Proposed budget would hit higher education hardest. Cut of 15% would shift more funding burden onto states

As Congress lets President Reagan's new budget proposal ``breathe'' for a few days, many analysts say his plan to cut education funding by nearly $3 billion is already gasping. Under the Reagan proposal, higher education would take it on the chin, while elementary and secondary education emerge relatively intact.

For now, ``everyone is in limbo about what Congress will actually cut,'' says Scott Widmeyer of the American Federation of Teachers.

Should the White House have its way in fiscal 1986, the Education Department's budget will drop from $18.2 billion to $15.4 billion (a 15 percent cut), eliminating loans for some 1.4 million students along the way. Also, students would accrue interest debts on their loans while still in school.

New Federalism -- under which states assume more funding responsibility -- is the ongoing theme of this budget. Education Secretary William Bennett said last week that ``a healthy economy'' has allowed states to spend more on education. The secretary feels that such increases ``will more than offset the reductions we are proposing.''

Interested parties, however, are not focusing on the President's budget -- but on the new Gramm-Rudman act, which mandates a 4.3 across-the-board cut in 1986 federal spending. The automatic budget-cutting provision was struck down by a federal court last week, but it remains in effect pending an appeal before the United States Supreme Court to be heard later in the year.

Under Gramm-Rudman, student aid -- grants and work-study loans -- will be cut by about $210 million (from $4.8 billion to $4.6 billion) March 1. The measure cuts the dollar amount of 600,000 grants and loans and eliminates 200,000 awards ranging from $200 to $2,100.

Educators say the one saving grace of Gramm-Rudman is that the $3 billion Guaranteed Student Loan program will remain untouched.

Nonetheless, there is considerable consternation in the education community over the fact that no one knows how much money will be available further down the Gramm-Rudman road, since cuts are expected to take place yearly until at least 1991. This crimps college planning for many students, educators say, and may discourage some low- and middle-income students from considering college at all.

``Cuts in Pell grants reach into decisions made during 10th grade,'' says Michael McPherson of the Brookings Institution. ``It causes continuing uncertainty -- you can't really assure these kids the money will be there.''

Tom Wollanin, chief staff member of the House subcommittee on education, says more cuts may cause an exodus from private schools. More students and parents may begin asking: `` `Should we consider community college for a few years?' ''

Over the past five years, says Allan Oster, president of the American Association of State Colleges and Universities, the real value of student loans has declined 25 percent -- through modest inflation and immodest tuition increases. Mr. Oster challenges the new federalism, under which states pick up the education slack caused by Gramm-Rudman. Most states are not having the budget surpluses of two and three years ago, he says, which let them to pump dollars into education. Michael Kirst, a specialist in education politics at Stanford University, says more state education money is ``problematical.''

Above and beyond the immediate funding horizon lurks Gramm-Rudman in fiscal 1987. And the real story, many educators say, will play itself out between this coming August and October, when President Reagan must ``sequester'' funds to cover deficit overruns. Tom Wollanin says that ``most people around here predict cuts between 15 and 20 percent.''

Such cuts, triggered automatically if the President and Congress do not agree on a budget, may cause shock waves deep within the educational structure in America. Robert Rosenzweig, president of the Association of American Universities, says a 20 percent cut would be ``staggering.'' Many schools would have ``no resources to cover something like that,'' he says.

Vital university research programs, often forgotten in the immediate hue and cry over student loan cuts, would undergo ``serious damage.'' Universities would not be able to ``keep their commitments'' to students and faculty in biotechnology, supercomputer programs, defense, and other developing fields.

Dr. Rosenzweig describes Gramm-Rudman as ``a nightmare vision'' not unlike other major mistakes of the 20th century, in which ``people put into motion events they could not control.''

``Don't panic!'' says Janet Hanson of the College Board. Federal education money is ``forward funded.'' Instead of dealing with cuts tomorrow, there are nine months to figure out ways to circumvent funding crunches and to let cooler heads prevail, she says.