July 26, 2006

• Congress Begins Annual Month Long August Recess; House, Senate Pass Labor, HHS, Education FY 2007 Appropriations Bills; Secretary's Higher Education Commission Releases Second Draft Report

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Congress Begins Annual Month Long August Recess; House, Senate Pass Labor, HHS, Education FY 2007 Appropriations Bills; Secretary's Higher Education Commission Releases Second Draft Report

As the 109th Congress heads into its final week before beginning its 35 day summer district work period and Labor Day recess; here is an update on issues of interest and a synopsis of where this final session stands with respect to FY 2007 appropriations for student financial aid and the Higher Education Act reauthorization.

Appropriations and HEA Reauthorization
The House and Senate have approved their versions of the FY 2007 appropriations bills for Labor, HHS, and Education. While there are differences between the two on some matters, they are nearly identical in the amounts proposed for funding the Title IV federal student financial aid programs, as well as Titles III and V.

Both bills reject the Administration's proposed cuts to education and health and human service programs and either restore, or increase, proposed appropriations to most of the programs under its jurisdiction. This results in a continued freeze of these programs at FY 2001 levels.

Annual maximum Pell Grants are increased by $100 to $4150, after remaining at $4,050 for the past four years in the House bill, while the Senate bill appropriates funds sufficient to maintain a maximum annual grant of $4,050.

Proposed appropriations in both bills for the SEOG ($771 million), College Work-Study ($980.4 million), Perkins Loans ($65.5 million), GEARUP ($303.4 million), LEAP ($65 million), Title III ($296 million), and Title V ($94.9 million) programs are level funded at current levels — which are the same as 2001 levels.

TRIO funding is restored to last year's level of $828 million in both bills, rejecting the $448 million cut proposed in the President's budget.

Both bills direct all states that offer in-state resident public postsecondary education tuition and fee rates to "non-citizens" to offer the same to non-resident students from the other 49 states or, otherwise, lose their eligibility to receive federal funds.

On the HEA reauthorization front, the House passed its version of the reauthorization legislation, HR 609, early in this session. The bill was referred to the Senate Health, Education, Labor, and Pensions Committee, where it remains today.

There have been some rumors that the bill may be taken up by the Senate in September, or in a post election lame duck session. But those are only rumors. There is very little time for a lame duck session. In addition to being in recess for the entire month of August and the first week in September, the Congress will also be in recess from October 1st through election day, November 7th, and Thanksgiving November 15th through December 1st.

So, a lame duck session would have to be limited to issues both parties want to address, e.g., FY 2007 appropriations bills, immigration reform, pension reform, and minimum wage increase.

Of course, there is no enthusiasm on the part of Senate (or House) Democrats to take up the House Republican HEA reauthorization bill since they feel there is a legitimate shot of a Democratic 110th Senate next year during which the Democrats can offer up and pass its version of an HEA reauthorization bill, the elements of which have already been introduced in the form of:

• S 2573/HR 5150 — The Reverse the Raid on Student Aid Act;
• S 3255 — The Student Loan Borrower Bill of Rights; and
• S 3593 — The Student Debt Relief Act.

The same reasoning applies to the failure of the "PLUS Loan interest rate fix" to be addressed by this Congress — no interest on the part of the Democrats to apply piece meal "fixes" if they can start new next year with their own bill.

These bills include:

• a reduction in student loan interest rates for subsidized student loans and Parent Loans;
• increased transparency in the student loan process;
• capping the monthly amount a borrower is required to repay on a student loan debt;
• a reduction of collection fees on student loans;
• an immediate increase in the annual Pell Grant to $5,100 increased annually in $300 increments to $6,300 by 2011; and
• the Student Aid Reward (STAR) Act.

These proposed changes are paid for by achieving an Office of Management and Budget and Congressional Budget Office estimated $13 billion savings over five years through implementation of the STAR ACT.

The Secretary of Education's Commission on the Future of Higher Education
On a topic related to the HEA reauthorization, the Secretary of Education's Commission on the Future of Higher Education released its much improved 2nd draft report. The 2nd draft is shorter in narrative and more specific in its recommendations than the initial draft which most of the 15 Commission members disliked.

In addition to:

• touching on the status of higher education in the country;
• the importance of higher education to society;
• academic preparation, connection between K-12 and postsecondary education;
• financing of higher education;
• accreditation;
• measuring outcomes;
• transparency and accountability; and
• access issues;

the draft also recognizes the importance of increasing funding for the federal student financial aid programs and the complexity of the current application and delivery system. The draft recommends eliminating the FAFSA, consolidating the federal programs into fewer programs with resulting budgetary savings going to the Pell Grant program, and better targeting of student aid to needy students.

The report is available at http://www.ed.gov/about/bdscomm/list/hiedfuture/about.html.

The Texas student financial aid community will be submitting a response to the draft later this summer.

Florida
Several weeks ago the Florida state legislature acted on a FY 2006-2007 state appropriations bill that included agency budget submissions that were in response to a directive from the governor's and legislative leadership offices to submit budget submissions that would reduce agency spending and propose ways to generate increased revenues to the Florida state treasury.

The directive, similar to the one from the same offices in Texas that is directing Texas' state agencies to submit budgets for FY 2008-2009 that reduce spending over the current year by 10 percent, was judged necessary by the governor and legislative leadership to address a state budget shortfall and set spending priorities within the State of Florida that represent, in their view, the interests of the citizens of Florida.

Any savings and new revenue will be used to fund state priorities such as state infrastructure improvements to protect life and property from natural disasters, public education and teacher salaries, children's health insurance, Medicaid, transportation, etc.

Among the spending savings and revenue generators included in the appropriations bill was a rider that restricts access to the state's primary need-based higher education grant program to students attending institutions that use the state FFELP guarantor to process at least 70 percent of the institution's FFELP student loans. This provision is estimated to generate increased revenue to the Florida treasury through both savings and new revenue to fund the governor's and legislative leadership's priorities for the state for this year and next year.

The net effect for the State of Florida, if this provision is enforced, is that revenues that have been generated to out-of-state FFELP guarantors operating in Florida will, instead, stay within the State of Florida to be appropriated by the legislature to fund the governor's and legislative leadership's priorities as reflected by Florida's electorate.

Because this provision is part of an appropriations bill, it is in effect for only one year. To be in effect longer the rider will have to be added to the FY 2008 appropriations bill.

The Florida legislature convenes in Regular Session annually for 60 days, generally early March through early May. It is during this time when this issue may be taken up again, unless the Department of Education rules that the state provision violates the federal inducement provision of the HEA.

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