June 19, 2008

• Congressional Update
• State Legislative Update

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Congressional Update

Higher Education Act Reauthorization, Supplemental, Energy, Taxes, Medicare, Unemployment Benefits, FY 2009 Appropriations Shape Floor Schedules
The reauthorization of the Higher Education Act (HEA) — HR 4137 — continues to be in a conference committee in which House and Senate sponsors are all but completely adjusting the differences between the Senate-passed and House-passed versions.

Passage by both chambers and acceptance by the White House must occur by June 30th when the latest extension of the HEA expires.

In the event this does not happen, congressional leadership must decide to extend the Act again for a period of time. With the congressional schedule being as crowded as it is and time running out on this Congress, the next extension may continue beyond the November 11th general election (in the event the 110th Congress returns for a lame duck session), or possibly even into 2009 for the 111th Congress to take up the reauthorization of the HEA, starting the process from the beginning.

If the HEA reauthorization rolls over to the 111th Congress, it will be considered in an environment in which the Senate may have six or seven new Democrats, the House may have up to 30 new Democrats, and the White House will be occupied by a president who has advocated abolishment of the FFELP (Senator Obama) or a president who has not advocated support for either the FFELP or FDLP, but has advocated the need for an extension and expansion of the 2001 and 2003 tax reductions, a continuation and expansion of spending on the war on terror, and a reduction of spending in both domestic discretionary and entitlement spending.

Therefore, at this time, it appears that the continued challenges and evolution of the ways in which the federal and private student loan programs are structured, administered, and delivered will continue through consideration and implementation of ad hoc legislation (like the HEA reauthorization) and the annual budget and appropriations process (through the budget reconciliation process).

The primary drivers of the HEA Reauthorization and student loan legislation will be the:

• "the big picture", i.e., the country's economic condition, federal tax and spending policies, entitlement reforms, domestic vs. foreign policy priorities;
• federal budget (record annual deficits and national debt which has almost doubled since 2001 when the accumulated 225 years of debt totaled $5.2 trillion; and,
• the continuing and evolving condition of the two major federal student loan programs — the FFELP and the FDLP — and their respective capabilities to originate, deliver, and service educational loan in a reliable, responsible, and transparent way.

Remaining Congressional Agenda
With less than 30 voting days left in the current 110th Congress, Democratic leaders are looking at a very crowded floor schedule in both the Senate and House for the remainder of this Congress which has a scheduled adjournment date of September 26th.

Adding to the problems caused by a shortage of time, the war supplemental has become a legislative vehicle for Members to add domestic priorities to, e.g., extension of unemployment benefits, educational benefits for veterans, spending for hurricane damage, etc., which the administration opposes.

President Bush has said that he would veto the Senate supplemental, in part, because of the added domestic spending, including $10.4 billion for Gulf Coast states affected by 2005's Hurricane Katrina.

In a letter to Bush sent by Rangel and other Members of the Ways and Means Committee the message was that the added spending, especially that for the unemployment benefit warrants the extension.

The energy legislation includes items the White House has threatened to veto, including repealing $17 billion in tax incentives for oil and gas companies; instituting a windfall profits tax on the top five major integrated oil and gas companies, and making gasoline price-gouging a federal crime.

It also includes veto-bait language supported by Senate Judiciary Democratic and Republican leaders that would allow the United States to sue OPEC for manipulating crude oil supply and prices.

Another provision aims to clamp down on oil futures market speculation by preventing traders of U.S. crude oil from routing transactions through offshore markets. It would require the Commodity Futures Trading Commission to increase the margin requirement for all oil futures trades, contracts or transactions.

Next up will be consideration of a $55.5 billion tax extenders bill the House approved in May. Movement on the tax extender legislation is not assured either, thanks to almost unanimous opposition of Senate Republicans to offsetting the cost of extending existing tax cuts.

The White House has threatened to veto the House-passed bill. But business and other interests lobbying on the bill, including environmental groups and advocates for the poor, are going to try and peel off a handful of Senate Republicans who are up for re-election to try to overcome a filibuster.

Meanwhile, the Senate is expected to begin considering legislation this week meant to prevent a Medicare physician payment cut that will carry additional changes for the federal health care program as well. The $20 billion bill will increase physician payments 1.1 percent in 2009, link adoption of electronic prescribing to Medicare reimbursement and ease access for low-income beneficiaries for prescription drug assistance.

The bill must be signed by the president before July 1 to stop the scheduled 10.6 percent payment cut.

All of these bills will be considered and acted upon before the HEA reauthorization conference committee report is considered.

FY 2009 Appropriations
With the FY 2009 budget resolution passed by both chambers last week, the House Appropriations subcommittees will begin marking up their respective funding bills.

The twelve FY 2009 appropriations bills are the only legislation that the congress is absolutely required to pass before final adjournment. The option to passage is for the congress to pass a continuing resolution for a set period of time. On Wednesday, the House Homeland Security Appropriations Subcommittee and the Interior-Environment Subcommittee will mark up their bills.

The budget resolution caps discretionary spending at $1.013 trillion — $21 billion more than what President Bush requested.

Differences between Bush and Democratic leaders over spending has led many lawmakers to believe that few, if any, appropriations bill will be enacted this year. The Military Construction-VA Appropriations Subcommittee and the Commerce-Justice-Science Appropriations Subcommittee are on tap to mark up their respective bills.

As may be the case with the HEA reauthorization, Democratic congressional leadership are discussing the option to forego action on final passage of the bills and pass a continuing resolution that extends current funding for the federal government through the calendar year and allow the 111th Congress to enact FY 2009 and FY 2010 spending bills next year.

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State Legislative Update

The Feasibility Study for Restructuring Texas Student Financial Aid Programs mandated by the 80th Regular session of the Texas Legislature released its preliminary findings and recommendations.

Among the recommendations are to:

• maintain the TEXAS Grant Program as the state's primary postsecondary education grant;
• begin to phase in a merging of the TEG and TEOG into the TEXAS Grant Program, but maintain the separate revenue streams for each program until the merger;
• align the eligibility and allocation formulas for the three programs;
• focus the programs to the lowest income population groups;
• maintain the TPEG Program as a campus-based program and the B-On-Time programs as a secondary incentive program for full-time students;
• add a further merit component to the TEXAS Grant Program (1300 SAT, or rank in the upper 40 percent of one's high school graduating class, or complete the high school Distinguished Curriculum);
• develop an eligibility pathway for low income nontraditional and independent students for a TEXAS Grant by earning an associate degree, or complete 12 hours of transferable general education courses with a 3.0 GPA, or complete 24 hours of transferable general education and/or major-specific courses;
• use the federal Pell Grant and institutional definition of Satisfactory Academic progress for renewal TEXAS Grants;
• maintain a decentralized administration of student financial aid programs with some new standardization of formulas and FAFSA priority dates;
• merge smaller programs into a workforce shortage program and a college readiness program;
• improve monitoring and accountability of the success of the state's programs.

The final report was considered and adopted by the Participation and Success Committee of the THECB and will be submitted to the full Texas Higher Education Coordinating Board on July 24th. If adopted, the report will be submitted to the state legislature for consideration by the 81st Regular Session of the Texas Legislature in 2009.

Input from interested parties, associations, organizations, etc., can be transmitted at any point in this process, including during the legislative session during January through May 2009. Implementing legislation will likely be considered by the Senate Education Committee and Subcommittee on Higher Education and the House Committee on Higher Education.

House Committee Leaders Send Student Loan Dear Colleague Letter
The following letter was sent to the 435 members of the House of Representatives by Committee on Education and Labor Chair Miller and Subcommittee Chair Hinojosa in order to bring the membership up to date on the FFELP funding liquidity issue.

The bolded portion is becoming a new talking point for FDLP proponents in response to the real and threatened withdrawal and selectivity of lenders from the FFELP.

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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