Senate Approves Budget Resolution; Education Funding Remains

The Senate late Thursday night gave final approval to its FY 2006 Budget Resolution by a vote of 51-49. 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.

In the end, the Senate Republican leadership did not seek to strip out a successful amendment offered by Sen. Ted Kennedy (D-Mass.), which increased education funding by $5.4 billion education funding for FY 2006. In a flurry of activity Thursday evening, higher education advocates thwarted the threat against the Kennedy amendment.

Divergent House/Senate Budget Resolutions

The versions of the budget bill passed by the House and Senate are quite different and resolving those differences to produce a compromise budget will be difficult to achieve. For example, for discretionary spending on 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, 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), Leveraging Educational Assistance Partnerships (LEAP), Byrd Honors Scholarships, the Thurgood Marshall Legal Educational Opportunity Program, TRIO Upward Bound and Talent Search Programs, and the GEAR-UP Program. Unlike President Bush's budget request, the House 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). It also does not include funding to eliminate the $4.3 billion Federal Pell Grant shortfall, which the President and the Senate Budget Resolution do include.

In contrast, among the assumptions contained in the Kennedy amendment on how the additional $5.4 billion for FY 2006 would be spent are: an increase in the Pell Grant maximum award to $4,500; restored funding for TRIO, GEAR UP, LEAP, and Perkins FCC; and cost of college increases in FSEOG, Federal Work-Study, and graduate education programs. These assumptions follow the recommendations of the Student Aid Alliance, of which NASFAA is a member.  The Kennedy amendment also assumes a guarantee of up to $23,000 in student loan forgiveness for four years of teaching by new math, science, and special education teachers in high need schools, and restores the President's proposed cuts to job training/adult literacy. It also restores funding for the Perkins Vocational Education Act, which is important to many community colleges and which President Bush had recommended for elimination.

The differences between the House and Senate versions of the Budget Resolutions matter because in order to increase existing programs or even to restore funding for any of the programs President Bush seeks to eliminate, 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 the House Budget Resolution on discretionary student aid spending. Appropriations program cuts will come later this year unless some almost miraculous funding alternative is developed, but such an alternative would not be needed if Budget Resolution conferees accept the Kennedy amendment spending assumptions.

The Senate also rejected the budget approaches shared by President Bush and contained in the House Budget Resolution in a number of other important areas by adding $1.5 billion to the National Institute of Healths budget, $78 million for development of small business, half a billion dollars for AIDS prevention overseas, $855 million for first responders assistance, $2 billion of community development, and restoring $14 billion in cuts proposed for Medicaid. Neither House nor Senate Budget Resolution Conference Committee members can totally insist on "my way or the highway" in forging a compromise FY 2006 spending, tax cut, and reconciliation plan." If either the Senate or the House budget plan predominantly prevailed in the Conference Committees final product, then assuredly the opposite chamber would defeat it. Further, without some balance of interests coming out the Conference Committee, especially regarding budget rules, tax cuts, or spending priorities, then either the Senate or the House would reject such a Budget Resolution. The Congress has been unable to approve a Budget Resolution in two of the last three years.

Student Loan Reconciliation Cuts Remain

The House bill orders the House authorizing committee (Committee on Education and the Workforce) to achieve $21.410 billion of savings over five years (it is NASFAA's understanding that a third of that amountan estimated $6.7 to $7.2 billion--would come from student loan programs). The Senate bill contains reconciliation instructions to its authorizing committee (Committee on Health, Education, Labor, and Pensions) to achieve savings from programs under its jurisdiction of $8.576 billion over five years and approximately $6.5 billion would come from student loan program savings.

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.

Next Steps

Once a Conference Report gains Senate and House approval, then the normal appropriations process may proceed. The first step in appropriations would be the assignment to Appropriations Committee subcommittees of a dollar amount for discretionary spending that the subcommittee cannot breach, the so-called "302(b) allocations." If a Conference Committee has not completed its work by May 15, then the Appropriations Committee is free to begin its work on the FY 2006 funding bill that is supposed to be completed prior to the beginning of the federal fiscal year on October 1.

In terms of reconciliation bills, the authorization committee must report them to the Budget Committee, which packages the savings into one bill. This bill then must be passed by each chamber separately, followed by House and Senate conferees from the authorizing committee of jurisdiction working to develop a compromise bill. Reconciliation bills are separate legislative vehicles.

The House Budget Resolution mandates that House authorizing committees complete their reconciliation work by mid-September of this year; that resolution also mandates that tax cuts coming from its Ways and Means Committee be reported by late June.

The Senate Budget Resolution calls for the opposite. Spending or reconciliation cuts are sought from the authorizing committees by early June and tax cuts from its Finance Committee in early September.There are several consequences if the Budget Resolution conferees decide to retain this timetable unchanged. Some observers state the reason the two chambers have different dates is to obscure from the public that spending cuts are being used as offsets to extend tax cuts for the wealthy and once tax cuts are enacted Members of Congress will blame spending for the record federal deficits, making it easier to enact both tax and spending cuts while expressing concern about the deficit.

Impact on the HEA

Any reconciliation bill savings achieved by the authorizing committees this year matters because it will impact what can be done in an HEA reauthorization, since it is apparent that any House or Senate reauthorization bill will be deficit neutral. In other words, any HEA reauthorization legislative changes increasing federal costs in the FFELP or Direct Loan programs, which are considered entitlement or mandatory spending, will be offset by savings, of an equivalent or greater amount, in the Stafford Loan Program. Therefore, any reconciliation savings achieved this year and over the next five years will not be available to use as an offset in an HEA reauthorization bill.

Stating it directly, any increases in student loan borrower benefits that the Congress may wish to provide may be severely limited by the amount of reconciliation savings that, once used, cannot be used a second time, resulting in the curtailment of such borrower benefit improvements.

Thank You

For further information please see these earlier NASFAA articles.

Senate Passes Kennedy Amendment Increasing FY 2006 Education Funding by $5.4 Billion; House Completes Action on its Budget Resolution Without Change (posted 3/18/05)

House Begins Budget Resolution Debate; Senate Approves Education Amendment as It Slogs through Scores of Amendments  (posted 3/17/05)

NASFAA State Association Presidents Asked to Contact Congress on Budget Resolutions; Senate Defeats First Education Amendment (posted 3/15/05)

Committee-Reported Congressional Budget Resolutions Are First Step to Student Aid Cuts (posted 3/14/05). This article includes a comprehensive discussion of the congressional Budget Resolution process

Analysis of President's FY 2006 Budget Request to Congress (posted 3/14/05).   This article includes a comprehensive discussion of President Bush's FY 2006 student aid budget

By Larry Zaglaniczny
NASFAA Director for Congressional Relations

Posted March 21, 2005 on www.NASFAA.org, the Web Site of the
National Association of Student Financial Aid Administrators (NASFAA).
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