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TG's Legislative Report

August 17, 2004

State Legislative Interim Committees on Higher Education Meet

The Interim Committee on Higher Education met on August 10, 2004 at the State Capitol to discuss key findings and challenges identified by the Committee's Groups.

Leading things off was a workgroup on Community Colleges, headed by Senator Royce West. Other members included Sen. Kip Averitt, Rep. Lois Kolkhorst, and Mr. Jodie Jiles — a public member. West explained that the workgroup's recommendation was that the Legislature restore formula funding to community and technical colleges, and that this could be accomplished by allowing no area of the state to be outside of the community college taxing district.

Next was the workgroup on Systems. Representative Tony Goolsby was the chair of the workgroup followed by Senator Judith Zaffirini and Mr. Jerry Farrington. Rep. Goolsby stated that the consensus was that the university systems' administrations were going to need more funding, but also that it was understood that financial support from the state would be improbable.

A workgroup on Research Institutions was headed by Senator Kyle Janek and included Rep. Fred Brown, Rep. Roberto Gutierrez, and Dr. Martin Basaldua. Janek stressed the following bullet points:

  • recruitment and retention of research-oriented faculty,
  • developing a constant and dependable source of funding and building deeper research infrastructure,
  • recruitment of high-quality graduate students to support the faculty,
  • the expansion of graduate programs,
  • collaboration across higher education research institutions, and
  • understanding the need for time and patience in research.

The work group on Teaching Institutions has not met at present, but is planning to meet and present a report at the next hearing. The workgroup is chaired by Rep. Sylvester Turner, and includes Sen. Robert Duncan and Mr. Robert Shepard.

The Joint Interim Committee on Higher Education is Co-chaired by Senator Florence Shapiro and Representative Geanie Morrison. The committee stands at recess subject to the call of either chair.

Upon adjournment of that Committee, the Legislative Oversight Committee on Higher Education convened. This committee includes the same members with the addition of public members. The focus of the meeting was to discuss Tuition and Financial Aid issues of Colleges and Universities of Texas.

Opening the testimony was Carol McDonald, President, Independent Colleges and Universities of Texas. Ms McDonald discussed the tuition and fees setting policies in use at Texas 40 private institutions of higher education, and how they differ from those mandated by the legislature and state law at the state's public universities.

A presentation from the Financial Aid Advisory Committee followed with testimony from Lois Hollis, Assistant Commissioner, Texas Higher Education Coordinating Board; and George Torres, Assistant Vice President for Congressional and Legislative Relations, Texas Guaranteed Student Loan Corporation. This Committee was mandated by the 78th Texas Legislature with a directive to produce a study, findings, and recommendations to improve the state's student financial aid programs for consideration by the 79th Texas Legislature in 2005. Some of the recommendations will be to reduce the number of state student aid programs (which produce about 10 percent of all student aid in Texas), retain and fully fund the core programs, e.g., TEXAS Grant, B On Time, Tuition Equalization Grant, study further other issues, e.g., waiver and exemption programs.

The bulk of the meeting, however, involved presentations from Texas colleges and universities on Fall 2004 tuition increases.

The general focus of these discussions between the Committee members and those testifying centered on the amount of tuition and fee increases in response to the 78th Legislature deregulating tuition, the reasons for the increases, the uses of the increased tuition revenues, amounts and uses of the required student aid set-asides from the increases, and the progress and plans of each institution to accelerate graduation rates.

Those testifying were:

  • Representing Texas Southern University: Priscilla Slade, President.
  • Representing Stephen F. Austin State University: Danny Gallant, Director of Financial Services and Mike O'Rear, Director of Student Financial Aid.
  • Representing Texas State University System: Lamar Urbanovsky, Chancellor; Dr. Denise Trauth, President, Texas State University-San Marcos; Jack Parker, Vice President for Finance and Operations, Sam Houston State University.
  • Representing University of North Texas System: Lee Jackson, Chancellor; Phil Diebel, Vice President for Finance and Business Affairs.
  • Representing Texas Tech University System: Dr. Jon Whitmore, President.
  • Representing University of Houston System: Dr. Jay Gouge, Chancellor and President of University of Houston; Dr. Bill Staples, President, University of Houston-Clear Lake; Dr. Max Castillo, President, University of Houston-Downtown.
  • Representing Texas A&M University System: Dr. Benton Cocanougher, Interim Chancellor; Dr. Bill Perry, Vice Provost, Texas A&M-College Station; William Hearn, Interim Dean, Texas A&M-Galveston; Dr. Robert Furgason, President, Texas A&M-Corpus Christi; Dr. Dennis McCabe, President, Tarleton State University.
  • Representing University of Texas System: Mark Yudof, Chancellor; Dr. James Saniolo, President, UT-Arlington; Patricia Ohlendorf, Vice President for Institutional Relations and Legal Affairs, UT-Austin; Dr. Franklyn Jenifer, President, UT-Dallas; Dr. Diana Natalico, President, UT-El Paso; Dr. David Watts, President, UT-Permian Basin; Dr. Ricardo Romo, President, UT- San Antonio; Dr. Rodney Mabry, President, UT-Tyler.

No public testimony was taken. The Committee is Co-Chaired by Senator Florence Shapiro and Representative Geanie Morrison. Senate Membership includes Senators Kip Averitt, Robert Duncan, Kyle Janek, Royce West, and Judith Zaffirini. House Membership includes Representatives Fred Brown, Tony Goolsby, Roberto Gutierrez, Lois Kolkhorst, and Sylvester Turner. The committee stands in recess subject to a call of either chair.

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CBO, OMB Provide Similar FY 2004 Deficit Projections

Last week, the Congressional Budget Office (CBO) released its August Monthly Budget Review estimating an FY 2004 on-budget deficit of $422 billion, about $56 billion lower than it had predicted in March. CBO attributes most of the change to higher-than-expected tax collections. In the first ten months of the fiscal year, CBO estimates that corporate income taxes have increased by 45.5 percent over the same period in FY 2003. Several previous Monthly Budget Reviews have noted the trend of increased tax revenue.

Two weeks ago, the Office of Management and Budget released (OMB) its Mid-Session Review, in which it estimated an on-budget deficit of $445 billion for FY 2004. The difference between the two estimates is not unusual. CBO uses baseline scoring, which requires that it take into account current law when estimating future deficits and surpluses. OMB is not bound to baseline scoring, and is free to take into account Administration proposals that have not yet been enacted into law.

CBO notes that the difference between the two estimates ($26 billion in increased spending and $4 billion in decreased revenues assumed by OMB) are mostly derived from these legislative proposals. The proposals were centered around the following agencies:

  • Department of Health and Human Services ($8 billion)
  • Department of Transportation ($5 billion)
  • Department of Homeland Security ($4 billion)
  • Department of Agriculture ($4 billion)

Minor differences aside, CBO's numbers track OMB's estimates closely. CBO notes that it estimates a deficit of $445 billion if the effects of the Administration's proposed legislation are included.

The $422 billion deficit is the largest in history in nominal terms, but at 3.6 percent of GDP is relatively smaller in comparison to the size of the economy than it was during the 1980s (when the deficit often topped 5 percent of GDP).

Statements released by the Chairman and Ranking Member of the House Budget Committee both follow these arguments. Chairman Jim Nussle's statement notes that the deficit will be $56 billion less than March projections, and states, "Our policies are creating a stronger economy, more jobs and a lower deficit."

Rep. Spratt's release states, "While the deficit is lower than previously predicted, there's no way to make it good news."

Democrats argue that the Administration purposely over-estimated the FY 2004 budget deficit when the budget was released in February for the express purpose of making it easier to claim improvement later on.

Look for CBO to release its semi-annual 10-year estimates on September 7th. When those number come out, the differences between CBO and OMB estimates will become more substantial.

CBO's baseline estimates will assume that tax cuts enacted over the last few years will sunset as scheduled. OMB's estimates already assume that the tax cuts will be made permanent through FY 2010.

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Kerry-Edwards Campaign Unveils Fiscal Platform to Counter GOP Ticket

Calling the administration's fiscal policies "reckless", the Kerry-Edwards camp unveiled a far-reaching fiscal policy last week, pledging to increase spending on health care, education, and veterans programs by more than $900 billion over ten years while halving the deficit in four years.

Some big ticket Kerry-Edwards proposals include fully funding the No Child Left Behind Act (NCLB) and extending health care coverage to 95 percent of Americans. Kerry's campaign staff estimates that fully funding NCLB would cost $100 billion over ten years, and their health care initiatives would weigh in at $653 billion.

The Democratic ticket plans to offset these spending increases by rolling back some of the 2001 and 2003 tax cuts (e.g. restoring top two tax brackets and raising the estate tax exemption). Other proposed offsets include closing corporate tax loopholes, eliminating "corporate subsidies", and the ever-popular extension of customs user fees.

With respect to the annual budget process, Kerry and Edwards propose to hold discretionary spending at the rate of inflation (excluding homeland security and education programs) via an across-the-board sequester if discretionary caps are breached. If elected, Kerry and Edwards intend to call on Congress to pass a "constitutionally acceptable form of line item veto", in order to control pork.

The Kerry-Edwards camp contend that its fiscal proposals will reverse President Bush's "spending spree" since he took office, arguing that the administration's initiatives will increase the deficit by $6.5 trillion over the next ten years.

The Bush campaign, in response to the Kerry-Edwards fiscal proposals, stated in a release that there is a "budget gap of $1.3 trillion", citing Kerry's plan to end corporate subsidies (estimated to save $300 billion over ten years) as one example. "If there were $300 billion in easy savings from corporate welfare, it would have been saved a long time ago", the Bush campaign release stated. "By the time a [Corporate Welfare Commission] is named, staffed, and performs a study, the term of the next President is likely to be half over, if not all the way over."

Depending on the results of the November elections, cutting corporate subsidies may not be the only questionable proposal by the Democratic presidential nominee. The Kerry-Edwards plan to roll back some tax cuts aimed at the wealthy could prove to be an additional $860 billion shortfall in offsets. A Republican-controlled House has consistently defeated House Democrats' repeated attempts to offset spending increases by scaling back tax cuts for individuals making over $1 million a year. If Kerry is elected president, but the House remains in Republican hands after November, Kerry's plan to reverse some of the Bush tax cuts may not clear Congress.

Another potential snag is the Kerry-Edwards proposal to offset spending increases for education, health care, and veterans programs with the increased revenues resulting from closing corporate tax shelters. The Senate-passed Jumpstart Our Business Strength (JOBS) Act (S. 1637) contains several provisions aimed at closing corporate tax loopholes to ease the costs of tax cuts for manufacturers, small businesses, and farmers. If provisions reflecting the Kerry-Edwards corporate tax shelter plan are included in the final S. 1637, these offsets would be accounted for, forcing a President Kerry to find other offsets for his proposed spending increases.

In summary the approaches to reducing the deficit are:

Tax Cuts
John Kerry wants to make permanent the Bush tax cuts for the middle class, and repeal the cuts for households earning more than $200,000. The savings in doing this would range from $860 billion (Kerry campaign) to $425 billion (measured under current law which includes automatic expiration of some tax cuts, unless reauthorized by congress) over ten years.

The president wants to make permanent all of the 2001 and 2003 tax cuts, including the estate and gift tax cuts. The cost according to OMB would range from $929 billion to $1.13 trillion over ten years.

New Initiatives
The Kerry campaign proposes to increase spending by $653 billion for health care, $207 billion for education, and $55 billion for veterans and military families.

The president has not released a proposed agenda for a second term, other than freezing or reducing discretionary spending, other than that for national defense and homeland security.

Other Issues
Kerry maintains that savings approaching $300 billion can be saved by repealing "corporate welfare" and $50 billion from closing corporate tax loopholes.

President Bush's position is that an expanding economic growth, partly due to the 2001 and 2003 tax cuts, will lead to increasingly higher tax revenues.

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For more information, contact:

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

 

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