www.NASFAA.org Committee-Reported Congressional Budget Resolutions Are First Step to Student Aid Cuts

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Committee-Reported Congressional Budget Resolutions Are First Step to Student Aid Cuts

Last week both the House and Senate Budget Committees held mark-up sessions and reported their versions of the FY 2006 Budget Resolutions. Congressional Budget Resolutions set government spending and revenue parameters for the congressional committees, which translate those limitations into final appropriations and tax legislation. Those resolutions can mandate that spending reductions be made by those committees, which is the case this year with student aid funding.

The President's budget request was submitted in early February. NASFAA has posted a comprehensive analysis of that budget.

General Information

Budget Resolutions, among other features, divide spending into two categories:

discretionary spending, which is funding that is provided in the annual Appropriations process by the House and Senate Appropriations Committees, and
mandatory spending, which is automatic and not subject to yearly appropriations.

Budget Resolutions can mandate a process called "Reconciliation," as do this year's House and Senate bills. Reconciliation is part of the congressional budget process in which the Budget Committee, through its Budget Resolution, mandates that another committee or committees report a specified amount of savings. These budget savings may be achieved by cuts to program funding, changing the program's parameters, or by revenue raising measures (or a combination of these changes) to programs under the committee's jurisdiction. Committees are free to make whatever changes they wish to make as long as the budgetary savings target number is met.

House Budget Resolution

The House Budget Resolution was reported on Wednesday, March 9. For discretionary spending for education, the House bill assumes a total of $78 billion in discretionary budget authority, which is the same as the President's FY 2006 budget request. This would result in little room for increases in the student aid programs for FY 2006, since the President's budget freezes Federal Supplemental Educational Opportunity Grant and Federal Work-Study program funding at last year's levels. The President also eliminates several Title IV programs, including Federal Perkins Loan Federal Capital Contributions (FCC), the Leveraging Educational Assistance Partnerships (LEAP), Byrd Honors Scholarships, Thurgood Marshall Legal Educational Opportunity Program, TRIO Upward Bound and Talent Search Programs, and the GEAR-UP Program.

In order to increase existing programs or even to restore funding for any of the programs President Bush seeks to eliminate, then such increases or restoration must have offsetting cuts from some other student aid or federal program under the jurisdiction of the relevant Appropriations Subcommittee. The ability of the Appropriations Committee to increase current programs or to restore funding for programs slated for elimination is severely curtailed under the terms of both the House and Senate Budget Committee bills on discretionary student aid spending. Appropriations program cuts will come later this year unless some almost miraculous funding alternative is developed.

Unlike President Bush's budget request, the House Budget Committee Budget Resolution does not include funding for an FY 2006 increase in the Pell Grant maximum (the President requested an increase of $100 to $4,150) nor does it include funding, as the President does, to eliminate the $4.3 billion Federal Pell Grant shortfall.

The House Budget Resolution mandates "Reconciliation," which as noted earlier is the budget process that mandates authorizing committees report a specified amount of budget savings to programs under their jurisdictions. The House bill orders the House authorizing committee (Committee on Education and the Workforce) to achieve $21.4 billion of savings over five years (it is NASFAA's understanding that a third of that amount--$7.2 billion--would come from student loan programs). Although Budget Resolutions do not specify where the cuts must be made (that is the prerogative of the authorizing committee) the amount of reconciliation savings were negotiated between the chairmen of the Budget Committees and the chairmen of the authorizing committees. There is no doubt that these negotiations include student loan program savings and the possible recall of Perkins Loan revolving funds.

Senate Budget Resolution

The Senate Budget Committee reported its Budget Resolution on Thursday, March 10. Like its House counterpart, which replicates the President's recommended spending level, the Senate Budget Committee contains a similar amount in discretionary spending, but with a few exceptions. Again, if increases in existing programs or even a restoration of funding for any of the programs requested for elimination by the President are to be accomplished, then such increases or restoration must have offsetting cuts coming from some other student aid or federal program under jurisdiction of the relevant Appropriations Subcommittee. As noted above, the ability of the Appropriations Committee to increase current programs or to restore funding for programs slated for elimination is severely curtailed under the terms of both the House and Senate Budget Committee reported bills for student aid discretionary spending. Appropriation programs cuts will come later this year unless the Senate also develops some miraculous funding alternative.

The Senate Budget Committee reported resolution contains reconciliation instructions to its authorizing committee (Committee on Health, Education, Labor, and Pensions) to achieve savings from programs under its jurisdiction of $8.6 billion over five years. Again, although Budget Resolutions do not specify where the savings must be made, the amount of reconciliation savings were negotiated between the chairmen of the Budget Committees and the chairmen of the authorizing committees. There is no doubt that these negotiations include savings from the student loan programs and the possible recall of Perkins Loan revolving funds.

The Senate Budget Committee bill does contain four positive aspects. While the measure does not accept the twin funding sources for increasing the maximum Pell Grant Program, as the President recommends (part discretionary funding, part mandatory funding), it does provide:

$417 million to accommodate a $100 increase in the program's maximum award for FY 2006 and $2.1 billion over five years for an increase in the Pell Grant maximum of $100 per year,
a $4.3 billion "reserve fund" to eliminate the Pell Grant shortfall,
$5.5 billion over five years reserve fund to accommodate increased student loan benefits coming from reauthorization of the Higher Education Act, and
some room for funding up to $1,000 per year in loan forgiveness to Pell Grant recipients who complete their degree programs in four years. This loan forgiveness would be paid off during the grace period once the student documents program completion within the specified time period.

Next Steps

The House will take up its version of the Budget Resolution on Wednesday and the Senate begins its debate today. No doubt there will be amendments we can support restoring or increasing student aid funding, especially in the Senate. NASFAA will keep the Membership informed about these amendments and on what you can do to affect passage of those amendments to help your students and your schools.

By Larry Zaglaniczny
NASFAA Director for Congressional Relations

Posted March 14, 2005 on www.NASFAA.org, Web Site of the
National Association of Student Financial Aid Administrators
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