NAICU Washington Update

Sequestration Hits, First on the Student Aid Chopping Block are Programs for Military and Teachers. . .

March 12, 2013

Sequestration, the once unthinkable plan of last resort, was officially triggered on March 1, pursuant to the Budget Control Act of 2011. With Congress and the President unable to agree on a middle ground between no more spending cuts and no more tax increases, President Obama issued the order for sequestration of Fiscal Year 2013 funds. The move continued the game of budgetary chicken that has seen a year-and-a-half of failed deficit reduction commissions, super committee plans and other budget reform proposals.

Despite some dire predictions, the sky didn’t fall and the government didn’t shut down, and everyone in Washington got up and went to work the next day. But without further action, things are already starting to change as federal agencies are just now releasing information about how the across-the-board cuts will be implemented. Options run the gamut, from furloughs to grant cuts to reducing hours on federal properties such as parks and museums.

Among the first hits on higher education and the students are new limitations on the education options for active duty military. Following the advice of the Department of Defense comptroller, the Marines and the Army have suspended new applications for the Tuition Assistance program. Current TA benefit recipients will be permitted to complete the courses in which they’re currently enrolled.

Decisions about the program are made by each individual service. There is no word yet whether the Navy or Air Force will follow suit, though a decision is expected later this week.

At the Department of Education, guidance was issued last week advising institutions to halt disbursements on any new TEACH Grants for new students for the upcoming academic year. Current TEACH students can continue to receive grants.

As for other student financial aid, Pell Grant program funding available July 1 will not be cut, and student loan origination fees will increase only a modest amount. The bigger hits will be to Supplemental Educational Opportunity Grants and Federal Work Study, which NAICU has learned will have their “fair share” portions cut by five percent. The National Association of Student Financial Aid Administrators created and published tables illustrating how the cuts would be implemented. Institutions receiving only the base guarantee will not see cuts, but institutions depending on “fair share” allocations will have those funds reduced. That could mean more than a five percent reduction for some institutions.

Now What?

Now that sequestration has been ordered, agencies are scrambling to find ways to do their work with fewer resources. At the same time, Congress plans to pass final FY 2013 appropriations before the current continuing resolution (CR) expires on March 27. Since Congress leaves for spring break on March 22, it will have to work fast.

The House passed its version of FY 2013 appropriations on March 6, by a vote of 267-151. The House plan includes two appropriations bills with traditional line-item funding levels -- for Defense and for Military Construction/Veterans Affairs -- plus simple CRs at sequestration levels for the other 10 appropriations bills, including the one for education. Total spending under the House plan would be $984 billion, an amount that takes into account the sequester cuts. During the week of March 11, the Senate is expected to consider passing line-item funding levels not only for Defense and for Military Construction/Veterans Affairs, but also for some of the other 10 subcommittees that the House funded with only CRs. At this time, it seems unlikely that the Senate version will include any type of “sequestration fix.”

If each chamber writes and passes its version of final FY 2013 funding on schedule, that will leave just one week for them to work out their differences. Public reaction to the implementation of sequestration over the next two weeks will be a decisive factor in how the chambers maneuver for that final, negotiated bill. If they don’t work out their differences, the possibility of a government shutdown on March 27, when the current CR expires, will come into play. The next opportunity for the chambers to debate a deficit reduction deal will come sometime in May, when the government reaches its debt limit once again.

What about FY 2014?

Under normal circumstances, the President’s FY 2014 budget would have been released on Monday, February 4, and Congress would now be in the middle of analyzing his proposals while drafting its own in response. Instead, the House and Senate Budget Committees plan to mark up their own FY 2014 budget resolutions during the week of March 11, and have those resolutions on their respective floors for passage before March 22. The President’s budget is expected to be released on April 8.

NAICU is hearing from the House that its budget resolution will keep the maximum Pell Grant at $5,635 for next year, but that underlying changes to eligibility will be proposed in order to save money. On student loans, a House proposal to restructure the interest rate is expected, along with the elimination of subsidized loans.

The Senate budget resolution is expected to highlight education spending as a top priority. Sen. Patty Murray (D-Wash.) is the new chair of the Senate Budget Committee, and has had plenty of experience with education programs as a member of the HELP Committee and of the Labor-HHS-Education Appropriations Subcommittee.

The President’s budget likely will reflect his comments in the State of the Union address about “putting colleges on notice” and reforming the campus-based aid programs to incorporate institutional behavioral outcomes, as did his budget for last year.

Since the congressional budget resolution does not get sent to the President for signature, it is possible for each chamber to work through all 12 appropriations bills over the spring and summer. Finding a middle ground by September 30, the end of the government’s fiscal year, will again be the challenge.

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