the use of contracts to operate the Direct Student Loan program. Finally, Congress has helped improve the balance between staff and workload by acting on many of the Administration’s recommendations to eliminate categorical programs that are duplicative, have outlived their usefulness, or have a limited Federal role.
Administrative support for most programs and offices in the Department is provided by the Program Administration account. The 1998 request for this account is $341 million, an increase of $14.8 million over 1996, including $186 million for staff pay and benefits and $155 million for non-pay costs. Staffing paid for from this account would decrease from 2,628 FTE in 1997 to 2,573 FTE in 1998.
The $186 million request for salaries and benefits, which is 55 percent of the total, reflects average employee pay raises of about 3 percent in January 1997 and another 2.8 percent included under OMB guidance for 1998, covering both national and locality pay raises. Other increases would provide for: (1) technology improvements to upgrade current information systems in order to communicate better with customers and prepare for Year 2000 conversion; (2) administrative support for programmatic initiatives including the Technology Literacy Challenge, America’s Hope Scholarships, America Reads Challenge, and the School Construction Initiative; and (3) contract support for the "One Pubs" initiative, which will provide customers with a "one-stop-shopping" service for the Department’s publications.
Student Financial Aid Management
The major focus of the Department's S&E budget continues to be improving management of student financial aid programs and continuing the successful implementation of Direct Loans. Excluding $152 million in payments for services to FFEL guaranty agencies, student aid administration spending will total nearly $516 million in 1998, almost 60 percent of the Department’s total administrative budget. About 75 percent of this $516 million reflects mandatory funding authorized under Section 458 of the Higher Education Act; the remaining funds are provided under the discretionary Program Administration and FFEL Administration accounts. The Department’s request for funding under Section 458 is $218 million below the current mandatory appropriation. Major activities supported with these funds include:
Direct Loans. Increased servicing costs for Direct Loans account for virtually the entire 1998 increase in student aid administrative spending. The Direct Student Loan program grew from 7 percent of total loan volume in academic year 1994-95 to 36 percent in 1996-97, and is expected to continue increasing over the next few years. In addition, large numbers of loans are now beginning to enter repayment, resulting in increased servicing costs as Department contractors begin distributing statements and coupon books, responding to requests for account information, and collecting and processing payments. As a result of these trends, costs for contracts to originate and service Direct Loans are expected to increase from $136 million in 1997 to $170 million in 1998.
Student Aid Delivery. The Department expects to provide over $47 billion in grants and loans to over 8 million students in 1998. In awarding this aid, the Department expects to spend roughly $82 million on contracts with a number of private firms to process paper and electronic applications, determine student eligibility, and maintain information management systems required to transfer data and funds between the Department and the more than 6,000 schools participating in the Federal student aid programs.
The Department is in the initial stages of a major effort to streamline and enhance the capacity of these student aid delivery and management systems. The multi-year Project EASI (Easy Access to Student Information) will ultimately create a student-based information tracking and data transfer system that will link the Department, schools, and other student aid program participants. Initial plans for the system are underway, with detailed design work scheduled for 1998 and actual development expected to begin in 1999.
Ensuring Program Integrity. The Department dedicates almost 400 FTE to ensure that institutions participating in Federal student aid programs—including schools, accrediting associations, lenders, private service contractors, and guaranty agencies—meet statutory eligibility requirements and operate in accordance with all statutory and regulatory guidelines. These efforts, which involved over 2,000 institutional reviews in fiscal year 1996 alone, have resulted in more than 400 schools losing their eligibility to participate in the Federal student aid programs over the past two years.
National Student Loan Data System. The budget includes $32 million in 1998 for the National Student Loan Data System (NSLDS), a national database that was developed in response to Higher Education Act requirements. The system is used to screen financial aid applications to prevent loans to applicants who have defaulted on their student loans or who have reached maximum award levels, and to compute institutional default rates. Throughthe end of fiscal year 1996, the system had already prevented at least $582 million in grants and loans from being made to ineligible students.
Increasing Debt Collections. Collections on defaulted loans by the Federal Government and guaranty agencies more than doubled from $1 billion in 1992 to $2.2 billion in 1996, contributing to a steady decline in net default costs. Expenses for Department collection activities are paid in part through the Federal subsidy, and in part through direct Federal administrative funds. The direct cost for Department data system contracts supporting these collection activities is expected to increase from $18 million in 1997 to $21 million in 1998.
Improving Customer Service. The Department is also committed to increasing access to information on Federal student aid, both through printed materials such as the Student Guide—which is also available on the World Wide Web—and through enhanced capacity to respond to specific requests. Spending on the Department’s contract to maintain a toll-free information line (1-800-4FED-AID) and to respond to written requests for information will increase from $14 million in 1997 to $15 million in 1998. This increase reflects both the growing volume of requests and improvements in the timeliness and accuracy of the Department’s responses.
The Department continues to build on its management improvement efforts to enhance its overall customer service; to provide greater flexibility for States, communities, and institutions; and to focus on internal improvements that help the Department work better and save taxpayer dollars. Burdensome process-oriented structures have been replaced with results-oriented initiatives aimed at making the Department a streamlined, high-performance organization. A major example of this is a redesigned grants process implemented at the beginning of fiscal year 1997 which will continue the shift of resources to program areas and focus on successful project outcomes and customer service. The Department also eliminated nearly 40 percent of its regulations and reduced the paperwork burden for its customers by changing reporting requirements from an annual basis to every 2 or 3 years. Special areas of emphasis in the budget include:
Information Technology for Improved Dissemination and Customer Service. The Department continues to improve both its management and customer service by expanding and making repairs to its computer network; upgrading and replacing its computers to handle new technology; and expanding its Internet and on-line services to teachers, parents and researchers. Of the $126 million for Department overhead services, $25.2 million is for centralized ADP services—including $19.7 million for operation of the Department’s local area network and $5.5 million for new initiatives. These new initiatives include (1) a data warehousing effort that would simplify the internal use of databases by providing access to data in a consistent manner from one location (data warehouse); (2) data conversion needed to comply with Year 2000 requirements; and (3) an enterprise modeling project to develop an architectural framework and uniform operating standards for all Department data systems to eliminate duplication in collection and storage of data. Another $6.4 million is requested for ADP equipment in the 21 offices supported by the various administrative appropriations.
Financial Management. The Department's budget request will also fund continued enhancements in accounting and financial management to improve services to grant applicants and recipients as well as ensure accountability for the $40 billion Department budget. These enhancements have accelerated the use of electronic funds transfer to provide funds to schools to make financial aid awards to students, while also giving grantees electronic access to the financial records and the ability to submit reports electronically. The budget also would provide $4.3 million for final implementation of the Education Department Central Automated Processing System (EDCAPS), which consolidates a collection of separate financial management and information systems that GAO and the IG have found to be inadequate. This 5-year, $31.4 million project will be phased in during 1997 and 1998.
Improved Customer Service for Department Publications. The Department has dramatically improved customer access to its programs and materials. The toll-free number, 1-800-USA-LEARN, provides information and accurate referrals to approximately 5,000 callers each week. The Department plans to expand its customer service to include access to well over 20,000 publications that provide a wealth of information for teachers, administrators, policymakers, researchers, parents, students, and others with a stake in education. The budget request includes $3.1 million for the "One Pubs" contract, which will begin to centralize the Department’s publications process, as called for by the National Performance Review, and provide customers with "one-stop-shopping" for Department publications.
Examples of the publications available include Guide to the U.S. Department of Education Programs, Student Guide to Financial Aid, Teacher’s Guide to the U.S. Department of Education, NCES statistical compilations, Strong Families, Strong Schools, the Helping Your Child series, The National Long-Range Technology Plan, and the Goals 2000 Progress Report (Fall 1996).
Documents will be available by calling an 800 number as the initial point of contact or, for those with access to the Internet, through the Department’s World Wide Web home page (http://www.ed.gov). The contract will incorporate the planning, printing, mailing, distribution, and storage of all Department publications beginning in 1998. Costs are anticipated to decrease over time due to elimination of duplicate contracts and mailing lists now in place.
Departmental Overhead Services
The budget includes $126 million for the centralized support and administrative services for every program and staff office within the Department. These services include computer network operations and maintenance, interagency agreements and contracts fortelecommunications, mail operations and delivery, rent, and postage. Nearly 45 percent of the total is for contractual agreements for services provided by other Federal agencies such as payroll and administrative payments processing, health unit and counseling services, regional support services, security investigations, training, building alterations and telecommunications services provided by the General Services Administration (GSA), and rental of space from GSA for Department staff. Because of its small size, the Department does not have staff to perform these services. Handling these arrangements on a centralized, contractual basis achieves savings in both dollars and staff resources.
The Department’s Office for Civil Rights (OCR) investigates discrimination complaints, conducts compliance reviews, monitors corrective action plans, and provides technical assistance on civil rights issues. The 1998 request for OCR is $61.5 million, an increase of $6.6 million over the 1997 level. About $48 million of the OCR budget is for staff pay and benefits for its 724 FTE; the remaining $13.5 million covers overhead costs as well as computer equipment and services.
Almost 90 percent of OCR staff are assigned to 12 enforcement offices in four regional enforcement divisions. OCR plans to manage its increasing workload in 1998 by reliance on the redesigned complaint resolution process and Case Resolution Teams. OCR also will continue proactive enforcement activities such as partnerships with State and local education agencies, empowerment of parents and educators through clarification and guidance in key civil rights areas, and increased staff training on civil rights issues. Over half of the complaints filed with OCR allege discrimination on the basis of disability, but OCR addresses all educational equity issues.
Office of the Inspector General
The Office of the Inspector General (OIG) conducts audits and investigations of the Department’s programs and activities to help ensure accountability for taxpayer-provided funds and to identify management improvements. The 1998 request for the OIG is $32 million, an increase of $2.1 million over 1997. Nearly $25 million of the total OIG budget is for the pay and benefits of its 317 FTE; most of the remaining $7 million covers overhead costs and travel. Nearly 80 percent of the budget increase is for built-in costs, including pay adjustments and the operation and maintenance of the Local Area Network now operating in all regional offices.
Three-quarters of OIG staff are assigned to 8 regional, 5 field offices, and 5 flexiplace locations where they investigate allegations of fraud on the part of recipients of program funds and conduct audits of the Department's programs and operations. In 1998, OIG will direct a majority of its efforts to program and operations improvement, with a focus on Student Financial Assistance (SFA) programs, Elementary and Secondary Education Act programs, and the audit of the Department’s financial statements. Most compliance activities will continue to focus on the Student Financial Assistance programs.
Direct any questions to Martha Jacobs, Budget Service
last update: Feb. 5, 1997
