Author Archives: garverj

Passage of Debt Ceiling Law Impacts Higher Education

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Last week President Obama signed into law legislation that will increase the federal debt limit and reduce long-term budget deficits.

The Budget Control Act (BCA) of 2011 consists of both known and unknown impacts to higher education.

What is Known

The BCA impacts student aid in three major ways. First the legislation amends the Higher Education Act of 1965 to directly appropriate $10 billion in additional funds for Pell Grants in FY 2012 and $7 billion in FY 2013. These funds will supplement the portion of Pell Grants funded through annual discretionary appropriations. In addition, the bill eliminates the in-school loan interest subsidy for graduate and professional students and the Direct Loan repayment incentives.

What is Unknown

What remains unclear is the impact to higher education with regard to the near-term and long-term reductions to discretionary spending.

In the near-term the Act implements approximately $1 trillion in deficit reduction through the establishment of 10 year spending caps. The caps are established on discretionary spending through 2021. For Fiscal Years 12 and 13 the Act specifies spending limits for security and non-security spending, however in the following years the law only specifies the total.

The FY12 discretionary total  is slightly less than FY11 spending levels (-$7 billion overall) but significantly more than provided in the House budget resolution. For non-security programs the FY12 spending level is -$2 billion compared to FY11 spending levels.

In the longer-term the Act creates a joint, bipartisan committee made up of 12 members of Congress to develop legislation to acheive at least $1.5 trillion in future deficit reduction by the end of November. The Committee’s legislation, which can include entitlements and revenues, must be voted on by the end of December.

Enactment of the Committee’s recommendations would permit President Obama to request an increase in the debt limit up to the amount of deficit reduction up to $1.5 trillion. The request would be subject to a congressional disapproval vote. 

If the Committee’s efforts fail to achieve at least $1.2 trillion in deficit reductions by January 15, 2012 automatic across-the-board spending cuts would be applied to discretionary and certain mandatory federal programs, including Medicare.  The automatic reductions would be equally split between defense and non-defense spending. If the reductions total less than $1.2 trillion over 10 years are implemented in alignment with the Committee’s efforts then across-the-board cuts would be used to cover the difference.

At this time it remans unknown what the composition of the Committee’s recommendations will be, but they will likely include some combination of   program eliminations, consolidations and reductions.  For higher education, discretionary reductions could impact several key programs, including Perkins Loans, the Supplemental Educational Opportunity Grant and TRIO programs.

Three Initiatives Qualify for Ballot

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Last week the Secretary of State’s office reported that three proposals qualified for the ballot.

The initiatives include measures to privatize the sale of liquor, restrict highway tolls, and reinstate a training program for home health care workers.

Initiative 1183 would close state liquor stores and sell their assets, including the liquor-distribution center. The initiative would allow private stores to sell liquor and create licensing fees for sale and distribution of liquor based on sales and revenues.

Initiative 1125 would require the Legislature, not the state Transportation Commission, to set tolls, and mandate that a toll on a particular road or bridge be used only for construction, operation or maintenance of that project.

Initiative 1163 would require background checks and training for long-term care workers and providers.

Gregoire Passes NGA Chair to Nebraska Governor

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In July Governor Gregoire passed on the National Governors Assocation (NGA) Chair to Nebrasaka Governor Dave Heineman.

As the incoming chair, Governor Heineman unveiled his chair’s initiative for the year Growing State Economies-A Guide for State Policy Makers in Fostering Economic Growth. The initiative will include an individualized state profile for each governor, action-oriented reports on policy choices to generate job growth and four regional summits for governors and their senior economic advisors.

 

Gregoire Introduces New Report at National Governors Association Meeting

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In July the National Governors Association (NGA) met to dialogue on a variety of issues facing states, including the role of higher education in global competitiveness.

A key part of the conversation with regard to higher education focused on a report introduced by Governor Gregoire, as part of her NGA Chair’s initiative Complete to Compete,  that focuses on restructuring state higher education accountability systems. The report, From Information to Action: Revamping Higher Education Accountability Systems, makes the case that states should include efficiency and effectiveness metrics in their accountability systems to help answer for key policy questions.

  • What extent are public higher education institutions meeting the state’s need for an educated workforce and supporting progress toward longer term economic goals?
  • How many students at public institutions are graduating relative to total enrollment?
  • What is the return on states’ and students’ investment in public institutions in terms of completed certificates and degrees?
  • How can public institutions demonstrate that efficiency gains are being achieved without sacrificing student learning?

The report goes on to suggest that several policy options are available to make better use of accountability measures, including bugeting, funding, and regulation.

Governor Gregoire Asks Agencies to Prepare for Additional Cutbacks

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If state revenues continue to decline, as witnessed in June and July and expected in September, Governor Gregoire will ask agencies to trim their budgets further.

This afternoon Marty Brown, Director of the Office of Financial Management, sent a memo to all state agencies asking each agency to prepare for possible cutbacks by submitting 5% first-priority reductions and a second 5% for a total of 10% in state funding reduction options as part of the agency’s 2012 supplemental budget request.  The request does make exceptions for basic education, pensions, and debt service.

The impact to Evergreen of a 5% reduction of state funds would be a reduction of $1.545 million (a 1.5% reduction to total funds) and a 10% reduction of state funds would be a reduction of $3.89 million (a 3% reduction to total funds).

Recognizing the difficulty of this task given the limited amount of time that has passed since the passage of the 2011-13 budget, the memo encouraged agencies to revisit essential service assessments compiled last year and budget reductions included in the Governor’s 2011-13 biennial budget but were not enacted by the Legislature. In addition, the memo suggests additional consideration be given to new or additional policy choices and structural or business process changes that allow improved efficiencies and reduce state funding expenditures.  Finally capital-budget proposals should be limited to technical corrections, emergency issues, or return of project savings.

Debt-Ceiling Deal Appears to Be Reached; Impact on Higher Education

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Late Sunday congressional leaders appeared to have reached a deal to increase the nation’s debt ceiling. Though the impacts to higher education may not be the worst-case scenarios feared among advocates, as details come clear it is apparent that the plan leaves much long-term uncertainty for higher education.

Impacts to Financial Aid

In a fact sheet provided by the White House, funding for Pell Grants was protected. The plan “provides specific protection in the discretionary budget to ensure that there will be sufficient funding for the President’s historic investment in Pell Grants without undermining other critical investments.” Prior plans from both the Senate and the House would have directly appropriated funding for the Pell Grants in FY 12 and 13.

Despite the preservation of the Pell Grant, the deal does reduce some higher education benefits. Among the changes is the elimination of the interest subsidy for graduate student loans and the elimination of repayment incentives for federal student loans.

The Plan- Impact to Higher Education

The plan gives President Obama the authority to increase the debt limit by at least $2.1 trillion. The plan immediately enacts discretionary spending caps for 10-years for nearly $1 trillion in deficit reduction to be balanced between defense and non-defense spending. 

In addition a bipartisan committee is established to identify an additional $1.5 trillion in deficit reduction. The Committee is required to put their recommendations into legislation by November 23, 2011 and Congress is required to vote on the recommendations by December 23, 2011.  If the Committee fails an enforcement mechanism will trigger spending reductions beginning in 2013  to be a fifty-fifty split between domestic (i.e. discretionary spending and some entitlement programs) and defense spending. Social security, medicare beneficiaries, and low-income programs are protected from further reductions.

It still remains unclear exactly what discretionary spending would fall under the reductions if the enforcement mechanism is used.  Further discretionary reductions could impact several key higher education programs, including Perkins Loans, the Supplemental Educational Opportunity Grant and TRIO programs. As the details come to light, what is known is that higher education will be competing for a slice of an increasingly smaller federal pie.

Governor Appoints New External Affairs Director

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Today the Governor appointed Carol Cockrill Albert as the new External Affairs Director. She replaces Marty Loesch who recently took the position of Chief of Staff to the Governor.

Albert has worked for twenty years in state and national politics, including seving as Washington state director for Barack Obama’s presidential campaign three years ago. She also served on the Clinton-Gore transition team in 1993 and as a congressional aide and strategic adviser to U.S. Senator Patty Murray.

Debt Ceiling Plans Would Impact Higher Education

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Over the last few days the U.S. House and Senate have each released separate proposals to raise the national debt ceiling. Both proposals include impacts to higher education.

Financial Aid

An analysis by the National Association of Student Financial Aid Administrators shows many similarities between the House and Senate proposals as they relate to student financial aid.

Both plans provide additional mandatory funding for the Pell Grant program for FY12 and FY13.  Senator Reid’s plan proposes $10.5 billion in FY12 and $7.5 billion in FY13 and Representative Boehner’s plan identifies $9 billion in FY12 and $8 billion in FY13.

In addition both plans eliminate the graduate student Stafford Loan interest subsidy. The savings from this are applied to the Pell Grant. The impact of this falls on graduate and professional students in programs beginning on or after July 1, 2012 who will not be able to receive a subsidized Federal Direct Stafford Loan. A subsidized stafford loan does not accrue interest as long as a student is in school at least half time, or during any future deferment periods.

The one major difference between the two proposals is the inclusion of language in the House proposal to eliminate the Direct Loan Repayment Incentives, including the Interest Rate Reduction for Electronic Debit Account Repayment and Up-Front Interest Rebate.

Federal Appropriations

Both the House and Senate proposals would establish caps on annual appropriations for the next 10 years. In addition both proposals would include enforcement rules with regard to these caps.  Identified as “sequestration” the caps would be enforced by across-the-board spending cuts.  In other words if the caps are exceeded then Congress would imlement across-the-board spending cuts in the area in which the cap was exceeded. The caps are divided between defense and non-defense spending.

The proposed caps in each proposal are similar.

 Debt Ceiling Proposal Caps, Discretionary Spending 
($ in billions)
  2012 2013 2014 2015 2016
Sen. Reid 1.045 1.047 1.068 1.089 1.111
Rep. Boehner 1.043 1.047 1.066 1.086 1.107

Both of these elements would squeeze education funding over the next decade as nearly all federal education programs are funded through the annual appropriation process. Though, as noted above, both proposals take steps to fund the Pell Grant program and mitigate the squeeze that appropriation caps would have on the program these efforts are only for a two-year period.

What’s Next

As August 2 looms both the U.S. House and Senate are moving forward with their proposals, though it is expected that no real movement will occur until a compromise is agreed upon. If Congress is unable to reach an agreement by August 2 there is speculation that a short-term debt ceiling increase will be passed.

Teacher Compensation Work Group Convenes

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After two years since the passage of legisation to examine and potentially modify how teachers are paid in Washington, the Compensation Technical Working Group convened for the first time this week.

The Compensation Technical Working Group, a fifteen member group, was established in HB 2261 in 2009 and modified through HB 2776 in 2010.  The focus of the group is to examine the current enhanced salary allocation model (SAM) for teachers and compensation issues related to classified staff and administrators.

The Work Group is charged with recommending details of an enhanced model that aligns state expectations for educator development and certification with the compensation system and providing an implementation schedule.  The law requires the Work Group to make recommendations on several issues, including:

  • How to reduce the number of tiers within the existing model
  • How to account for labor market adjustments
  • How to account for different geographic regions and recruiting/retention challenges
  • The role of and type of bonuses available
  • Ways to accomplish salary equalization
  • Fiscal estimates for implementing recommendations

The Work Group faces a demanding schedule over the next 18-months. The recommendations and report of the Work Group are due to the Governor and Legislature by December 1, 2012.

Governor Names Lead for Restructuring Effort and Head of New Department

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Governor Gregoire announced that Joyce Turner will oversee the effort to retructure several state agencies. The restructuring comes as part of legislation (SB 5931) passed during the 2011 session. 

The restructuring effort will merge five agencies into three and eliminate four other agencies.  As part of this effort the Department of General Administration, the Department of Personnel, the Department of Information Services, the state printer and the Office of Financial Management will be reconfigured.

The final product will be the establishment of a new Department of Enterprise Services (to include the Department of General Administration, Department of Personnel, and parts of the Office of Financial Management), a reconfigured Office of Financial Management, and a new Consolidated Technology Services.

Once the restructuring effort is formalized on October 1, Turner will become the new Director of DES and Mike Ricchio will serve as the new Director of Consolidated Technology Services. Turner currently serves as the Director of the Department of General Administration and Ricchio serves as the Director of the Department of Information Services.