NAICU Washington Update

Bipartisan Budget Act Passes House; Poised for Passage in the Senate

December 17, 2013

With a 67 to 33 vote to invoke cloture, the Senate is now poised to approve the Bipartisan Budget Act of 2013, passed by the House on December 12, and then send it to the president for signature by close of business Wednesday, December 18. The deal restores some of the sequestration cuts from last year, and avoids government shutdown politics in early January. Despite balking from conservatives about too much spending, and from liberals about not addressing unemployment, the House bipartisan leadership endorsed the deal and secured passage of the bill by a vote of 332-94.

The bipartisan budget conference committee, co-chaired by Sen. Patty Murray (D-WA) and Rep. Paul Ryan (R-WI), announced a final budget agreement on December 10. This two-year budget deal will undo part of sequestration, set higher funding limits for FY 2014 and FY 2015, and provide $23 billion in deficit reduction. This is good news for low-income students as sequestration would have forced dramatic cuts in student aid over the next two years.

Details

The deal partially restores the discretionary sequester by adding $65 billion to defense and non-defense programs for FY 2014 and FY 2015. Mandatory sequestration stays in place, and is extended to 2022 and 2023. This is the heart of the compromise. This means funding will increase from the current FY 2013 sequester level in FY 2014, but sequestration, itself, is extended two years.

For non-defense programs, this deal restores 87% of the FY 2013 cut. FY 2014 non-defense funding will be $492 billion, and FY 2015 non-defense spending will be $493 billion. (Defense spending will be $520 billion in FY 2014 and $521 billion in FY 2015.) Student aid funding comes out of the non-defense pot.

The good news for student aid funding is that it is not targeted for cuts in the budget deal, and could possibly maintain level funding over the course of the 2-year outlook. However, just because student aid wasn’t cut does not mean that appropriators won’t juggle the pot to balance actual spending in a different way than the budget negotiators imagined. There will be lots of competition among many worthy programs for the limited money available.

There are two small mandatory offsets from higher education, which total $5.2 billion. One is a change to guaranty agency profit in the default reduction program, requiring 100% of the proceeds be returned to Treasury. Also, the maximum borrower collection fee is lowered to 16%. The second offset is the elimination of mandatory funding for nonprofit student loan servicing contracts. This means they will be funded out of the discretionary pot at about $400 million per year, further squeezing the overall pot that funds education, health, labor and other domestic priorities.

The deal is written as legislation, which will be signed by the president, not a traditional budget resolution of the Congress, which is not law but merely binding rules on Congress. It amends the Budget Control Act of 2011 to change sequestration targets and aggregate spending totals; and self-execute budget resolutions for the House and Senate to maintain points of order.

What’s Next?

The current continuing resolution expires January 15, 2014. So in the next stage, the House and Senate Appropriations Committees will have to pass the FY 2014 spending bills before January 15. Appropriators are already discussing how to divide up the new spending total among the subcommittees, and staff will work over the holidays to have bills ready for the New Year. We will keep you informed as to their approach on the Labor-HHS-Education Subcommittee allocation, which funds student aid, employment programs, and institutional research. House action is expected the week of January 6, 2014.

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