March 14, 2006

• Congressional Update

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Congressional Update

HEA Extension
This week, prior to recessing for the week long St. Patrick's Day holiday, the House is scheduled to act on HR 4911-The Higher Education Act of 2006. The bill temporarily extends the current federal Higher Education Act through June 30, 2006, with the exception of those programs reauthorized for five years under the recently enacted Higher Education Reconciliation Act of 2005, part of DC 109-171-The 2005 Deficit Reduction Act.

The Department of Education's Dear Colleague Letter concerning the student loan changes made in DC 109-171 can be accessed at http://fp.ed.gov/fp/attachments/activities_whatsnew/
ReconDCLOPEPost.doc.

Federal Budget Update
On March 9, 2006, the Senate Budget Committee reported its version of a FY 2007 budget resolution on a 11-10 party line vote. All amendments offered to increase spending were rejected by similar votes. The resolution, which Senate Budget Committee Chairman Judd Gregg (R-N.H.) characterized as a "standard plain vanilla" proposal left out most of the Administration's calls for another round of reconciliation reductions to entitlement programs to the tune of $65 billion. The Senate committee action came at the same time more than 100 House Republicans continued to call for a continuation of reductions to non-defense federal health, human services, and education programs through across-the-board discretionary appropriations and reconciliation reductions to entitlement programs.

The budget resolution lays out assumptions of spending and tax policies during the next five years and is used as a guide for allocating annual appropriations among federal agencies and programs.

After the vote, Chair Gregg admitted that the votes necessary to pass the resolution are not present at this time in the Senate. The 44 Democrats and moderate Republicans will likely vote against the measure because of its proposed freezing of spending on domestic programs.

The legislation does include a few of the Administration's proposals. It calls for opening Alaska's Arctic National Wildlife Refuge to oil drilling, increasing the national debt ceiling to almost $9 trillion, and limiting discretionary appropriations to $873 billion for FY 2007. All of these will also generate significant opposition in the Senate and House.

The Senate budget proposes to give a modest boost to defense programs by increasing discretionary spending from $842 billion in fiscal 2006 to $873 billion in fiscal 2007, at the expense of non-defense domestic health, education, and human services programs.

According to a Senate Budget Committee chart, the deficit would be slightly less in fiscal 2007 than in the current year, falling from $372 billion to $359 billion. It would dip to $159 billion in 2010 before rising again the following year. However, these numbers do not include any continuing costs associated with the wars in Afghanistan or Iraq.

The Senate budget resolution can be accessed at www.budget.senate.gov/republican.

Meanwhile in the House, the situation is markedly different. Disagreements in the House have forced Budget Committee Chair Jim Nussle (R-Iowa), to delay his Committee's mark up of the House version of the budget resolution to the end of March.

While the House leadership and House Budget Committee Republicans try to craft a House budget resolution that will include "reform" provisions to the budget process (including a modified line item veto for the president) and to campaign finance and lobbying practices, close to half of the House Republicans have built on last year's Deficit Reduction Act and the Administration's FY 2007 budget proposal and introduced a proposal of their own that they claim recaptures the spirit of the party's 1994 Contract With America.

The conservative Republican Study Committee (RSC) is calling for a budget-reconciliation package that would net $358 billion in savings over five years (instead of the Administration's $65 billion). The bulk of the savings would be found in changes to the Medicare, Medicaid, Food Stamps, healthcare programs for the elderly and poor, and K-16 education programs.

The RSC would turn the Medicaid program into block grants to states and establish means testing within the controversial Medicare prescription-drug program. A bloc of House conservatives voted against the creation of the prescription-drug program in 2003.

The Committee's budget proposal also includes the establishment of a Sunset Commission, earmark reform, caps of entitlement spending, a partial rollback of recent income tax reductions, and a prohibition of the practice advance/forward funding of programs.

The RSC's budget proposal has 103 House Republican members signed on and is available at www.house.gov/pence/rsc/doc/RSC_2007_BUDGET.doc.

It is unclear at this time how hard Republican leaders will press for savings from another round of budget reconciliation that, through last year's deficit reduction act, resulted in $39 billion in saving from entitlement programs ($12 billion from student loans). The sentiment in the House to do so is significantly stronger than in the Senate.

House leaders' sensitivity to the RSC's demands was evident when Majority Leader John Boehner (R-OH) and Majority Whip Roy Blunt (R-MO), both issued statements praising the RSC's effort.

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