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Congress Debating New Economic Recovery Package

Nov. 18, 2008—Congress is meeting now for a one-week lame duck session to try and pass an economic stimulus plan. While the House passed one version before the election break, the Senate did not endorse it. As part of this new effort, the National Governors Association (NGA) has submitted recommendations that include two education items. First, the NGA suggested that Congress fund the Pell Grant shortfall, estimated at $3.5 billion for fiscal year 2009, to ensure that adequate resources are available for eligible students at the maximum grant amount ($4,800). Second, the NGA would like Congress to provide $19 billion over two years for IDEA programs. Currently, NGA has no other K-12-related proposals.

In addition, some Democrats would like to include state aid as many states must balance their budgets and will need to make considerable changes to their spending priorities to make that happen. There is not, however, bipartisan support for any proposed components or for the size and scope of a plan. President-elect Obama is encouraging Congress to pass a significant package now; if that does not happen, it will be his first priority after inauguration.

The effect of the economic downturn has already created uncertainty in state spending, especially on education. For example, in California Governor Schwarzenegger has proposed an emergency budget that calls for a $2.5 billion cut in K-12 education funds for the current school year. Although the state legislature has not finished debating the proposal--nor is there any sign of which cuts it will approve--school districts are already taking action, such as freezing spending on instructional materials. The Los Angeles Unified School District is anticipating that proposed cuts would increase the district's deficit from $375 million to more than half a billion.

With constantly changing data there is no indication as to how long the economic downturn, federal or state, will last. Educational publishers are advised to be extremely cautious in this business environment and to look at each state as they try to counteract shortfalls. Below are more key indicators of the country's current economic status.

• Economists originally projected that a financial recovery could begin as early as the third quarter of 2009. However, according to the NGA, now economic recovery is not expected until 2010.
• On Thursday, Nov. 13, Standard and Poor's Rating Service reduced the credit ratings of several large auto suppliers and placed 13 more on a watch list for potential reductions.
• Retail sales fell by 2.8 percent in October 2008--the biggest drop on record.
• The number of foreclosure notices rose by 25 percent from a year ago.
• Americans filing for unemployment benefits is at a seven-year high. There are 3.89 million Americans who continue to need jobless benefits. This is the highest level since 1983.

For more information

Economic Recovery: A Federal-State Partnership
National Governors Association

Governor's Budget - Special Session 2008-09
State of California

Superintendent Brewer's Message to Employees
Los Angeles Unified School District

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