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TG's Legislative Report
December 21, 2005
- HEA Reauthorization/HHS, Labor, Education FY 2006 Budget Reconciliation/Appropriations Update
- FY 2006 Appropriations
- Texas House Set to Begin Interim Studies
This is the final legislative report for 2005 and we want to take this opportunity to wish all of our readers and their families a happy, safe, and restful holiday season.
HEA Reauthorization/HHS, Labor, Education FY 2006 Budget Reconciliation/Appropriations Update
The First session of the 109th Congress is about to adjourn.
The second election year session will convene in January (Senate) and February (House) and pick up where the First Session left off on a variety of issues including the tax reconciliation legislation.
Today, the Congress will pass HR 4525 which extends for a second time the Higher Education Act through March 31, 2006. The second session of this Congress will, once again, try to permanently reauthorize the HEA for five years in 2006. The HEA provisions included in the Budget Reconciliation Bill may be revised during the reauthorization process.
The budget reconciliation and FY 2006 appropriations processes were used by the leadership to achieve billions of dollars in spending reductions in domestic, non defense/homeland security/war on terrorism, programs by approving a one percent across-the-board reduction in appropriations ($8.5 billion savings) and amending the authorizing laws to slow the growth of programs. These targeted programs include those in the health and human services, education, and labor areas.
The choice to reduce spending in these areas is intended to offset dramatic increases in spending on the exempted areas mentioned, as well as, to pay for the 2001 and 2003 tax reductions, the damage caused by recent natural disasters ($96 billion), and, $4 billion to fight the latest "threat", avian flu.
The original House and Senate FY 2006 budget resolutions called for $2.6 trillion in spending (including $843 billion in discretionary spending). The HR called for $56 billion in reconciled tax cuts and $49.5 billion in reconciliation savings over five years. The SR called for $34 billion in savings and $59.6 billion in reconciled tax cuts over the same time period. The HR called for $14.5 billion to come from the FFELP, while the SR called for $18 billion to come from the FFELP. However, the SR reinvested $11 billion of its savings into student financial aid, including $8 billion in new spending for the Pell Grant program.
The final spending budget reconciliation bill negotiated by a conference committee and approved by the House by a 212-206 vote at 5:00 am on December 19, 2005 and the Senate on December 21, 2005 by a 51-50 vote generates a $39.7 billion savings over five years largely by reducing spending for student loans (FFELP) by $12.6 billion and Medicaid, Medicare, and Food Stamps by $13 billion.
The Vice President cut short an overseas trip to return to the Capitol to cast the deciding vote in the Senate.
The effective date for the HEA provisions is July 1, 2006.
The tax cut reconciliation bill passed by the Senate by a 66-33 vote and the House by 234-197 will be negotiated and considered next year.
To date the House has approved $94 billion in tax reductions to match up with the $41.6 billion spending reduction legislation.
Among the changes to the HEA included in the budget reconciliation bill (S.1932 - Deficit Reduction Act of 2005) are:
- Two new supplemental Pell Grant programs (Academic Competitiveness Grant and National Science and Mathematics Access to Retain Talent (SMART) Grant programs) for certain Pell recipients with 3.0 GPAs.
- A 6.8 percent fixed interest rate (8.5 percent for PLUS loans) for all Stafford student loans. Lenders' return is still variable with any excess interest above the amount guaranteed by the government to be rebated to the Treasury.
- A student loan annual maximum increase to $3,500 and $4,500 for first year and second year borrowers.
- A reduction in Stafford loan fees to one per cent for the FFELP and FDLP phased down to zero by 2010 and mandates its collection from borrower loan proceeds or from non federal funds.
- A reduction in loan reinsurance for lenders from 98 per cent to 96 per cent (exceptional performer - 99 per cent).
- A reduction in the collection retention rate on consolidation loans for FFELP guarantors from 18.5 per cent to 10 per cent loans.
- Reduction in the requirement for a defaulted loan to be rehabilitated to 9 consecutive monthly payments.
- Repeal of Section 438(b) (2) (B) concerning recycling and refinancing by certain FFELP secondary markets of pre-1993 "9.5 percent" interest loans that are not nonprofit organizations.
- Make administrative funding (except the account maintenance fee) for the FFELP and FDLP under Section 458 of the HEA discretionary.
- Increase percentage of wages subject to wage garnishment for borrowers in default of federal student loans from 10 percent to 15 percent of income.
- A requirement that FFELP guarantors operating under a Voluntary Flexible Agreement to charge the proposed one percent federal default fee (guaranty fee) mandated under Section 428(B)(1)(H).
- A requirement that a school lender of student loans to use the FFELP criteria for eligibility and excess funds to supplement existing need based grant programs.
- A new College Access Initiative which directs each guaranty agency to coordinate with state agencies and ED to collect information necessary to develop internet web links on postsecondary education information.
FY 2006 Appropriations
The Senate is set to approve the revised conference committee report for the Labor, Health and Human Services, and Education FY 2006 appropriation bill (HR 3010). This too will be a close vote that may need a tie breaker from the Vice President.
The bill proposes to fund for FY 2006:
- Pell Grant Program — $4,050 (no increase over FY2005)
- SEOG — $778.7 million (no increase over FY2005);
- Work-Study — $990.3 million (no increase over FY2005);
- Perkins Loan — $66.1 for loan cancellations (no increase over 2005);
- LEAP — $65.6 million (no increase over FY2005);
- Title III and Title V — $394 million (an increase of $3.1 million over FY2005);
- TRIO — $836.5 million (no increase over FY2005);
- GEAR UP — $306.5 million (no increase over FY2005);
- Student aid administrative funding — $120 million discretionary appropriations ($5 million increase over FY2005).
These bills and comprehensive information about each can be accessed at thomas.loc.gov, appropriations.house.gov, www.appropriations.senate.gov, www.budget.house.gov, www.budget.senate.gov.
Texas House Set to Begin Interim Studies
Among the charges issued to the 36 committees by the Speaker of the Texas House of Representatives for studies to be conducted between the last Regular Session of the Texas Legislature and the 80th Regular Session, which convenes on January 9, 2007 are six charges issued to the Committee on Higher Education. Among those six are the following:
- Evaluate state supported financial aid programs, and whether they are structured and administered in a manner that will most effectively allow the state to meet the goals set forth in Closing the Gaps.
- Evaluate accessibility to higher education, and identify whether certain areas of the state are underserved with respect to bachelors and associate degrees.
The Committee will convene in an organizational meeting early in 2006 to plan its studies.
The entire list of interim charges can be accessed at www.house.state.tx.us.
TG Congressional and Legislative Relations
(512) 219-4503
P.O. Box 83100
Round Rock, TX 78683-3100
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