Late this week the Republicans in the U.S. House of Representatives released a budget proposal for fiscal year 2013.
According to the author of the budget proposal. U.S. Representative Paul Ryan, the proposal would reduce next year’s deficit to $797 billion, a lower figure than the $977 billion deficit the Congressional Budget Office estimates would result from the president’s budget. Ryan also estimates it would reduce deficits over the next decade by $3.3 trillion more than the Obama budget.
The proposed budget would impact multiple frederal programs and services. The proposal cuts discretionary spending beyond the required reduction levels in the debt ceiling agreement established last year. The budget would set discretionary spending for 2013 at $1.03 trillion, which is $20 billion less than the discretionary cap agreed when Congress increased the debt limit in August. The proposed budget also instructs six committees to find $261 billion in replacement savings over 10 years, and $18 billion in savings in the next year alone.
The limits to discretionary spending will impact all non-military and non-entitlement programs, including several higher education programs. The one exception in the budget is basic research which is funded at current maintenance levels. Beyond the decrease in discretionary funding, the budget proposes a handful of key changes specific to higher education.
Within the framework of the proposed budget, changes to higher education are noted under the heading “Repairing the Social Safety Net”. According to the budget proposal:
The safey-net system created in the last century is in dire need of a new round of reform. Government programs that aim to support the safety net are failing the citizens who rely on them and the taxapyers who fund them. A system designed for mid-20th century demographics and economics is ill equipped to deal with the unique pressures of the 21st century. From a budgetary perspective, these programs are growing at an unsustainable rate…From a moral perspective, which well-intentioned, the paternalistic structures of these programs fail the very people they are intended to help.
Specific to higher education the budget proposal notes that:
Globalization and technological advances have made the modern economy more complex and dynamic. The new reality is workers at all levels must be ready to update or learn new, more specialized skills to match the changing needs of employees competing in the global economy. Federal higher eduation and job-training programs must be reformed to help workers adapt to this new challenge. Current federal aid structures are exacerbating a crisis in tuition inflation, plunging students and their families into unaffordable levels of debt or foreclosing the possibility of any higher education at all…these young adults are graduating with enormuous loan repayments and having difficulty finding jobs in our low-growth economic environment….But, instead of helping more students achieve their dreams, studies have shown that increased federal financial aid is simply being absorbed by tuition increases…when it comes to job training and continuing education, the current policy landscape is dotted with failed, unaccountable and duplicative programs.
The higher education context laid out in the budget proposal drives three major recommendations for change to current higher education policy.
The proposal calls for placing the Pell Grant on a “sustainable path by limiting the growth of financial aid and focusing it on low-income students who need it the most”. The goal, according to the proposal, is to force institutions to reform and adapt and to ensure that Pell spending goes to students who truly need it.
In addition the proposal makes the argument that federal intervention in higher education should be focused on financial aid as well as policies that maximize innovation and ensure a robust menu of intitutional options from which students and their families can choose. To achieve this goal the suggestion is made to re-examine the data made available to students to make certain students and familes are prepared with information that will assist them in making their postsecondary decsions. Finally the proposal recommends removing regulatory barriers in higher education that act to restrict flexibility and innovative teaching, particularly as it relates to online coursework.
The proposal does not state specific spending levels for the program.
Change How Student Loans are Viewed on the Federal Government Balance Sheet
The budget proposal would authorize the use of “fair-value” accounting principles for any legislation dealing with federal loan and federal loan guarantee programs. The budget would make this change by altering the Credit Reform Act (1990).
The Act allows Congress to treat loans differtently from other types of spending in the federal budget. Before the Act was passed, loans were measured in the cash flow of expenditures and repayments in a given year. After the Act, the cost to the government of loan programs was measured using the total value of the loans.
This change would allow for market risk to be taken into consideration rather than relying on the Treasury borrowing rate. As a result student loans would appear to be a slight loss on the government’s balance sheet, because it would take into account the difference between what the govenrment would earn and what a private leander would earn on the loans. As a result the change would make the federal deficit appear slightly larger.
This, however, does not mean that changes to loan programs are inevitable. But, the impact, critics share, is that this accounting change would change how loan program costs are scored by the Congressional Budget Office. Some argue that this change would create a more difficult enviornment for new loan programs. Additional loans would appear to lose the govenrment money in the long term, not break even which makes for a harder sell.
Consolidate Overlappyting Job-Training Programs into Accountable Career Scholarships
The proposal calls for consolidating several job-training programs into scholarships to “improve access to career development assistance and strengthen the first rung on the ladder out of poverty”. The budget would establish, from the consolidation of these programs, a streamlined workforce development system with fewer funding streams that provide accountable, targeted career scholarship programs. In addition the proposal would improve oversight and accountability for job-training programs by tracking the type of training provided, the cost per student, employment after training, and whether or not trainees are working in the field for which they were trained.
Other Budget Proposals
The congressional Democrats have not released a budget proposal. However earlier this year President Obama did release a budget proposal. An overall comparison of President Obama’s budget and the Republican proposal shows very different philosophies for moving forward.
Under the President’s proposal, funding for the National Science Foundation would increase by 5 percent, to $7.4 billion and the National Endowment for the Humanities would get a slight increase, from $146 million to $154. The American Opportunity Tax credit is also made permanent – providing up to $2,000 per year for tuition.
With a goal for the US to “lead the world in college graduates by 2012,” specifics include:
- Sustaining the maximum Pell Grant award of $5,635 through the 2014-2015 award year.
- A one-year measure to prevent student loan interest rates from doubling this summer and doubles the number of work-study jobs over the next five years.
- New reforms that shift federal aid away from colleges that do not keep tuition low.
- Making permanent the American Opportunity Tax Credit.
Beginning with a committee markup Wednesday morning, the U.S. House of Representatives hopes to move the proposal through the House by the end of this week. And as most lawmakers leave for spring recess, six House committees would be left with an April 27 deadline to report back legislation that would become a down payment of $261 billion in deficit reduction — to be brought to the floor in May.