NAICU Washington Update

Budget Deal Gets Closer, More Complex

May 09, 2007

House and Senate budget negotiators are getting close enough to a deal on the FY 2008 budget resolution that they will appoint conferees the week of May 7, and move forward with formal conference meetings later in the week. The House is aiming to have the conference report on the floor for a vote the week of May 14. The two major sticking points of interest to private colleges have been (1) the total spending amount for appropriations, and (2) the reconciliation instruction to the education committees to allow fast track procedures in the Senate for the consideration of changes to the student loan programs.

It is our understanding that the total spending amount the budget will allow appropriators will be better than half way between the House and Senate plans. The House proposes $22 billion above the president's budget, and the Senate proposed $18 billion above the president's budget. This is good news for education, and specifically student aid funding, because it means we have a better chance of securing increases for the student aid programs when the total pot of money is bigger.

It is obvious that a reconciliation instruction that would require funding cuts to student loans is also very much in play and will be the last decision made. The reconciliation instruction was included in the House version of the budget resolution. It requires the House Education and Labor Committee to find $75 million in student loan savings by September 10, 2007. The instruction was included in order to grease the wheels for dramatic changes in the student loan program by getting around Senate procedural and budget rules. Unlike regular Senate legislation, reconciliation bills are limited to 20 hours of debate, with no amendments, and require a simple majority for passage. By requiring Congress to direct a relatively small amount ($75 million) of student loan savings to deficit reduction, the Senate can also use the special rules to cut a reported $15 billion from lender subsidies and transfer it to increased student benefits, including additional grant aid.

While one of the lead negotiators is firmly against it, the education chairmen are trying to work out a deal. Senate Budget Chairman Kent Conrad (D-N.D.) has been quoted as saying he is against including the reconciliation instruction to achieve nominal deficit reduction just to move controversial student loan changes. While he supports increased student aid, he says it should be done through the regular legislative process, and not using the budget reconciliation process intended for deficit reduction purposes. He had criticized Republicans for using that process to pass the 2001 tax cuts, so he doesn't want to use it for student aid financing.

Because of the recent scandal in the student loan industry, House education committee chairman George Miller (D-Ca.) is pushing strongly for the reconciliation instruction to survive the budget conference, and has offered that more could go towards deficit reduction to address Conrad's interest in protecting the integrity of the budget reconciliation process. It is our understanding that Senate chairman Ted Kennedy (D-Mass.) is talking to Ranking Member Mike Enzi (R-Wyo.) to see if they have enough common ground on student loan issues under the HEA reauthorization process to ensure that he does not need to use budget reconciliation to reach his goal of cutting lender subsidies to increase grant funding.

Once conferees finalize the FY 2008 budget resolution, appropriators are given the final total spending amount, and then they divide that up between the 12 appropriations subcommittees. Student aid programs are funded in the Labor-HHS-Education appropriations subcommittee, which is the largest domestic appropriations bill of the 12, coming in at about $145 billion last year. If the student loan reconciliation instruction survives the budget process, the education committees begin writing that legislation, which would then put the reauthorization of the HEA on two tracks - one for student loans, and one for everything else.

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