NAICU Washington Update

Congress Concludes the 114th with Continuing Resolution to Avoid Government Shutdown

December 13, 2016

After enacting another stopgap measure to keep the government running through April 28, 2017, Congress effectively concluded the 114th Congress on December 9.

The continuing resolution (CR) maintains FY 2016 funding levels for most federal programs, with a 0.19 percent across-the-board cut to stay under the Budget Control Act discretionary cap for 2017. 

House Appropriations Committee Chairman Hal Rogers (R-KY) called the bill “a band aid, but a critical one,” that needs to be enacted to address immediate needs. 

If the terms of the current CR become final in the spring, student aid programs such as Supplemental Educational Opportunity Grants (SEOG), Federal Work Study, TRIO and GEAR UP will experience slight cuts.  However, the scheduled increase in the Pell Grant maximum award to $5,920 is more likely to remain in place, because of the existing mandatory funds and surplus funds available to pay for the increase.  The program funding levels for 2017-18 will not be guaranteed until a final bill is enacted. 

Pushing a CR this far into the spring is unusual, and has the potential to cause uncertainty for students and families because it disrupts the student aid packaging schedule. While student aid programs are forward funded, meaning FY 2017 dollars become available for the 2017-18 academic year on July 1, 2017, colleges normally offer student aid packages in the spring, before this CR is set to expire.  The Department of Education issued preliminary Pell Grant disbursement tables in October, along with its announcement on Early FAFSA, but these and other program amounts are considered estimates.  It is unclear if the CR can be relied upon for the final funding levels for the SEOG and Federal Work Study programs.  

The CR does not include any policy riders or major changes in existing policy throughout the government, but does address some year-end funding issues, such as: providing $4.1 billion in emergency funds for natural disasters; $10 billion for Overseas Contingency Operations outside of the spending cap; $170 million for Flint, MI, and other areas with contaminated drinking water; and $352 million for the National Institutes of Health Innovation account as part of the 21st Century Cures Act.

Outlook for Budget and Appropriations Work in 2017

With the CR running through April 28, 2017, the FY 2017 and FY 2018 budget and appropriations processes will collide as soon as the 115th Congress convenes, with student aid funding possibly in the mix. 

First up is the possibility of FY 2017 budget reconciliation instructions. FY 2017 technically started October 1, 2016, but because the appropriations bills are not done, leadership is expected to use this window early in the year to propose a FY 2017 (current year) budget resolution with reconciliation instructions addressing health care reform. This process allows fast-track Senate consideration to “replace and repeal Obamacare.”  However, reconciliation could also put money-saving changes to the student loan programs and mandatory Pell Grant funding at risk.  Nearly one-quarter of Pell funding now comes from savings generated by the student loan programs.  In fact, the savings from switching all federal student loans from bank-based to direct government loans in the Health Care and Education Affordability Act of 2010 contributed $5 billion towards health care reform, in addition to deficit reduction. Fortunately for student loans and the Pell Grant program, it does not seem likely Congress will want to tackle these questions at the same time they take on Obamacare, so any changes to student aid would more likely be debated further down the road.

President-elect Donald J. Trump is not expected to meet the statutory deadline of the first Monday in February for his FY 2018 budget proposal, as he has yet to appoint the head of the Office of Management and Budget.  He also encouraged Congress to enact the CR through April to give his new administration more time to consider budget possibilities.  While some budget watchers predict Trump’s first budget could be released late spring/early summer, others report that he may not submit a budget to Congress at all.  There is no penalty for missing the February deadline.

Meanwhile, the expiration of the suspension of the debt ceiling comes on March 17, 2017.  This deadline always calls attention to budget action, but is usually deferred a few months by executive authority to avoid a financial crash. 

Rather than starting the congressional budget and appropriations process for FY 2018 in March, it is now expected to get started in early summer. Traditionally, a Republican Congress proposes to balance the budget within a 10-year time frame through deficit reduction and entitlement reform.  What’s unknown now is whether this history will hold or whether congressional Republicans will shift their focus to reflect the budget priorities of the incoming administration.  Proposals for border security, infrastructure stimulus, and tax cuts from President-elect Trump may change the approach congressional leadership takes with the budget this year.

It remains to be seen if this truncated process, and a Republican-controlled Congress and White House, will produce faster, more unified results, or if it will apply excessive pressure on Congress to finish in four months what sometimes takes 12 to 18 months to finalize. 

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