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Day Twelve of Special Session; Nearing End of Week 2

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Yesterday was the first time since Monday that the Senate floor was active. Most Senators returned to Olympia for a brief floor session to concur on a handful of House bills. The House did not take any floor action.

Of most interest was the action the Senate took on Senate Bill 6143 (revenue tax bill). The Senate rejected the House’s amendments to SB 6143 and formally asked for an official Conference Committee.

In the meantime, the leadership of both chambers continue behind-the-scenes negotiations on a tax package to fund the 2010 supplemental operating budget and take action on a 2010 supplemental capital budget.

Lawmakers remain deadlocked over how to raise this revenue, the primary dividing point being the implementation of a sales tax. The Senate still supports a temporary general sales-tax increase and the House does not.

The ongoing divide between the two chambers has opened the door for “what if” conversations about concluding the session without the adoption of  a budget. The state’s budget for 2009-11 is already in place (i.e. the budgets that passed at the end of the 2009 session) and a supplemental budget is not required. 

These conversations, which can be recognized as still too-early conversations at this time, fail to address the state’s remaining $2.8 billion budget problem.  As you may recall, State Treasurer McIntire publicly stated earlier this year that Washington is at risk of running out of “cash” by fall 2010 without new revenues or reductions in budget expenditures. At that point, Governor Gregoire would have the authority and legal obligation to implement across-the-board cuts. An option she has been public about in the last few days but does not desire.

An across-the-board reduction of state funding is not appealing to many policymakers. It is believed that such action could be as high as 20 percent to close the $2.8 billion budget gap.   Some believe that yesterday’s move by the Senate to move Senate Bill 6143 to conference may be a small and optimistic sign towards the passage of a supplemental budget, only time will tell.

As for now, the bills needed to implement a 2010 supplemental operating budget, 2010 supplemental capital budget, and increase revenue remain where they were this weekend, with the execption of SB 6143 which has gone to conference. In addition, the bills that Evergreen is tracking this special session also have not moved further in the process.

Student Aid Bill Hits Bump in U.S. Senate Goes Back to U.S. House for Vote

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Yesterday afternoon the U.S. Senate began nine hours of debate on the floor. Senators considered twenty-nine amendments to alter the reconciliation bill .

Lawmakers sought to vote down amendments in an effort of saving the bill from returning to the House for another vote.  However, this was not to be the case.

In the wee hours of this morning, the Senate Parliamentarian informed Senate leaders of parliamentary problems with at least two provisions.

According to the budget reconciliation rules governing the bill all provisions of the bill must directly affect government spending or revenues. Both of the provisions in question relate to the student aid portion of the bill.

One provision involves changes to the Pell grant program for college students from low-income families. As written the bill would establish an automatic increase in grant awards tied to inflation. The provision in dispute would prevent any reductions in the maximum award. The second provision seems to be mostly a technical issue.

The Senate voted this afternoon to pass the reconciliation bill with a vote of 56-43. The House is expected to take up the bill this afternoon.

Week Two of Special Session Nears End; Adjournment Still Unclear

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As Special Session nears the end of week two, movement has been slow but still forward in nature.  Today, the full Senate is on the floor to move a handful of job-creation related bills, while the House is expected to return to the floor tomorrow.  The leadership of both chambers have been in negotiations for most of the week while the majority of legislators have been away as negotiations continue.

As stated earlier this week, policymakers have reached an agreement that $800 million is the revenue target. In addition, negotiations are taking place with regard to the operating and capital budgets for the 2010 supplemental session, though neither can be finalized until the elephant in the room is resolved – revenue.

Lawmakers remain gridlocked over how to raise this revenue, the primary dividing point being the implementation of a sales tax. The Senate still supports a temporary general sales-taxe increase and the House does not.

Frustration is in abundance. The Democrats are frustrated that they cannot get the votes necessary to pass an agreed upon revenue package. The Republicans are frustrated because the special session continues. The Governor is frustrated regarding all the above.

In the latest to come out of Olympia, Governor Gregoire has made it clear that she may be forced to make across-the-board cuts of 20 percent if the Legislature does not reach a budget-balancing agreement.  Gregoire has no plans to call a second special session unless a firm deal is in place. In lieu of any firm deal post the first special session, the only other choice would be across-the-board cuts.

As for now, the bills needed to implement a 2010 supplemental operating budget, 2010 supplemental capital budget, and increase revenue remain where they were this weekend. In addition, the bills that Evergreen is tracking this special session also have not moved further in the process.

Health Care Legislation Benefits Higher Education

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Higher education institutions and students may benefit from the recent passage of health care legislation beyond the changes made to student aid.

While the broader implications for higher education and students are still being fettered out, there are several tangible benefits which students, campus health care centers and medical schools are likely to feel sooner rather than later.

  • College and university-based student health insurance plans are provided a special exemption that allows them to continue even though they do not fit the classification as individual plans or employer-based group plans.
  • As of late September 2010 young adults will be eligible to be covered by their parents’ insurance plans through age 26.
  • Significant expansion of funding for the National Health Services Corps, which helps young doctors who work in underserved areas.
  • Significant expansion of the Title VII Health Professions Education programwhich offers scholarships and loan forgiveness to help diversify allied health professions racially, ethnically, and geographically.

The benefits for students and higher education will become law today upon President Obama’s signature.

U.S. House Passes Student-Aid Bill

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While much of the media has focused on the passage of health care legislation in the last few days, the passage of this bill also signals the passage of student aid reform that many in higher education have worked hard to move forward and waited months for approval.

On Sunday, March 21 the U.S. House of Representatives passed a reconcilation bill to reform student aid and health care by 220-211. The bill makes several changes to student financial aid policy and provides funds to community colleges and historically black higher education institutions. Of much significance is the elimination of the Federal Family Education Loan Program (FFELP) on July 1, 2010 and the use of the estimated savings to increase funding for Pell Grants.

Prior to the passage of the reconciliation bill containing the changes to student aid, the House passed the Senate-passed health care reform package (which also included significant student aid provisions) by a 219 to 212 vote.

The student aid reform included in the reconciliation bill passed by the House was a leaner version of the Student Aid and Fiscal Responsibility Act (SAFRA).  Democrats had to revise the bill when the Congressional Budget Office showed that expected savings from the elimination of the FFELP were lower than previously estimated and eliminate the proposal of several new programs to comply with procedural requirements in the Senate.

Four major provisions that were a part of SAFRA were not included in the student aid legislation passed by the House on Sunday. They include:

  • The Obama Administration’s proposal to revise the Perkins Loan Program
  • A provision to lower interest rates on student loans
  • Funding for Obama’s American Graduation Initiative to help community colleges graduate five million more students by 2020.
  • $2.5 billion for a new College Access and Completion Fund

The passage of the bill by the House clears the way for the legislation to be considered by the Senate as early as this week. Debate on the bill in the Senate will be limited to twenty 20 hours and requires only 50 votes to approve the bill to be signed into law by President Obama. If the Senate makes any changes to the bill, the legislation would have to be sent back to the House for another vote.

Special Session Enters Second Week

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Nine days into the first special session of 2010, policymakers have reached an agreement that $800 million is the revenue target.

However, lawmakers remain gridlocked over how to raise this revenue, the primary dividing point being the implementation of a sales tax. The Senate still supports a temporary general sales-taxe increase and the House does not.

It has been reported that policymakers from both chambers agree on more than they disagree, such as closing tax loopholes and raising the cigarette tax. In addition, there is agreement on the expenditure side to make hundreds of millions of dollars in cuts and use one-time fixes, such as federal aid and reserves, to bridge the gap until the 2011-13 biennium.

As for now, the bills needed to implement a 2010 supplemental operating budget, 2010 supplemental capital budget, and increase revenue remain where they were this weekend. In addition, the bills that Evergreen is tracking this special session also have not moved further in the process.

As the Legislature convened on Monday, hopes were that an agreement would be reached by Wednesday, March 24. Now as Wednesday approaches, it looks like perhaps adjournment will have to wait either until the weekend (optimistic) or next week (reality).

College Savings Foundation 2010 Survey of Youth Supports 529 Savings Plans

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A recent survey of 500 high school students aged 16-17 has been published by the College Savings Foundation (CSF). CSF is a Washington, D.C.-based organization that represents investment and financial interests that focus on promoting 529 college investment plans. Investors in 529 plans enjoy various tax benefits, and contributions may only be used for educational costs.

The study demonstrates high school students’ college plans, savings strategies, funding expectations and parental involvement, and paints a picture of a new class of college students ready to shoulder the financial burden of their educations. This commitment is demonstrated by the 45 percent of students surveyed who have already begun to save for college on their own, 43 percent of whom have saved between $1,000 and $5,000. In addition, 66 percent of students expect to take out loans to cover costs, with 40 percent of them expecting to borrow a quarter to a half of their costs and another 30 percent who expect to borrow more than a half of educational expenses.

Financial aid also figured into future students’ perceptions of educational costs, with 85 percent planning to definitely or probably take advantage of financial aid and scholarships to meet their educational goals. Financial aid eligibility can be affected by 529 plans, which count as assets for dependent students applying for aid.

With the majority of those surveyed indicating plans to attend a public institution or community college, the next wave of college students will follow their predecessors, relying on a combination of state and federal funding sources on top of family contributions.

The study, which does not correlate responses with students’ socioeconomic status or race/ethnicity, is clearly in support of the CSF agenda to promote 529 accounts. Currently, this type of account is utilized by a particular portion of the population. According to United States Treasury Secretary Tim Geithner, “only 5 percent of families with children in the middle of the income distribution have 529 accounts, while nearly one third of those in the top 5 percent of the distribution have them.”

Taking into consideration the difficult financial decisions Americans are faced with today, it is unlikely that middle to low-income families will take advantage of 529 accounts, which have recently come under scrutiny as investments underwent a challenging year. CSF’s agenda in D.C. to shift the responsibility of college funding to money paid into savings accounts rather than debt payments after college leaves out the commitment of state funding and state and federal financial aid, all of which are in danger of further deterioration.

President Signs Jobs Bill

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Last Thursday, President Obama signed what some believe is a jobs creations bill. Others argue that it will simply reward businesses that would have hired workers anyway.

The Hiring Incentives to Restore Employment Act (H.R. 2847) spent some time in the legislative process prior to its passage this past week. The bill passed the U.S. Senate on February 24. The U.S. House amended the bill and sent it back to the U.S. Senate for concurrence. The final bill was passed by the U.S. Senate on Wednesday, March 17 .

The bill takes several actions to incentivize job creation, among these actions:  

  • Employers who hire a person without a job do not have to pay the new worker’s social security taxes for the remainder of the year. All private-sector employers, including nonprofits are eligible along with post-secondary schools. Eligible workers must swear in writing that they have not been employed for more than 40 hours during the previous 60 days and must pay their own social secruity tax (6.2% of pay)

 

  • Employers are eligible for a tax credit worth up to $1,000 on their 2011 tax return if they retain the new worker for at least 52 consectuive weeks. The employer is eligible for the lesser of $1,o00 or 6.2 percent of wages paid to the employee over the 52-week period. In addition, the employer must pay the new worker, during the second half of this 52-week period, at least 80% of what it paid during the first half.  

 

  • Includes employers in Puerto Rico and other U.S. possessions and covers Railroad Retirement taxes.

 

  • An employer cannot collect these tax breaks on workers who replace people they laid off, but it can get the incentives on workers who replace ones who quit or were fired for cause.

Final Agreement Reached on Student-Aid Legislation

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This weekend the U.S. House of Representatives is expected to approve the combined student-aid and health-care plan.  This is the culmination of a year-long process as well as much strategy and discussion during the past week to determine a final agreement to overhaul the government’s student-loan system.

The final agreement, the Health Care & Education Affordability Reconciliation Act (H.R. 4872), would end the bank-based system of distributing federally subsidized student loans (FFELP program) and move toward a system in which the U.S. Department of Education would provide all loan money directly to colleges and students (Direct Loan program).

The final agreement would use savings generated from the elimination of the FFELP program (approx. $61 billion over 10 years) to increase the maximum Pell Grant. The maximum Pell Grant, currently scheduled to reach $5,500 for the 2010-11 academic year, would increase by the rate of inflation over most of the next 10 years. 

The effort by the Obama Administration to urge Congress to approve an annual increase equal to the rate of inflation plus one percentage point was eliminated in the final agreement and the start of the annual increases was delayed until 2013.

Finally, the bill:

  • Pays off billions of dollars in accumulated budget shortfalls in the Pell Grant program because of rising college enrollments and demand for the program.
  • Includes $225 million a year to help historically black colleges.
  • Includes $750 million over five years for College Access Challenge Grants, which support states and other governments in efforts to prepare low-income students to enroll and succeed in college.  This is down from the $3 billion in the House version.
  • Includes $2 billion over four-years to help two-year institutions. This is down from the $10 billion in the House version.
  • Includes $1.5 billion over 10 years to finance the Obama Administration’s proposal to increase assistance to borrowers eligible for income-based repayment of a federally subsidized student loan by limiting their mandatory monthly payments to 10 percent of discretionary income, down from 15 percent, and by forgiving their loans entirely after 20 years, instead of the current 25 years. The House version did not include these funds.
  • Eliminates the $9 billion that had been approved in the House version to reduce the interest rate on federally subsidized loans in 2012-13 and subsequent years.  The rate is due to drop to 4.5% for the 2010-11 academic year; 3.4% the following year; and then rise to 6.8% after that.
  • Eliminates a provision in the House version to spend $8 billion on early-childhood-education programs.

So what is next. If the House passes the reconciliation bill, most likely this Sunday, the bill will move to the Senate where it could be voted on as early as next week.

What and Where are the Bills of Special Session

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The Governor, the Senate and the House all stated that the focus of the first special session of 2010 would be budgets, revenue, and job creation. While it is clear that the bills that would implement the 2010 supplemental operating and capital budgets and any revenue increases are necessary, several other bills are also required to pass to implement the budget and revenue proposals of the Legislature.

Bills, referred in the political arena as NTIB (Necessary to implement the budget), are widely defined. Many are deemed NTIB because they allow for implementation of budget policies, create cost savings, and/or are take home bills for policymakers.

During this first week of the first special session of 2010 several bills have been reintroduced that did not pass the Legislature prior to adjournment of the regular session.

A summary of the five bills Evergreen is tracking through the course of the special session are below.

House Bill 2561

 House Bill 2561 authorizes the State Finance Committee to issue $861 million in general obligation bonds, to be known as Jobs Act Bonds (Act), for the purpose of creating jobs by constructing capital improvements that lead to energy-related cost savings in public schools, state colleges and universities, and other public facilities. Public schools, colleges and universities and other public facilities would compete for funds in two rounds of competitive grant funding for the dollars according to criteria laid out in the bill. The first round is dedicated solely to education and higher education.

House Bill 2561 has been referred to in the media as one of the vehicles that the Legislature may consider as part of its job creation efforts in the special session.

HB 2561 passed the House 54-39 on the second day of the special session and awaits further action in the Senate Ways & Means Committee.

House Bill 2854

House Bill 2854 determines student eligibility for the Higher Education Loan Program (HELP). To be eligible a student is defined as one that: (1) has an annual family income, adjusted for family size, that is no greater than 130 percent of the Washington median family income; (2) has completed the free application for federal student aid; (3) is a Washington resident; (4) is not enrolled in Theology as a field of study; (5) is enrolled at least half-time in a first-aid-eligible certificate or degree program up to and including graduate and professional degrees; (6) maintains satisfactory academic progress as determined by the attending institution; (7) is not delinquent or in default on a federal or state student loan; and (8) is not past due in child-support obligations.

The bill also establishes a limit on the loan amount granted per academic year is established as the cost of attendance minus any other student financial aid received.

HB 2854 passed the House 58-35 on the second day of the special session. A public hearing on the bill was held in Senate Ways & Means Committee on March 17.

House Bill 3193

House Bill 3193 reduces the bonus for National Board-certified teachers teaching in high poverty schools from $5,000 to $2,500 during the 2010-11 school year.  In addition, persons receiving the National Board bonus are required to be in “instructional assignments” in a Washington public school.

HB 3193 awaits further action on the House floor.

SB 6409

Senate Bill 6409 creates the Washington Opportunity Pathways Account. Beginning in state fiscal year 2011, all net revenues from in-state lottery games that are not otherwise dedicated to debt service on the Safeco Stadium and Qwest Field and Exhibition Center are dedicated to the new account. All net income from the multi-state lottery games, other than those dedicated to the Problem Gambling Account, are deposited into the Washington Opportunity Pathways Account rather than into the General Fund.

The Washington Opportunity Pathways Account is subject to appropriation by the Legislature, and may only be used for the following programs: recruitment of entrepreneurial researchers, innovation partnership zones, and research teams; the early childhood education and assistance program (ECEAP); the State Need Grant; the State Work Study program; College Bound Scholarships; Washington Promise Scholarships; Washington Scholars; the Washington Award for Vocational Excellence (WAVE); the Passport to College Promise; the Educational Opportunity Grant; and GET Ready for Math & Science Scholarships.

SB 6409 passed the Senate  32-10 on the second day of the special session and awaits further action on the House floor.

SB 6503

Senate Bill 6503 as passed by the Senate on March 16 expresses the intention of the Legislature that state agenices and institutions of higher education reduce government operating costs. In doing so agencies and institutions of higher education are required to preserve family wage jobs. The bill further requires the following:

  • The Office of Financial Management (OFM) certify to each state agency the compensation reduction amount to be achieved by the executive branch agency or institution as provided in the omnibus appropriations act.
  • Executive branch general government state agencies and higher education institutions may submit plans that achieve compensation cost savings to OFM. The State Board for Community and Technical Colleges shall submit a single plan on behalf of all community colleges.
  • Compensation reduction plans submitted by higher education institutions may include leave without pay, temporary layoffs, reductions in force, reduced work hours, and voluntary retirement, separation, and other incentive programs authorized by law.
  • OFM shall review, approve, and submit the higher education institution plans that achieve the required cost reductions to the legislative fiscal committees. Those institutions that do not have approved plans will close on the ten dates specified in the amendment.
  • Legislative branch agency plans for mandatory and voluntary leave will achieve savings as provided in the omnibus appropriations act and are subject to the approval of the Chief Clerk of the House of Representatives and the Secretary of the Senate.
  • Judicial branch agencies will similarly submit plans for review and approval by the Supreme Court. Agency closure days will not prevent actions from being considered timely on the next business day.
  • Specified activities of agencies and institutions are exempt from closure or reductions. Minimal use of state employees by any agency or institution is permitted as necessary to protect public assets, protect information technology systems, and maintain public safety. For higher education classroom instruction, operations not funded from state funds or tuition, campus police and security, emergency management and response, and student health care are exempt.
  • The agency employing an employee not scheduled to work on an agency closure day must designate an alternative day during the same month for the employee to take temporary leave without pay.
  • Employees earning less than $30,000 per year may use annual leave or shared leave in lieu of a temporary layoff.
  • Implementation subject to bargaining will be performed consistent with applicable laws.
  • For state agencies, temporary layoff impacts will be negotiated between each agency and one coalition of all exclusive bargaining representatives.
  • For higher education institutions that have negotiations conducted by the Governor or Governor’s designee, and that have submitted a reduction plan, negotiations regarding impacts shall be conducted between coalitions of representatives at each college, college district, or university of all the exclusive representatives.
  • For institutions that do not submit aplan, negotiations regarding impacts shall be conducted between the Governor or Governor’s designee and one coalition of all the exclusive bargaining representatives. Institutions that do not have negotiations conducted by the Governor or Governor’s designee shall each negotiate institutional impacts.
  • An exception to the requirement that agencies remain open 40 hours per week is provided.
  • In addition to the Public Employees Retirement System provisions in current law eliminating the effect of temporary salary reductions on pension calculations (chapter 430, Laws of 2009), members of the Teachers’ Retirement System, the Public Safety Employees’ Retirement System, the Law Enforcement Officers’ and Firefighters’ Retirement System and the Washington State Patrol Retirement System will not have pension calculations reduced for salary not earned as a result of compensation reductions integral to expenditure reduction efforts.
  • The act contains an emergency clause and takes effect immediately. 

Senate Bill was further amended on the Senate floor to:

  • Direct that state agencies and institutions reduce expenditures on salaries and benefits for Washington Management Service and exempt management positions by amounts provided in the omnibus appropriations act. The reductions shall be sufficient to save $10 million General Fund-State in Fiscal Year 2011
  • In higher education institutions, the amendment exempts student employees from the compensation reduction plans and the agency closure dates.