TG's Legislative Report

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TG Congressional and Legislative Relations
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May 11, 2009

Congressional Update

Under the FY 2010 budget resolution the Congress is using to craft its twelve FY 2010 appropriations bills:

Deficits will be $824 billion lower than if no changes were made in current law during the period 2010-2014.
Deficits will decline from $1.7 trillion (12.0 percent of Gross Domestic Product) in 2009 and $1.2 trillion (8.6 percent of GDP) in 2010 to $523 billion (3 percent of GDP) in 2014, the last year the budget plan covers.

Congress has complete flexibility to develop legislation-through the reconciliation process or regular order-to implement the Administration's major proposals to reform health care, reform the federal student loan programs, develop a comprehensive national energy policy and save an estimated $87 billion.

Congress can extend some, or all, of the 2001 and 2003 income tax reductions and modifications, rather than allowing these measures to expire as scheduled under current law.

The budget resolution is not a law and is not binding. It is only a guide for the congressional committees to use to develop tax and spending legislation. But the assumptions in the budget resolution can have an impact on legislation.

The congressional budget plan accommodates consideration of the Administration's major proposals with a series of deficit-neutral "reserve funds" as well as — in the case of health reform and changes in the student loan programs — the possibility of using the budget reconciliation process.

The budget resolution includes 20 deficit-neutral reserve funds for the consideration of legislation in the House and 14 deficit-neutral reserve funds for the consideration of legislation in the Senate.

These reserve funds allow the House and Senate Budget Committees to adjust the budget resolution's overall spending and revenue estimates and the spending allocations for particular congressional committees to ensure that legislation accomplishing a reserve fund's goal — such as to "…make higher education more accessible and affordable while maintaining a competitive private sector role in the student loan program…" — will not be subject to a Senate filibuster if it exceeds those limits or allocations provided for in the resolution.

The budget resolution does not specify what policies either chamber should adopt to achieve the desired outcomes-for instance, it neither endorses nor rejects the Administration's proposed changes to the student loan programs the savings from which are targeted to infuse appropriations into the Pell Grant Program. Instead, it leaves all of the details to the committees of jurisdiction, so long as the legislation they produce is deficit neutral.

In deliberating how to go about achieving these outcomes, reconciliation instructions in the budget resolution direct three committees in the House (Energy and Commerce, Ways and Means, and Education and Labor) and two committees in the Senate (Finance and Health, Education, Labor, and Pensions) to report reconciliation legislation no later than October 15 of this year. The full House and Senate would then consider this legislation under special procedures, the most important of which is a limit on the time allowed for debate in the Senate. Under the Senate's regular rules, 60 votes are needed to prevent a minority of senators from blocking legislation through a filibuster, but reconciliation legislation cannot be filibustered.

A budget resolution cannot require a committee to use reconciliation instructions for a specific purpose, but the 2010 budget resolution makes clear that the reconciliation process is intended to be available this year for legislation concerning health care reform and student loan reform.

Democratic leaders in Congress have stated that committees should try to move health reform and student loan reform legislation through the normal legislative process over the next few months without using the reconciliation process, but that it is important to have reconciliation as a backup if a minority of senators tries to block consideration of a health care reform bill. A decision can be made in the fall about whether to use reconciliation for health reform or just for education legislation and, possibly, other matters within the jurisdiction of the reconciled committees.

Although pay-as-you-go rules in the House and Senate require the cost of any tax cut or mandatory spending increase to be offset, the budget plan includes a provision enabling the House to consider legislation extending the assumed extensions without having to waive its pay-as-you-go rule.

No such provision applies in the Senate, and it would take 60 senators to vote in favor of waiving the rule.

The budget plan assumes that funding for discretionary programs in fiscal year 2010 (other than appropriations for unanticipated emergencies or for the wars in Iraq and Afghanistan) will total $1.086 trillion. Funding for defense activities other than Iraq and Afghanistan is assumed to total $556.1 billion, exactly the amount the President proposed.

The total amount assumed for all other discretionary programs in 2010 (excluding defense) is $529.8 billion. That is $10 billion below the amount the President requested but $29.8 billion, or 6.0 percent, above the level provided for 2009 (excluding the recovery legislation), adjusted for inflation.

It is impossible to know how Congress will distribute these funds among various non-defense functions and activities. A budget resolution simply sets the total amount of discretionary funding available for the year - it is up to the appropriations committees to determine how to allocate the funds among federal programs and activities.

Budget resolutions make assumptions about how discretionary funds should be divided among 17 budget "functions".

For FY 2011 through 2014, the budget resolution assumes larger reductions below the President's requested levels for non-defense discretionary programs than the $10 billion reduction assumed for 2010. However, the figures for 2011-2014 are not binding; future budget resolutions will determine the amounts actually available for appropriations in those years.

The Administration's FY 2010 budget plan proposes to cut or eliminate 121 federal programs, resulting in an estimated $17 billion in the $3.5 trillion budget request. $11.5 billion would come from discretionary spending with the remainder from mandatory programs. About $4 billion would come from repealing subsidies paid to FFELP lenders.

Overall, the Administration's FY 2010 budget suggests terminating or cutting $87 billion in mandatory spending over the next ten years.

Higher Education

The Administrations budget request proposes:

an increase of $9.3 billion in the Pell Grant program to $28.7 billion;
an increase in funding for the Perkins Loan program from $1.1 billion in available loan assistance in 2009 to $5.8 billion in 2010;
an increase of $ million to the SMART grant program to $1 billion;
level funding the SEOG program at $757.5 million;
level funding the Federal Work-Study program at $980.5 million;
level funding the TRIO program at $905.1 billion;
level funding the GEAR-UP program at $313.2 billion;
to zero fund the LEAP program;
to fund the proposed College Access and Completion Fund with an initial appropriation of $500 million.

The Administration's FY 2010 budget proposal effectively abolishes the Federal Family Education Loan Program (FFELP) and transfers the savings to finance the Pell Grant program to provide much of the record increase cited above and to allow an authorized and funded annual maximum grant of $5,500. The proposal also provides for the Pell Grant moving from a program funded with discretionary appropriations to an entitlement program funded through mandatory funds, indexing annual increases to no less than the CPI plus one percent.