September 28, 2005

• Congressional Update

---

Congressional Update

During the National Council of Higher Education Loan Programs (NCHELP) legislative workshop September 20-22, representatives from TG, TASFAA, and ATLE paid visits to twelve Texas Congressional Delegation offices, meeting with Members and staff. The purpose of the visits was to provide the Members and staff with the TG and Texas student financial aid community's views on HR 609 and S 1614 — the House and Senate Higher Education Act reauthorization bills.

The following summarizes the overall view of these offices on the outlook for the remainder of this first Session of the 109th Congress.

Hurricanes Katrina and Rita and their aftermath have reordered the Washington agenda, moving disaster-related legislation and FY 2006 budget negotiations to the top of the list.

Two of thirteen FY 2006 appropriations bills have been passed by the Congress and signed into law. The Congress will pass a continuing resolution this week to keep the government open for business beyond the start of FY 2006 on October 1, 2005. As of September 30th , $70.7 billion in FY 2005 supplemental appropriations have been passed to fund Hurricane Katrina and Rita relief efforts. However, it has been estimated that an additional $150 to $200 billion may be required for Hurricane Katrina efforts alone.

These additional expenditures, at this time, are to be funded through offsets (reductions) from the FY 2006 appropriations bills, federal borrowing (the national debt ceiling is $8.2 trillion and is currently at $7.9 trillion), and, possibly, through budget reconciliation.

However, with respect to budget reconciliation ($70 billion in additional cost for extending the 2001/2003 tax reductions and $35 billion in reductions to entitlement spending), there is growing bipartisan support for lowering the cost and/or the savings, or setting budget reconciliation aside altogether for this Session. This, again, is caused by the additional cost estimates to be borne by the federal government resulting from the recent hurricanes, which the Congressional Budget Office (CBO) is estimating may contribute (along with the continuing costs associated with the 2001 and 2003 tax reductions and the "war on terror") to increasing the annual budget deficit in 2006, and beyond, by $100 to $150 billion to the already estimated $314 billion in FY 2006 and $320 to $340 billion each year through 2010.

Democrats have opposed reconciliation from the beginning and Republican Members are beginning to worry that increased federal borrowing and reductions to domestic programs important to their constituencies, along with the electorate's general discontent over the economy, deficits, gas prices, the progress of the Iraqi war, the handling of the two hurricanes, etc., may impact next year's elections.

For example, the Republican Study Committee, a group composed of about half the House Republican membership, released a report on September 22 titled Operation Offset.

In response to the increased hurricane related costs, these Republican Members now oppose the reconciliation effort and, instead, have recommended in their report savings to be taken from six categories of spending that total $370 billion in savings over five years.

These include:

• repealing the 6,140 ad hoc spending set asides in the recently passed Transportation reauthorization bill;
• delaying the implementation of last year's Medicare prescription drug bill;
• reducing the federal contribution to the Medicaid program;
• repealing subsidized student loans for graduate students;
• repealing the Leveraging Education Assistance Program (LEAP);
• repealing the Federal Direct Loan administrative fee paid to colleges and universities;
• updating the federal pension formula;
• level funding several foreign aid programs;
• repealing funding for the Corporation for Public Broadcasting;
• repealing funding for the National Endowment for the Arts and the Humanities;
• repealing funding for the Even Start program;
• repealing funding for the State Grants for Safe and Drug Free Schools;
• repealing funding for penile implants under Medicare; and
• reducing the number of eligible filers for the earned income tax credit.

So, the reordered priorities for this Session's remaining three month agenda is to complete the FY 2006 appropriations process, hurricane relief appropriations bills, and Supreme Court nominee hearings, debate, and votes in the Senate, and to decide whether to pursue budget reconciliation largely within the context of an HEA reauthorization, or to seek savings through the appropriations process, along with the reductions already anticipated in both HR 609 and 1614.

Senator Michael Enzi (R-WY), Chairman of the Senate Health, Education, Labor, and Pensions Committee and primary sponsor of S 1614, stated on September 21st on the Senate floor that he is "hopeful of having a [HEA reauthorization] bill signed into law before December 31, 2005" when HR 3784 — The Higher Education Extension Act of 2005 — expires. The question at this point is whether the HEA will be reauthorized as a part of the budget reconciliation process, which requires up to $12 billion to be saved over five years through changes to the Federal Family Education Loan Program, or whether the Act will be reauthorized on its own in the event the Congressional leadership decides to forgo reconciliation this year. If the latter is the case, reductions can still be made in the FY 2006 Labor, HHS, and Education appropriations bill (and the other ten appropriations bills) pending in the House and Senate and in the reductions called for in both HR 609 and S 1614 through amendments to the FFELP.

The Higher Education Act and several other reauthorization bills have been, or will shortly be, extended for three, six, or twelve months, with the second session of this Congress completing the work next year, if time runs out this Session.

With respect to three other high profile issues that are also affected by the new federal costs associated with the recent hurricanes and on the federal budget and funding for other programs in terms of their costs, the Administration's hopes for overhauling the Social Security, Medicare, and Pension Benefit Guaranty Corporation systems are fading.

The consensus is growing in Congress that Hurricanes Katrina and Rita have dealt a fatal blow to any hopes of major changes to all three this year. The Democrats are uniformly opposed to the Administration's proposals, and Republicans — split on the best approach to take, and the political risks posed-are unable to move forward on their own. Of the three, reauthorizing an improved PBGC stands the best chance of occurring this year because it represents a real problem that needs to be addressed ASAP, and legislation is about to be approved by each chamber that increasing employer contributions and pays off the $23 billion deficit.

Republican Congressional leaders in both the House and Senate who took the lead on these issues have said that, given the current Capitol Hill schedule, it's going to be difficult to handle all of them this year.

It will also be difficult to take up any of these high cost but crucial issues, and other issues like the HEA reauthorization, next year, when the budget crunch will probably be worse than this year's, and, when mid-term elections will make Members of Congress even less willing to tackle spending, tax, and reforms while looking to reelection prospects. Thirty three Senate seats (15 Republican and 18 Democrat) and all 435 House seats (231 Republican, 203 Democrat, and 1 Independent) are on the November 7, 2006 ballot.

The budget (revenue and spending) and politics will tell the story on how, in what form, and when the HEA reauthorization will occur and be completed.

Back to Top

For more information, contact:

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