HARRISBURG - Pennsylvania's need-based college grants don't stretch as far as they used to, and that worries officials at the state agency that administers financial aid programs.

In the past four years, the proportion of college costs that the average grant covers has slipped from 51 percent to 39 percent for community colleges, 43 percent to 34 percent for state-owned universities, and 36 percent to 25 percent for state-related universities such as Penn State.

The Pennsylvania Higher Education Assistance Agency, whose grants are taxpayer-funded, chalks it up to a perfect storm of rising tuition, minimal state funding increases, and rising demand for the grants, which students do not have to repay.

"One of the major decisions that's got to be made here is, do we continue to try to fund as many students as possible and see their purchasing power diminish, or do we try to maintain the purchasing power and maybe not fund quite so many students?" said Richard E. Willey, the education agency's president and chief executive officer.

To answer that question, the agency appointed a task force over the summer to study the grant formula and held hearings to gather testimony from higher education leaders, financial aid officers and students. Its recommendations are due in November.

Established in 1966, Pennsylvania's grant program awarded $2.2 million to 6,500 student in its first year. Last year, $348 million in PHEAA grants were awarded to more than 175,000 students; the maximum grant award is $3,300.

The grants are available only for Pennsylvanians, but can spent on public and private schools anywhere in the country.

Students in families with adjusted gross incomes of up to $67,000 - taking into consideration factors such as the number of the family's children in college, child support payments and unreimbursed medical expenses - are eligible to apply.

Pennsylvania is among just a handful of states that offer a substantial amount of need-based grant money, and finding new ways to stretch those dollars will be difficult, if not impossible, said Jane Wellman, a senior associate with the Institute for Higher Education Policy in Washington.

"As tuition is going up and affordability is declining, there's a lot of discussion about how financial aid is structured," Wellman said.Most states have been unable to solve the problem because officials haven't figured out where else to get the money, she said."It gets to be a zero-sum game at heart," Wellman said.Texas, for example, has encountered problems meeting the demand for grants in a five-year-old program that provides awards based on a combination of financial need and academic merit.The grants are calculated partly on state universities' tuition rates, which have ballooned ever since state lawmakers deregulated tuition in 2003, said Ray Grasshoff, spokesman for the Texas Higher Education Coordinating Board."If students have gotten grants in the past, we're focusing more on renewing them, rather than funding new students," Grasshoff said.In Illinois, officials eliminated grants for students who were spending five years in college after state lawmakers reduced funding by 10 percent in fiscal 2003, said Lori Reimers, spokeswoman for the Illinois Student Assistance Commission.In Pennsylvania, public and private institutions disagree over how the grant formula should be changed.Judy Hample, chancellor of the 14 Pennsylvania State System of Higher Education universities, said grant awards should be based on family income, regardless of tuition costs, so more low-to-moderate-income students can afford college."Every sector of higher education actually has an incentive to raise their tuition because their students are then eligible for more aid," Hample said. "Those of us who have strong political controls over our tuition increases suffer as a result of that."Leaders of more expensive private universities contend that students' college choices would be limited if the grant formula made public institutions more attractive, said Don L. Francis, president of the Association of Independent Colleges and Universities of Pennsylvania and a member of the task force."We have more students attending private institutions than state system schools," Francis said. If individual grant awards covered less of the cost of a private school, he added, "you would be threatening the viability of private institutions."Heidi Watson, a senior at Waynesburg College in western Pennsylvania, said her state grant and student loans made all the difference in being able to afford the school, where tuition is more than $14,000 a year. Her mother is a secretary and her father is a maintenance worker for an elementary school."I definitely want to go to a private institution, just because I learned better in a small classroom setting rather than a huge session where you have a professor who doesn't know your name," she said. "To me, there was no other option."