July 7, 2005

• Congressional Update - Overview of Final Five Weeks

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Congressional Update — Overview of Final Five Weeks

The first Session of the 109th Congress is scheduled to adjourn on September 30, 2005. The calendar for the remainder of the Session includes the current week-long recess (July 4th-July 10th) and a 36 day recess (August 1st-September 5th). The only required legislation the Congress must pass by September 30th-if continuing resolutions are to be avoided-are the eleven FY2006 appropriations bills. To date, the House has passed all eleven and the Senate three.

In addition to having to pass the appropriations bills, the remaining 35 days left in the current session will be occupied with approving presidential nominations, passing an energy bill, passing a transportation bill, passing (and considering a vote to override a veto) a stem cell research bill, and several reauthorization bills, including intelligence, defense, welfare, Head Start, agriculture, defense, and higher education.

The Senate leadership has stated that its priorities for the remainder of the session are passing the FY2006 appropriations bills; homeland security (HR 2360), highway (HR 3), energy (HR 2419), and welfare (S. 617) reauthorizations; estate tax repeal legislation (HR 8); and border-security legislation (HR1817). The second tier Senate legislation that may be considered include Social Security, medical malpractice, tax relief, and, possibly, another war supplemental appropriations bill.

Another issue that will take up the Senate's already tight floor schedule will be the consideration of Supreme Court nominee(s). The recent resignation announcement of Supreme Court Justice Sandra Day O'Conner is effective upon Senate confirmation of her replacement. The Administration wants a new nominee confirmed before the Supreme Court convenes on October 3, 2005. Since the Senate is expected to turn its attention to confirmation proceedings and debate as soon as a nominee is selected, this will substantially reduce the amount of time the Senate will be able to devote to FY2006 spending bills and any other legislation.

Since the House has passed all of its versions of next year's appropriations bills, it has time to take up consideration of other legislation which may include HEA reauthorization legislation pending in committee, principally, HRs 609, 1293, and S2960. But there are several other high priority bills that will take precedence over these.

Higher Education Act Reauthorization

While the HEA reauthorization will be impacted by the short time remaining in this congressional session and other legislative priorities, the House Education and Workforce Committee and Senate Health, Education, Labor, and Pensions Committee are working on HEA reauthorization bills, with the shared public goal of still passing a reauthorization bill this year. Both Committees will push toward producing a House reauthorization bill and Senate reauthorization bill this month. No more committee hearings are scheduled, nor may there be any more until legislation is filed. The Senate HELP Committee is still set on producing a bipartisan bill that the entire Committee can live with which will incorporate proposals to achieve budget reconciliation savings from Title IV of the HEA.

The Administration has transmitted its latest set of HEA reauthorization proposals to the Congress. The bill proposes to reauthorize the Title IV programs (except the Perkins Loan Program) and includes changes to the FFELP that the OMB estimates will save $12 billion over ten years. Among the proposals included in the submission are:

• increasing the annual Pell Grant to $4,550 over five years and permanently retire the program's $4.3 billion shortfall;
• establishing a new enhanced Pell Grant program for State Scholars at a cost of $33 million;
• establishing a new "dual enrollment program for community colleges at a cost of $125 million;
• moving all federal student loans to a variable interest rate capped at 8.25 percent;
• recalling the federal portion of the Perkins Loan Program and repealing the Program;
• increasing student loan annual maximums to $3,500 and $4,500 for 1st year and 2nd year borrowers and $12,000 for graduate student, estimated to cost $3.3 billion;
• reducing loan reinsurance for lenders from 98 percent to 95 percent and creating a new annual "loan holder" fee of .25 percent applied to each holder's outstanding balance of non-consolidated loans and to increase the consolidation loan fee from .50 percent to 1 percent ;
• reducing the FFELP guaranty agency reinsurance rate from 95 percent, 85 percent, 75 percent to 92 percent, 82 percent, 72 percent and collection retention rates from 23 percent to 16 percent by 2010;
• repealing the "single holder rule";
• standardizing student loan repayment plans to the FDLP plans;
• restructuring the loan consolidation program by applying a variable interest rate to the programs and allowing borrowers to reconsolidate their student loans multiple times with a 1 percent consolidation fee to save an estimated $3.7 billion.

Other proposals include limiting eligibility for Pell Grants to 16 semesters, restructuring the campus-based allocation formula, requiring FFELP guarantors to collect a 1 percent guarantee fee, reinstating the student loan disbursement provisions for low default rate schools, strengthening the "exceptional performer" provision, repeal Section 438(b)(2)(B), eliminating the "50 percent" and "90-10" rules.

The Administration's complete Reauthorization transmittal can be accessed at: www.NCHELP.org under "Reauthorization".

With, or without, final passage of the HEA reauthorization, the budget reconciliation process will require changes to the HEA that will produce budgetary savings of several billions of dollars, which will, in effect, at least partially, reauthorize parts of the HEA.

The FY2006 budget resolution calls for $2.6 trillion in spending (including $843 billion in discretionary spending), $106 billion in new tax cuts, and $35 billion in reconciliation savings. The FY2006 appropriation ceiling, or cap, for education, health and human services, labor, and pension programs is $142.5 billion ($20.8 less than the current appropriation).

Of the targeted reconciliation savings, the resolution calls for $12.7 billion to come from programs under the jurisdiction of the House Education and Workforce Committee and $13.7 billion to come from the same programs under the jurisdiction of the Senate Health, Education, Labor, & Pensions Committee. The Committees will decide which laws to amend (including the Higher Education Act) to achieve their savings targets. Student loans will probably bear the brunt of the savings through increased risk sharing amendments to the HEA.

The House version of the $602 billion Labor, Health and Human Services, and Education appropriation bill was passed by the House last week and is expected to be debated by the Senate soon after July 10th. The bill, while proposing to eliminate funding for 57 programs (estimated to save $2.8 billion), rejects the Administration's submission proposals to de-fund the Perkins Loan, LEAP, GEAR UP, TRIO Upward Bound and Talent Search programs. The bill proposes a $1 billion increase for FY2006 Pell Grant funding to achieve a $4,100 maximum annual grant and earmarks $4.3 billion to permanently retire the program's accumulated shortfall. The bill proposes to fund for FY2006:

• SEOG-$778.7 million (no increase);
• Work-Study-$990.3 million (no increase);
• Perkins Loan-$66.1 (no increase);
• LEAP-$65.6 million (no increase);
• Title III and Title V - $394 million (an increase of $3.1 million;
• TRIO-$836,543 million (no increase);
• GEAR UP-$306.5 million (no increase);
• Student loan 458 administrative funding-$124.8 million ($5 million increase);
• Community college job training initiative-$125 million (new program).

The bill also extends the repeal of Section 438(b)(2)(B) of the HEA and extends the repeal to the recycling of previous bond issues.

The House passed bill also rejected the Committee's proposal to phase out federal funding for the Corporation for Public Broadcasting.

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