Monthly Archives: April 2010

Governor Partially Vetoes Furlough Legislation

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On April 27 Governor Gregoire signed a partially vetoed Senate Bill 6503 – the “furlough” bill. 

Senate Bill 6503 requires agencies to cut the state payroll by $49 million. The final bill directs that savings will be generated at state agencies and institutions of higher education through either 10 temporary agency closure days or alternate-approved compensation reduction plans. This was one of the largest single cuts amid $755 million in reductions in the balanced budget solution the Legislature approved April 12 before adjourning its special session.

Gregoire vetoed section two of the bill, which directed $10 million of the savings to come from exempt employees and Washington Management Service workers, who comprise less than 5 percent of all state workers. Without it, management level employees will be subjected to the same levels of furloughs as other employees.

“A cut of this size, over such a small base, is too large to be practical,” Gregoire said in her veto message. She also expressed her preference that the $49 million in savings come from actual furloughs rather than other actions allowed under the bill.

U.S. Senate Committee Holds Hearing on G.I. Bill Implementation

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Last week the U.S. Senate Committee on Veterans’ Affairs held a hearing on the implementation of the new Post-9/11 G.I. Bill.

The focus of the hearing was to identify problems encountered to date with the implementation of the legislation and learn how they were addressed. In addition, committee members focused on understanding what needs to occur to ensure the benefits are delivered in a timely and accurate way.

Those who testsified at the hearing highlighted several key issues with regard to the  implemenation of the legislation including:

  • Long delays
  • Financial strain while waiting for education benefits
  • Difficulty for higher education institutions to accomodate veterans while waiting for funding
  • Variations in tuition benefits by state and student enrollment
  • Short-turn around for implementation of legislation

Some of the solutions that were taken to address these problems included the issuance of emergency advance payments and redirection of staffing within the Veterans’ Administration (VA) to processing claims.

In addition, the Veterans’ Administration has partnered with Space and Naval Warfare Systems Center Atlantic to develop an end-to-end claims processing solution that utilizes rules-based, industry-standard technologies for the delivery of education benefits.  This is the VA’s long-term strategy for implementation of the Post-9/11 G.I. Bill.

Governor Gregoire Signs Revenue Legislation Into Law

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On Friday, Governor Gregoire signed the two-bill revenue package passed by the Legislature earlier this month without veto.

Both bills are expected to generate $757 million in revenue through 2013. Senate Bill 6143 modified excise tax laws to preserve funding for public schools, colleges and universities, as well as other public systems essential for the safety, health, and security of Washington.

House Bill 2493 increased taxes on cigarettes and other tobacco products.

Senate Committee Takes Action on FY11 Budget Resolution

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Yesterday, the Senate Budget Committee approved a fiscal year (FY) 2011 budget resolution. The annual budget process calls for a budget resolution, which acts as a non-binding roadmap for federal appropriations for FY11.

The resolution passed by the Committee call for $4 billion less in spending than was requested in President Obama’s budget request in February. The resolution assumes the cuts would come out of international relations, though this assumption is not binding.

In addition, the resolution maintains the majority of Pell Grant funding on the discretionary side, instead of funding the program through mandatory spending as requested by Obama. The resolution also assumes Congress will identify an additional $5 billion to cover the remaining shortfall for Pell Grant funding.

Next steps for the budget resolution remain unclear. It is likely the Senate will set aside the resolution to take up financial reform in the near future, but this is unclear. The House has not scheduled any action on similar legislation at this time.

U.S. House Subcommittee Discussed Bill to Allow Private Student Loans to be Discharged in Bankruptcy

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Yesterday, the U.S. House Judiciary Committee’s Subcommittee on Commercial and Administrative Law held a hearing to discuss the Private Student Loan Bankruptcy and Fairness Act of 2010.

The Act would reverse current bankruptcy protections for private student lenders included in the 2005 bankruptcy law and allow most private student loans to be discharged in bankruptcy.

The National Association of Student Financial Aid Administrators and other groups representing students, consumers, institutions of higher education, and civil rights and public policy organizations have expressed support for the bill.

Representative Steve Cohen (D-TN), sponsor of the bill and the chairman of the Subcommittee, echoed the support of these organizations at the hearing. He stated, “the bankruptcy system should work as a safety net that allows people to get the education they want with the assurance that, should their finances come under strain by layoffs, accidents, or other unforeseen life events, they will be protected.”

Those opposed to the bill, including many nonprofit and state-based student loan providers, cited concerns with regard to increased financing costs, including higher market interest rates for borrowers.  As the President of the Education Finance Council, which represents nonprofit and state-based student loan providers, stated at the hearing, “making all private student loans funded by nonprofits completely dis-chargeable in bankruptcy would raise financing costs, harming the ability of these public -purpose entities to continue to offer below market interest rates to borrowers.”

In addition, opponents of the legislation question why Congress would not extend the same consumer protections to all education loans, regardless of source or tax status of the entity or governmental institution providing the funds.

Two versions of the legislation have been introduced in Congress. The Private Student Loan Bankruptcy Fairness Act of 2010 (H.R. 5043) was  introduced by Rep. Steve Cohen (D-TN) in the House. In the Senate, The Restoring American Financial Stability Act of 2010 (S. 3217) was introduced by Sen. Christopher Dodd (D-CT).

Though very similar with regard to intentions the Senate bill would allow all private education loans to be discharged in bankruptcy, while the House bill would not allow private loans substantially funded by nonprofit institutions to be discharged. Neither bill would allow federal student loans to be discharged in bankruptcy.

Legislation Introduced in U.S. House to Allow Private Loans to Be Discharged in Bankruptcy

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Earlier this week, the Private Student Loan Bankruptcy Fairness Act of 2010 (H.R. 5043) was introduced in the U.S. House of Representatives.

The Act would reverse current bankruptcy protections for private student lenders included in the 2005 bankruptcy law and allow most private loans to be discharged in bankruptcy. Prior to changes made in the bankruptcy code in 2005, only federal student loans and private loans where substantially all of the funds were provided by a non-profit institution were non-dischargeable through bankruptcy.

The bill, introduced by Rep. Steve Cohen (D-TN), is scheduled for a hearing today before the House Judiciary Committee’s Subcommittee on Commercial and Administrative Law.

Proposed State Initiative Would Implement an Income Tax in Washington

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Yesterday, Bill Gates Sr., alongside other advocates, announced efforts to move forward an income tax proposal for the November ballot.

Initiative 1077 would be limited to the top 3 percent of earners in the state. The Initiative would allow the earnings above $400,000 for couples at 5% and above $ 1million at 9% to be taxed.  The thresholds would be half of those for individuals.

In addition, the Initiative would reduce the state’s share of property tax by 20% and create large tax credits for small businesses, minimizing the number of businesses that would pay any B&O tax. 

Income-tax initiative
I-1077

  • Individuals would pay 5 percent income tax on earnings over $200,000 a year and 9 percent on earnings over $500,000. For couples, those tax rates would kick in at $400,000 and $1 million, respectively.
  • The state portion of property tax would be reduced by 20 percent, or slightly more than $160 on the typical $371,800 King County home, according to figures from the assessor’s office.
  • The credit on state business and occupation taxes would rise from $420 to $4,800 a year, eliminating that state tax altogether for 80 percent of businesses and reducing it for another 10 percent, proponents say.
  • Income-tax revenues would offset reductions in property and B&O taxes and would funnel an estimated $700 million into an education trust account for class-size reduction and other purposes, and $300 million to the Basic Health Plan and long-term care.

Initiative 1077 is expected to generate $1 billion a year in new money for education and health programs given these parameters.

The I-1077 campaign will need to collect more than 241,153 valid voter signatures by July 2 to qualify for the November 2 ballot.

FAFSA Filings Rise by Double Digits in 2010

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In the first quarter of 2010, filings for the Free Application for Federal Student Assistance (FAFSA) climbed by 17.5% to 8.1 million filings.

According to the U.S. Department of Education, the double-digit rise in FAFSA filings for 2010 followed on the heels of a 26.% percent (6.8 million filings) rise in 2009-10 and a 5.9% (5.4 million filings) in 2008-09. 

Washington ranked 11th in increases in filings among the fifty states and D.C., with an increase of 23.1 % or 182,822 thousands more filings.  Utah (30.9%), Nevada (30%), and Arizona (29.9%) all saw the sharpest increases in filings while Pennsylvania (6.8%), North Dakota (6.5%), and Vermont (4.6%) had the smallest increases.

The U.S. Department of Education suggested that the rise in FAFSA filings were due to multiple drivers.

  • Increased enrollment of mid-career professionals seeking to gain new skills
  • Increased need for financial aid
  • Increased awareness of the importance of filing the FAFSA early
  • Simplification of the FAFSA form

Health Care Legislation to Impact College Students

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Two provisions in the recently-passed Federal health care legislation will directly affect college students.

The first, an extension of benefits for students under their parents’ plans, will allow college students to remain covered until the age of 26. The second, part of the Student Aid and Fiscal Responsibility Act (SAFRA), will change the way students borrow money for college. Instead of applying for private loans subsidized by the government, students may now apply directly to the federal government for borrowed aid. The bill also changes repayment requirements, allowing graduates to pay back their loans on a sliding scale based on their income. In addition, graduates who pursue employment in the public sector will enjoy the added benefit of loan forgiveness after ten years of service.

Changes to the Pell Grant were also made as part of the SAFRA, providing an increase in the award amount. In three years the grant will be changed to reflect the Consumer Price Index and be adjusted to keep pace with the rising cost of living.

Federal Legislation Introduced by Senator Patty Murray Would Improve Veterans Services

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Senator Murray, acknowledging the difficult job market and relatively inflated unemployment rates among veterans, has urged a commitment by the Federal government to veterans. Among its provisions, the legislation would:

  • Expand the GI bill to allow veterans to use benefits for apprenticeships and worker training programs in addition to college
  • Establish a Veterans Business Center program to help vets starting their own businesses
  • Create pilot programs to help vets utilize and expand technical skills learned in the military and market those skills to the civilian work force
  • Create the Veterans Conservation Corps, modeled on Depression-era Civilian Conservation Corps, which created jobs and facilitated construction projects around the country
  • Require a study that could lead to the expansion of the National Guard Employment Enhancement Project, which provides career transition assistance to National Guard members

Funding for the legislation is still pending a report from the Congressional Budget Office, but the bill already has bipartisan support in the Senate.