TG's Legislative Report

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March 30, 2009

Congressional Update — FY 2010 Budget Resolution

"The [HouseBudget]Committee urges the Committee on Education and Labor to review options for the student loan programs that will maintain a role for FFELP lenders in the student loan program, and to look for ways to achieve savings and capitalize on current infrastructure and minimize the disruption to students and the employees of FFELP lenders who currently serve 75 percent of loans at American colleges, universities, and community colleges."

House FY 2010 Budget Resolution, page 27.

As the Administration's Office of Management and Budget (OMB) prepares its FY 2010 budget proposals to be submitted to Congress next week, the Congress is proceeding with its constitutional responsibility to adopt an annual budget and appropriations bills to fund the operations of the federal government.

As the House and Senate Budget Committees completed work on their respective FY 2010 budget resolutions last week that largely mirror the Administration's spending proposals, and both chambers prepare to consider and pass their differing versions of the resolutions by the end of the week, House and Senate Democrats increasingly are at odds on how to advance the Administration's planned overhaul of the nation's health care system, financing a new national energy policy, and increasing new entitlement spending through transforming the Pell Grant program into an entitlement program.

Many, like Max Baucus (D-MT), Senate Finance Committee Chair, believe that it's imperative that any health care reforms pass with strong bipartisan support, for it to be "more meaningful."

The chairman's words were in response to the move by the House Budget Committee to use a legislative procedure that would allow the Administration's health care, energy, and education proposals to pass the Senate with fewer votes (51 rather than 60) than normal. House Democrats worry that without the so-called "reconciliation" procedure included in its budget resolution, Senate Republicans could block or weaken the Administration's proposals because of the Senate's 60 vote requirement for consideration placed on legislation considered under the regular legislative process.

The House Budget Committee resolution includes reconciliation instructions to the Energy and Commerce, Ways and Means, and Education and Labor Committees to develop legislation that will make changes to programs under their jurisdiction and oversight that will save $1 billion each ($3 billion) over the next five years. The Senate Budget Committee Resolution includes no reconciliation instructions, but does include "revenue neutral reserve funds" to allow substantive Committees to provide additional funds for health, energy, and education programs.

Last Thursday, the Senate Budget Committee passed a $3.5 trillion budget resolution for fiscal 2010 that was similar to the $3.6 trillion resolution passed by the House Committee a day earlier. Both plans project budget deficits of $1.2 trillion for 2010, compared with the administration's $1.4 trillion predicted deficit.

Both Committees shaved a few billion dollars from the administration's $3.7 trillion budget proposal but preserved most of the president's key priorities, including health care, energy and education projects.

The two congressional versions both reject the Administration's desire to fix the expanding scope of the alternative minimum tax (AMT) and to make permanent Bush-era middle-class tax credits of up to $800 for couples. The House plan would phase out the credits and AMT solution after 2010, while the Senate calls for ending them after 2012.

Adding health care, energy, and education legislation to the final budget bill that emerges from reconciling the House and Senate versions would eliminate the potential for a Senate filibuster — the minority Republicans' most potent tool to influence bills and slow down the Democratic majority. Such a move would allow legislation to pass with only a simple majority, not the three-fifths supermajority needed to end a filibuster. Democrats have 58 seats — a comfortable margin, but two seats short of the 60-seat supermajority.

But several Democrats have said it's imperative that any health care reforms pass with strong bipartisan support and that using the reconciliation process will cause partisan warfare.

A conference committee composed of members from the House and Senate will adjust the differences between the House-passed and Senate-passed resolutions.

Republicans in recent days have exploited the growing Democratic rift regarding how to proceed with a health care package. Senate Minority Whip Jon Kyl (R-AZ), accused House Democratic leaders of using parliamentary procedures to "sneak through" nationalized health care.

It's "a special rule that was never intended to create energy or health care policy for our country — issues so significant that our regular order should prevail," Mr. Kyl said on the Senate floor Thursday. "If the final budget includes reconciliation instructions for the Senate, Senate Republicans will have no recourse for stopping Democrats."

The timing for the debate over the FY 2010 budget resolution is:

both resolutions should be approved by the House and Senate by April 3rd;
the differences between the House-passed and Senate-passed versions resolved by a House/Senate conference committee by May 31st;
the conference committee report will then be considered by the House and Senate in June, with a deadline for final passage September 30th.

Of course, this a tentative schedule which could be delayed for any number of reasons.

Budget Fight Ahead Over Plan To End FFELP Lender Payments
As a result of the Congressional Budget Committees actions, the House and Senate are headed for a showdown over the Administration's push to repeal subsidies to lenders originating educational loans through the Federal Family Education Loan Program and to use the savings to turn the Pell Grant program from a program funded through annual discretionary appropriations into an entitlement program similar to the Social Security, Medicare, Medicaid, and federal student loan programs, in which annual funding is automatic and not subject to oversight by the Congressional appropriations process.

While both resolutions would allow Congress to significantly increase spending on Pell Grants, they disgaree on the approach. The House has chosen to effect the change through the budget reconciliation process that would make it significantly easier for Democratic Congressional leaders to move forward with the plan. The Senate Committee's spending plan does not. Instead it simply provides for a revenue-neutral reserve fund to provide for the increased funding for the Pell Grant program through the regular appropriations process. The fight is expected to resolve in May when the Congress reconvenes after a two-week Easter recess.

It is important to keep in mind that it is the sole responsibility of the Congress to develop, draft, and implement legislation-including the annual budget and appropriations bills, with, or without the Executive Branch's proposals. This is why Congressman George Miller (D-CA) and Chairman of the House Education and Labor Committee stated, with respect to his Committee's reconciliation instruction to develop legislation that saves $1 billion over five years among the programs that fall under his Committee's jurisdiction:

"One student loan reform option that could be explored is President Obama's proposal to use federal funds to originate all new federal college loans beginning in the 2010 school year." (Emphasis is TG's.)

Likewise, the language quoted at the beginning of this update taken from the House Budget Committee's report language accompanying its budget resolution emphasizes this exclusive Congressional authority.

In other words, it will be up to a majority of the 47 members (28 Democrats and 19 Republicans) of the House Education and Labor Committee to decide how to achieve the assigned $1 billion savings.

What is the Budget Resolution and Budget Reconciliation?
At the beginning of each calendar year, as a part of Congress' budget process, lawmakers develop a non-binding budget resolution that provides a general guideline that the House and Senate Appropriations Committees use in appropriating funds to each federal agency.

As a practical matter, the budget resolution provides a pot of money to the appropriations committees to fund federal agencies' annual budgets through the twelve annual appropriations bills.

When the Budget Act was first written, it also allowed to be included a procedure known as reconciliation, which was designed to allow Congress at the end of the fiscal year to enact legislation to adjust revenue (tax) and spending levels through legislation which may not be filibustered (blocked) in the Senate. Reconciliation essentially reconciles policy with fiscal guidelines. The intent of the procedure is primarily to lower the deficit. If used for any other reason like, for example, to amend existing laws without achieving budget savings, it can become a divisive procedure that often crosses party lines, as is the case this year.

During the 1980's, reconciliation came to be used as a vehicle for implementing major economic/budget plans rather than simply adjusting revenue (tax) and spending levels. In recent years (including the current one), both Congress and the President have made it a high priority to reduce the federal deficit and reconciliation has been the favored vehicle to accomplish this. In such years, reconciliation instructions have become a critical component of most budget resolutions.

The reconciliation process provides Congress with an expedited procedure to achieve changes in revenues and reductions in direct entitlement spending through an omnibus bill. Such a large and complicated bill might otherwise be difficult to enact under normal legislative processes. These changes are considered difficult because the very nature of the entitlement programs involved (Medicare, Social Security, etc.) often necessitates changing tax rates or placing restrictions on very popular social programs in order to achieve budgetary savings.

Using the reconciliation procedure, the House and Senate direct their various committees (up to 30) to report legislation that achieve specified changes in spending for programs and agencies within their respective jurisdictions to the Budget Committees by a certain date (usually September 30th). These instructions are limited by the Budget Act to specifying the total amount by which direct spending or revenues under existing laws is to be changed. With respect to spending, such changes are crucial to reducing the deficit because entitlements and other direct spending comprise about two-thirds of the Federal budget.

The Budget Committees instructions do not dictate to the committees either the specific program to be changed or the substance of the change. Identifying the programs from which the savings is to be taken is left to the committees of jurisdiction.

After the committees have reported their recommendations to the Budget Committees, the Budget Committees package all the committee-reported legislation together into an omnibus reconciliation bill along with report language and Congressional Budget Office cost estimates. The legislation then is considered and approved by the House and Senate.

For the current process, we are really still at the beginning and there is much that is in flux with an uncertain number of Members of the House and Senate who are willing to use the reconciliation process to effect such major changes through an expedited budget process, rather than through a policy-driven process afforded by the regular legislative process.