June 22, 2006

• S. 3521 — The Stop Over-Spending Act of 2006; Student Financial Aid Programs Would be Affected
• Higher Education Act

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S. 3521 — The Stop Over-Spending Act of 2006; Student Financial Aid Programs Would be Affected

Following the lead of several state governors and state legislatures, Senate Budget Committee Chairman Judd Gregg (R-NH) introduced the Stop Over-Spending (S.O.S.) Act of 2006.

Citing the need to implement overdue changes in the Congressional budget process, Senator Gregg stated that the new tools provided for in the legislation are the most effective measures available for strengthening fiscal discipline and fixing the budget process. Enacting the entire proposal will be a challenge, particularly in Washington, where the forces of spending remain active and strong. But achieving even one element of the S.O.S. reform package would be a major accomplishment in our struggle to control spending.

Critics of the legislation cite it as a continuation of and further abdication of Congressional authority and oversight to the Executive Branch.

S. 3521, if enacted, would force automatic spending reductions in programs supported by both discretionary and mandatory (entitlement) appropriations.

If enacted, Title IV student financial aid programs, as well as Title III and Title V, both discretionary (Pell, SEOG, Perkins, College Work-Study, GEAR UP, LEAP, etc.) and entitlement (FFELP and FDLP) would be subject to automatic spending reductions without opportunity for debate or change by the Congress subject to the Executive Branch's recommendations.

The Stop Over-Spending Act contains the following provisions:

Line-Item Rescission — The bill creates a line-item rescission authority for the President that would allow the President to request the Congress to remove or rescind discretionary, entitlement, and tax measures and then force the Congress to vote to accept or refuse the requests on an expedited schedule vote by a majority, without opportunity to offer amendments.

Biennial Budget — S. 3521 establishes a two-year budget cycle with the first year devoted to adopting a two-year budget resolution and the appropriations and the second year used for authorizing and oversight.

Commission on Congressional Budgetary Accountability and Review of Federal Agencies and the National Commission on Entitlement Solvency — The legislation creates two commissions similar to the "Sunset Commission" which would be housed in the Executive Branch. One would annually review the effectiveness and efficiency of federal agencies and recommend to the Congress the continuation or elimination of agencies. The legislation would be fast tracked and implemented with a majority vote without the opportunity for amendment. The second commission would have the same responsibility with respect to entitlement programs.

Automatic Deficit Reduction Mechanism — S. 3521 creates a mechanism to balance the budget by 2012 by setting budget caps and enforcing the caps with automatic reductions in spending called sequesters, with deficit targets indexed to the Gross Domestic product (GDP) of 2.75 percent in 2007 declining to .5 percent in 2012, and beyond. If the Administration determines that a target is not met in any year, and the Congress fails to address the issue, an automatic across-the-board reduction (sequestration) in entitlement spending would take place.

Statutory Caps on Discretionary Spending — S. 3521 establishes three year spending caps on discretionary spending each year of $873 billion in 2007, $896 billion in 2008, and $920 billion in 2009. Increases in these amounts, except for limited emergency appropriations, would trigger automatic across-the-board reductions in discretionary spending.

Medicare Trigger — The bill proposes that if Medicare goes beyond 45 percent of the general fund in any two consecutive years over the next seven years, a budget point of order will be raised against any new entitlement spending.

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Higher Education Act

The House has passed a fourth extension of the federal Higher Education Act. HR 5603 extends the HEA through the end of the current fiscal year, September 30, 2006. The Act was originally scheduled to be reauthorized for a five year period in 2003.

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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