March 2, 2004

• CBO Increases its Projected Long-Run Deficit in Administration's Budget
• Higher Education Committee Studies Students Motivation for College

---

CBO Increases its Projected Long-Run Deficit in Administration's Budget

According to the Congressional Budget Office (CBO), President Bush's FY2005 budget plans would improve the fiscal deficit in the next few years but send the shortfall soaring over the longer run.

Democrats and some Republican members of Congress have criticized the Administration for the growing deficits, which have become a thorny political issue before the November 2nd election. The Administration inherited a budget surplus when he took office in January 2001.

In a review of the President's budget, the nonpartisan CBO said the Administration's policies would lead to a deficit of $356 billion in 2005, slightly better than the $363 billion deficit the CBO is forecasting without taking the President's budget proposals into account.

From 2005 until 2014, the cumulative total of the deficit would balloon to $2.75 trillion, far worse than the $2.01 trillion the CBO is looking for under existing policies.

The report came just two days after Federal Reserve Chairman Alan Greenspan warned Congress a major budget crunch loomed as tens of millions of baby boomers, born after World War II, begin to qualify for early retirement benefits.

Earlier this month, Bush proposed a $2.4 trillion election-year budget that would boost defense spending by about seven percent, slash 128 programs and seek to cut this year's record deficit share of the Gross Domestic product (GDP) in half.

Tax cuts and spending on defense paired with a sluggish economy have helped create a record budget deficit the White House estimates will hit $521 billion this year.

The CBO is slightly more optimistic, expecting a deficit of $477 billion this year, the same projection the budget forecaster made in January.

The ten-year outlook is likely to garner the most interest among the President's political opponents as they look to pin blame on him for what they say are poor economic policies.

The White House, which put out a five-year budget plan, said long-term outlooks could be unreliable.

"The further you go out, the more likely there are to be inaccuracies. They don't even do error estimates for ten-year figures," said Chad Kolton, spokesman for the White House Office of Management and Budget.

Democrats say the cost of extending the 2001 and 2003 tax cuts will eat into future funding for Social Security and other social safety nets.

Republican fiscal conservatives are also calling for spending restraint.

The CBO is forecasting deficits for every year through 2014, the last year it looks at in this report.

The congressional analysts also estimated the cost of making Bush's tax cuts permanent to be about $1.3 trillion over the next ten years.

The President told Congress on Thursday he would settle for making permanent only those of his tax cuts set to expire next year, after fellow Republicans warned the rest might have to wait until after the election.

All of this back contention and political posturing about the budget will impact FY2005 funding for student financial aid, as well as, what can, and cannot, be considered during the Reauthorization of the Higher Education Act. Budget savings will take precedence over increased spending on programs funded through discretionary appropriations, and this will, at least to some degree, influence proposals to increase funding for Pell Grants, increasing student loan limits, repealing the "single holder rule", and liberalize the student loan consolidation program. For Texas, where 90 percent of the need-based direct student financial aid comes from these federal programs, the possibility of further spending freezes, or reductions, will hinder financial access to postsecondary education for many students.

Back to Top

Higher Education Committee Studies Students Motivation for College

One of the challenges faced by higher education in Texas is how to identify which students could benefit the most from a college education. Secondly, educators want to encourage those students to attend.

The Texas Legislature has made this a priority for institutions of higher learning in the state. Last month the Joint Committee on Higher Education heard how successful the effort has been.

They heard testimony on the Education-Go Get It Campaign. Texas Higher Education Coordinating Board Commissioner Don Brown described it as an effort to help students prepare both financially as well as academically for college.

Commissioner Brown told the committee that outreach efforts such as public service announcements have caused the board to be "deluged" with requests for more information.

Linda Holstrom of the Georgetown Independent School District, said that self-motivation was the most important factor in getting students to encourage each other to go to college. Students from the district then told the committee of excellent support from the school board and how they had promoted the idea in the local community.

Mike Collins, Assistant Commissioner for Participation and Success with the Higher Education Coordinating Board, said that the program was especially valuable in inner city schools. Students in inner city schools responded especially well to the concept of other students helping them prepare for college.

Bliss Blumenthal, a student and co-author of Wiley's Way, a book that encourages students to go to college, testified that the very act of writing the book changed her outlook on learning in general and college in particular.

Other students demonstrated a skit they have taken to various schools, trying to locate students who are can benefit from college, but may not know what they need to do for admission.

Representatives from the Legislative Budget Board then described funding methods for general academics institutions, health-related institutions, and community colleges. Committee member Representative Fred Brown asked why higher education wasn't as accountable to the Legislature as were other state agencies. He said there was no accountability procedure other than the total number of students being educated. Committee co-chair Florence Shaprio agreed with him, saying that the issue would be examined before the next session of the Legislature in 2005.

Other questions addressed during the hearing included how to determine how much money is going to administration as opposed to the classroom. Other discussion centered around the methods by which higher education reports student performance, such as graduation rates and retention rates.

The Joint Interim Committee on Higher Education is co-chaired by Senator Florence Shapiro and Representative Geanie Morrison. Members include Senators Kip Averitt, Robert Duncan, Kyle Janek, Royce West and Judith Zaffirini, along with Representatives Fred Brown, Tony Goolsby, Roberto Gutierrez, Lois Kolkhorst and Sylvester Turner. Public members include Martin Basaldua, Jerry Farrington, Jodie Jiles and Robert Shepard. The committee recessed subject to call of the chair, with its next meeting tentatively scheduled for March 16, 2004.

Back to Top

For more information, contact:

TG Congressional and Legislative Relations
(512) 219-4503
P.O. Box 83100
Round Rock, TX 78683-3100