Category: On the Hill

The agreement reached on Wednesday by Senator Patty Murray and Congressman Paul Ryan reverses some sequestration cuts without raising taxes or making changes to entitlement programs. If approved, Congressional appropriators would have at their discretion $492 billion for non-military spending. That is about $23 billion more than would be available if Congress were to allow a second round of automatic sequester cuts to take effect in January. And yet, it is still about $14 billion below the original level of non-defense funding before the cuts first took place in March.

Within the confines of those top-level limits, lawmakers would have the discretion to restore and theoretically increase funding to campus-based financial aid programs and federal research agencies such as the National Institutes of Health and National Science Foundation, which would otherwise suffer more cuts if a second round of mandated “sequestration” reductions take place in January.

However, in order to pay for the $63 billion worth of increases to federal discretionary spending over the next two years, the negotiators identified various sources of revenue, such as hiking airline security fees and requiring federal workers to kick in more money for their pension plan.

Two of the cost saving provisions in the the agreement impact student aid servicers, but are not expected to have any immediate impacts on students. The first calls for Congress to cut payments to guarantee agencies in the now-defunct Federal Family Educational Loan Program, and changes how certain federal student loan servicers are paid. Not-for-profit and state loan agencies won a special provision in the 2010 Student Loan Bill that ended federal bank-based lending that guaranteed the entities loan-servicing contracts with the Education Department without having to go through a competitive bidding process. These payments will now be made with discretionary, not mandatory, funds. This change would save approximately $3 billion.

The second provision reduces the compensation that guaranty agencies receive for rehabilitating a loan from the Federal Family Education Loan (FFEL) program, beginning July 1, 2014. It will save more than $2 billion over ten years

Formal budget negotiations begin today with Democrats pushing for a multibillion-dollar job creation package aimed at speeding up economic growth. That will be in contrast with Republicans who want to maintain spending cuts under sequestration that will keep government operations running at reduced levels through the rest of FY2014. One thing that leaders in both parties already agree to: no grand bargain. The conference has until December 13th to recommend a plan under an agreement linked to spending and debt limit legislation that was passed October 16th (PL 113-46).

The goal for most of the budget conference committee members is to find a way to replace sequestration and agree on an overall FY2014 spending limit. While the House and Senate budget plans introduced earlier this year are far apart on tax and spending policy, they are somewhat closer on the more immediate issue of FY2014 discretionary spending. The House proposes an overall discretionary cap of $967 billion, $91 billion less than the Senate’s limit of $1.058 trillion. Absent an agreement on FY2014 funding, automatic spending cuts under the sequester would reduce spending by about $20 billion from current levels, to $498 billion for defense and $469 billion for domestic programs.

The House and Senate are both scheduled to recess next week through Veteran’s Day, and then will return to DC to continue negotiations. They will work for two weeks in November, and then take a two-week recess for Thanksgiving (November 25-December 6). That will leave just one week in December to complete work on the budget negotiations before the December 13th deadline. Again, most of the real negotiations will take place behind the scenes so the truncated work schedule should not affect the outcome that much. If a deal is not reached by the December deadline, Congressional leaders may need to consider another continuing resolution to keep government funded beyond January 15th.