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 House, Senate Pass Budget Resolutions 

3/27/2015

The House and Senate this week passed their respective FY 16 budget resolutions, which set top-line funding levels for government spending in the coming year (and lays out a plan for the next 10 fiscal years). The budgets call for non-defense discretionary (NDD) spending of $493.5 billion, which is the so-called sequester-level cap established in the Budget Control Act of 2012, and is roughly even with FY 15 NDD funding. Lawmakers will now attempt to reconcile the differences between the two of them in a conference committee. Budget resolutions do not require the president’s signature. Program-level spending decisions are made through the appropriations process, which will likely take the rest of the year.

Both budget resolutions lay out a plan to balance the federal budget within 10 years, largely by making deep cuts in projected spending to entitlement and non-defense discretionary programs.  There are deep divisions within the Republican Party between those who favor more defense spending and those who want to hold the line on overall spending.  While both budgets would hold defense spending at the sequester-level caps, they would allow for more war spending, which is not limited by the caps.  The Senate budget, as reported out of committee, would cut projected non-defense spending by $236 billion over 10 years.  The House resolution calls for even starker NDD cuts, a total of $759 billion below the sequester-level caps over the next 10 years.

The House resolution contains more details about the assumptions underlying its spending totals, including recommended changes to education programs, many of which were also included in recent House budgets.  In particular, it assumes several changes to the Pell Grant program.  The Pell Grant maximum award would be frozen at its current $5,775 level for the next 10 years, all of which would be supported by discretionary funds (eliminating mandatory funds that currently support the Pell Grant maximum).  Less-than-half-time students would no longer be eligible for Pell, and the automatic-zero Expected Family Contribution and Income Protection Allowances would be rolled back to pre-College Cost Reduction and Access Act of 2007 levels. The budget also calls for ending the $5-per-Pell student administrative fee paid to institutions, a maximum income cap for recipients, and modifications to the return of Title IV regulations to increase the amount of time a student must attend before they can withdraw without owing back any of their aid received. Any of these changes would require legislation.

The House budget also assumes several changes to the student loan programs, starting with the way the cost of federal student loans is measured. Under the current methodology, student loans generate positive income for the government because of the interest payments made by students.  This revenue has often been tapped to support other student aid programs, including Pell Grants. The House budget calls for estimating the cost of student loans (and other government loans) via “fair value accounting,” which shows student loans as a net cost to the government.  The Senate budget contains a similar, though less prescriptive, provision.

The House budget would also roll back recent expansions made by the Obama administration to the income-based repayment plan, eliminate the in-school interest subsidy for undergraduate students, and end the Public Service Loan Forgiveness Program.

Each budget contains reconciliation instructions which direct various authorizing committees to report legislation that saves a certain amount of money in mandatory programs under its jurisdiction.  The resulting legislation cannot be filibustered in the Senate, thus would only require a majority vote to pass.  It is expected that the majority party would use this process to modify or replace Obamacare, but reconciliation legislation could contain provisions affecting education programs, in particular the in-school student loan interest subsidy.

Senators filed nearly 800 floor amendments to the budget resolution, and considered 49 and adopted 35 during a marathon legislative session dubbed “vote-a-rama.” Sen. Tammy Baldwin (D-WI) offered an amendment to provide $72.5 billion for a free community college tuition initiative, paid for by raising income taxes on the wealthy, which failed on a vote of 55-45. Sen. Al Franken (D-MN) offered an amendment to add funds to Pell Grants, which also failed on a party-line vote. Sen. Susan Collins (R-ME) offered an amendment that established a deficit-neutral reserve fund to allow for the enactment of year-round Pell Grants that was approved by a voice vote. Deficit-neutral reserve funds do not provide extra money, but in this case would simply allow the budget committee to revise budget allocations at a later date to allow for legislation that implements year-round Pell Grants without raising the deficit, which would require spending cuts or revenue increases to offset the cost.

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