Legislative Notes for July 9, 2007

During summer months, periodic updates are being sent to keep you informed of state and federal legislative news.

Federal Update

Senate Approves Education Spending Bill

The Senate Appropriations Committee approved a fiscal year 2008 spending bill for education programs through the Labor, Health and Human Services, Education, and Related Agencies appropriations bill. The bill is $9 billion above President Bush’s recommendation.

The bill provides $16.3 billion total in student financial aid. Teacher Quality State Grants and Perkins Career and Technical Education State Grants would be level-funded and the Pell Grant maximum would remain frozen at $4,310. Though the Senate has "frozen" the discretionary funding for the maximum Pell Grant award in this appropriations bill, they do appropriate $30 billion in new Pell Grant funding over 10 years through the budget reconciliation process as reported below.

Also in the appropriations bill, federal TRIO and GEAR UP receive $30 million more and $10 million more, respectively, than in fiscal year 2007, and the bill provides for a 30 percent reduction in the funding for earmarks as compared to the fiscal year 2005 funding bill for Labor, Health and Human Services, and Education, the last year in which earmarks were provided in a Labor appropriations bill. For each earmark, the bill includes the name of the grantee, the amount, the purpose, and the sponsor.

The House version, which was approved by the Labor, Health and Human Services, and Education Subcommittee, appropriates $153.7 billion in fiscal year 2008 and is pending approval from the full Appropriations Committee.

House and Senate Pass Amendments to the Higher Education Act Through the Budget Reconciliation Process

Both the House and Senate education committees have passed amendments to the Higher Education Act through the budget reconciliation process that would significantly impact federal student aid policy over the next 10 years. Congress is using this budget reconciliation to find savings in lender subsidies to direct new spending towards student aid and other education programs.

The American Association of State Colleges and Universities (AASCU) reports that both bills would make substantial reductions in subsidies to lenders and guarantee agencies in the Federal Family Education Loan Program (FFELP), and use significant amounts of the new mandatory savings to increase the maximum Pell Grant awards.

In the House, the bill, referred to as the College Cost Reduction Act of 2007 makes cuts in lender subsidies, reduces lender and guarantee agencies subsidies by $37 billion over 10 years, and dedicates $19 billion of the savings created by cuts to lender subsidies to new Pell funding over 10 years. The bill would also allow the maximum Pell Grant award to be increased by $200 in 2008-2009 and by additional amounts each year until the increase reaches approximately $5,200 in 2012 and beyond. The bill also creates the TEACH grant program for students who agree to teach specific high-need subjects for at least four years in high needs schools. Each undergraduate participant would be eligible for up to $4,000, up to a maximum of $16,000, and graduate students would be eligible for up to a maximum of $8,000.

The College Cost Reduction Act of 2007 also reduces borrower interest rate for new subsidized Stafford loans over five years from 6.8 percent to 3.4 percent, and increases the Stafford undergraduate dependent loan limit from $23,000 to $30,000.

Colleges and universities would also be directly impacted by the bill, it includes "state maintenance of effort" language that addresses state appropriations levels for colleges and universities, and creates a system by which colleges would be added to a list if their tuition increases exceed a certain level, with a few exemptions. There is also a new incentive program established in the bill that creates a new grant for Pell Grant recipients if they attend an institution whose net tuition increase is equal to or less than the percentage change in the higher education price index.

In the Senate, the bill referred to as the Higher Education Access Act of 2007 does not include any "college cost" language in its budget reconciliation bill. Because of the Senate's "Byrd Rule,” which is used to challenge language added to a reconciliation bill that is not budget-related, this language will likely not make it through conference committee.

The Senate bill also makes cuts to lender subsidies, but reduces lender and guarantee agencies subsidies by $42 billion over 10 years (House makes reductions by $37 billion), and the Senate appropriates $30 billion in new Pell Grant funding over 10 years. The House is expected to vote on the College Cost Reduction Act of 2007, or H.R. 2669, on Wednesday, July 11.

Earmark Progress

The Senate appropriations committees are working on budget and earmark appropriations and are moving proposals forward that include $1 million for the system’s veteran's re-entry education program and $600,000 for the National Child Protection Training Center at Winona State University, This is a good first step in the appropriations process. The House appropriation committees also continue their budget work but earmarks are not expected to be identified until later in the process. Once both bodies pass their respective appropriation bills, the differences must be reconciled through conference committee and a final draft of the fiscal year 2008 funding measure will then be prepared, presented and passed.