Jan. 31, 2006

Budget Outlook for 2007? Bleak

Feeling battered and bruised by the treatment of student aid and research programs in the federal government’s budget setting process last year, college leaders have more than a little trepidation about the process set to unfold this year, which begins informally with tonight’s State of the Union address and kicks into gear with the release of President Bush’s budget next week.

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Judging from what a trio of well-connected Congressional aides told a gathering of student loan officials Monday, higher education administrators are right to be worried about what’s around the corner in the budget for the 2007 fiscal year.

“I’m not sure what the [president’s] budget will look like, but from what we’re hearing, it’ll be anywhere from not good to really bad,” said one Senate Republican aide, who as is customary for Hill staffers, who prefer to remain in the background, asked not to be identified.

A House aide knowledgeable about the Congressional appropriations process said he anticipated that the subcommittee that provides funds for education, labor and health programs could have $1 billion less to distribute for 2007 than it had for its more than 500 programs in fiscal 2006, when most college-related programs took small cuts and a few got whacked. If that’s the case, the aide said, “a lot of programs are going to be hit pretty significantly.”

That was not welcome news for those gathered at Monday’s meeting of the Coalition of Higher Education Assistance Organizations, which represents colleges or lenders that participate in the Perkins Loan Program. The Perkins program, which provides low-interest loans to students from low- and middle-income families, has been battling for survival in recent years, as President Bush has repeatedly proposed ending the program and last year proposed that colleges return to the government the federal share of the money they use to make new loans. Congress, in the Education Department spending bill it approved in December, rejected that idea but agreed to provide about $65 million to reimburse colleges for loan cancellations, but offered no new loan funds.

As bad as the fiscal 2006 budget was for education programs, 2007 could be worse, Congressional aides said. The compromise legislation worked out by House and Senate negotiators stripped from the bill nearly $1 billion in earmarked projects requested by individual members of Congress, and “I don’t know if they’ll be willing to do that again,” said one of the House aides who spoke Monday.

In addition, if the House of Representatives passes a budget reconciliation bill that it is reconsidering on Wednesday, the appropriations subcommittee that sets the budget for the Labor, Health and Human Services, and Education Departments will have to find an extra $1 billion in its 2007 spending plan for a program that provides heating to low-income families.

Those factors could intensify the competition for what is likely to be a smaller pool of funds than the subcommittee had to work with for the 2006 budget. “There are going to be 500 programs screaming and shouting for a piece of a smaller pie,” said the House aide.

“Keep us in mind,” one member of the audience said, with what sounded like resignation in his voice.

The Congressional aides also tried to shed some light on the complicated and confusing picture surrounding the budget reconciliation bill and legislation to extend the Higher Education Act. One House aide expressed confidence that the House would pass the controversial budget bill, which would squeeze about $12.7 billion in net savings from the student loan programs and create a new grant program aimed at drawing more low- and middle-income students into scientific and technical fields. (A Senate aide, however, noted that student groups and college associations have joined critics of other parts of the bill to wage an intense campaign against the reconciliation measure, which passed the House by just four votes in December.) Both staff members said they were hopeful that Congress would finish work on a bill to extend the Higher Education Act before 2006 ends.

The Senate staff member also acknowledged criticism of the new grant program that would be created by the compromise version of the budget bill, noting that lawmakers negotiating that compromise had transformed it from the purely need-based program advocated in the original Senate bill into a merit-based program that “may or may not be successful in increasing access to higher education” for low-income students.

If that criticism “does turn out to be true, that it benefits mostly higher income students, we will see an enormous push to change the requirements” of the program so that more low-income students can qualify for it, the aide said.

— Doug Lederman

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