Congress Panels Pass Budget Resolutions

Both the House and Senate Budget Committees passed their respective budget resolutions (BR) yesterday, taking an important step in the Congressional fiscal year 2009 (FY09) appropriations cycle. The Senate committee approved the BR on a 12-10 party-line vote, while the House committee passed its measure by a vote of 22-16. The Senate budget would allow $18 billion above the President’s request for the twelve appropriations bills for FY09, and the House budget would top the Administration’s request by $22 billion.

The House and Senate bills differ over paying for a way to fix the alternative minimum tax (AMT), which, if left unchecked, could cost middle class Americans millions. House Democrats want offsets for the cost of a one-year patch, but the Senate BR assumes there will be no offset. Both the House and Senate budget plans show surpluses in fiscal 2012 and fiscal 2013, but Senate Democrats plan to offer an amendment on the floor next week that would dedicate that surplus to covering the costs of extending tax cuts targeted to the middle class. At the same time, Senate leaders are assuming that the 2001 and 2003 tax cuts will expire in 2010, which the Congressional Budget Office (CBO) estimates would increase government revenue by $683 billion over five years.

The House BR allows for a $7.1 billion increase over the President’s request and about 9% over FY08 for “function 500” spending, which covers the Departments of Labor, Health and Human Services and Education. The Senate BR allows for $5.4 billion over the President’s request and an 8% increase over fiscal year 2008 levels. However, the BR is a non-binding resolution that sets spending caps for appropriators. As such, the levels in the BR do not necessarily reflect what will appear in final appropriations bills. If last year’s budget battle is any indication, the caps may become irrelevant, depending on how Congress decides to approach White House concerns.

While the Senate budget resolution does not include reconciliation instructions, the House budget proposal would include the AMT patch in reconciliation. The House measure also includes instructions for the Ways and Means Committee to produce a bill that would reduce mandatory spending by $750 million over six years, which could be used to move pending Medicare legislation. Sen. Judd Gregg (R-NH), the ranking member of the Senate Budget Committee, failed to add an amendment in the Senate that would require a reconciliation package that would produce net savings equal to 0.5% of total mandatory spending in the budget, or about $30 billion over five years.

The House is scheduled to debate the BR on the floor next week. The Senate may also bring its bill to the floor, depending on the schedule set by Majority Leader Harry Reid (D-NV). Congress begins its Spring recess next weekend, giving both chambers one week to pass their respective bills and negotiate a joint BR, giving appropriators final spending caps for the remainder of the session. Yet, since Congress usually aims to have a finished BR by mid-April, Democrats may take advantage of the recess to ensure full party support before bringing a final joint BR to each chamber for a final vote.

Resources:
David Clarke and Liriel Higa, “Tax Cuts Front and Center in Senate Budget Committee’s Debate,” CQ Today, March 6, 2008.
Author: SAS

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Governors Pushing For Federal Aid

Although education did not receive much attention at this week’s National Governor’s Association (NGA) meeting in Washington, fiscal problems were a topic of great interest. Governors cited different reasons for their state’s financial troubles, but all of those in attendance at the meeting were looking to the federal government to provide support. Many Governors are already taking steps to ensure their state either survives or sidesteps tight budget crunches over the next few years, but many Governors are still hoping Congress and the President will provide a helping hand. Their pleas may fall on deaf ears.

Many of the Governors discussed the benefits of passing a second stimulus package that includes money for transportation projects and other state funding needs. Currently, as many as 18 states have deficits, totaling $14 billion in the current budget cycle, and 20 states forecast spending shortfalls for 2009 totaling $34 billion, when combined. Governors are also looking to Congress for a one-year reprieve from new Medicaid rules that the Bush administration is attempting to put in place. State officials and health providers vigorously oppose the changes, which they say will shift $13 billion in costs over five years to states at a time their own budgets are facing deficits because of the economic downturn. (For more on the Medicaid rules, see the article above).

While Congress may be ready and willing to acquiesce to the states’ requests, they may not be able. In light of the federal budget deficit, and the need for continued war funding, the President is unlikely to give-up the Medicaid cuts easily, cuts he claims will provide billions in savings for the federal government. The President is also unlikely to support another $20 billion package until the current one has a chance to demonstrate success. If the President is unwilling to yield on his tight fiscal constraints, then states may have to work out their own financial difficulties without federal aid.

Resources:
Eric Kelderman and Daniel C. Vock, “Govs Press for More Money on Real ID, Medicaid,” Stateline, February 25, 2008.
Andrew Welsh-Huggins, “Governors Battle with Tight Budgets,” Associated Press, February 25, 2008.
Author: SAS

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Obey: Compromise or Else

On Tuesday, the House Appropriations Subcommittee on Labor, Health and Human Services, Education, and Related Agencies hosted a hearing on the President’s fiscal year 2009 (FY09) proposed budget for the U.S. Department of Education (ED). Committee Chairman David Obey (D-WI) brought Secretary of Education Margaret Spellings before the Committee, and, like the previous two years, the event was not pleasant for the Secretary.

Secretary Spellings defended the President’s flat funding for ED by stating, “we have limited resources” and the federal responsibility is to “ensure that taxpayer dollars are allocated in the most effective and efficient ways.” This meant cutting many “small or ineffective” programs while funding those programs the Administration believes are most effective. The President is requesting $59.2 billion in discretionary appropriations for ED, the same amount that Congress appropriated in 2008 and that does not account for inflation. The request proposes to eliminate or consolidate 47 ED programs, including zero funding for Career and Technical Education State Grants, Tech Prep Education State Grants, Even Start, Education Technology State Grants, and State Grants for Innovative Programs.

Members of the House Committee on Appropriations did not agree with the Administration’s request. Representative Barbara Lee (D - CA) and Congresswoman Lucille Roybal-Allard (D-CA) spent considerable time asking about many of the programs that were cut from the budget, noting that many of them affected students who were poor and minorities. Representative Dave Weldon (R-FL) made the point that the underfunding of Career and Technical Education has been a regrettable theme of this Administration, a point supported by Democrats and Republicans alike, including Congressman Tim Ryan (D-OH), Mike Simpson (R-ID), John Peterson (R-PA) and Tom Udall (D-NM).

Chairman Obey was less diplomatic and in no mood to negotiate over the proposed budget. He told Spellings to tell the President that either he negotiate with Congress to increase funding or Congress will wait until 2009, when he is out of the office, to resolve the matter. “I am not about to waste eight months of this Committee’s time,” Obey told Spellings, clearly still upset over last year’s budget standoff with the President. The question is whether the President “will act like an adult,” fumed Obey.

Resources:
http://appropriations.house.gov/Subcommittees/sub_lhhse.shtml
“U.S. Secretary of Education Margaret Spellings Testifies Before House Appropriations Subcommittee,” United States Department of Education, Press Room, February 26, 2008, http://www.ed.gov/news/pressreleases/2008/02/02262008.html
Author: DAD

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Appropriations is Top Priority this Spring (2/22/2008)

Congress is set to begin work on fiscal year 2009 (FY09) appropriations as soon as it returns to Washington next week. Both the Appropriations and Budget committees are preparing to flesh out their proposals for the next fiscal year’s funding levels. A number of the Administration’s Cabinet Members have already testified before Congress regarding White House budget proposals, and House Appropriations Chairman David Obey (D-WI) is planning another hearing for next Tuesday.

Rep. Obey, also the chairman of the House Appropriations Subcommittee on Labor-HHS-Education, is having Secretary Margaret Spellings testify before his subcommittee regarding the President’s budget requests for education. One issue that is sure to get the subcommittee’s attention is the President’s request to return Reading First funding back to the FY2007 levels. Rep. Obey cut the program considerably for fiscal year 2008, citing mismanagement and conflicts of interest with those responsible for administering the program. Spellings will also have to justify the 47 education programs that are targeted for elimination, a move that has not been popular with either party in Congress.

Meanwhile, the House and Senate Budget committees are set to begin their work on drafting the FY09 budget resolution (BR), which will set the spending caps under which appropriators are directed to operate when deciding funding for the various programs. Senate Budget Committee Chairman Kent Conrad (D-ND) and House Budget Chairman John Spratt (D-SC) have already stated that this year’s resolution will look much like last year’s BR, ignoring the President’s requested levels. Despite this apparent defiance, Congress is not in any better position than it was last year, when the President forced the majority to bring its total level of spending closer to his lower, requested levels.

The President continues to have enough support in the House to sustain a veto, giving him an edge over the Democratic majority, especially when he does not have to worry about reelection, unlike members of Congress. Leaders in Congress may not want to risk the backlash from failing to pass appropriations bill before the elections in November. In the past, the blame for government shutdowns has fallen squarely on Congress’s shoulders.

Author: SAS

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President Signs Stimulus Package (2/15/2008)

President Bush signed H.R. 5140, a $168 billion economic stimulus package, on Wednesday. The package is intended to help stimulate the economy, which many economists believe is heading into a recession, by putting more money back in the hands of consumers. Regardless of the legislation’s success, H.R. 5140 will have further implications on Capitol Hill as Congress heads into the fiscal year 2009 (FY09) budget cycle.

Marquee provisions in the bill include rebate checks to workers earning at least $3,000, whether or not they pay income taxes. The size of rebate payments are based on taxes paid last year, but will be shown as a credit for the 2008 tax season. Anyone without a Social Security number will not be able to receive one. While lawmakers and economists disagree on the probable benefits of the package, all interested parties agree that the bill’s quick package may not bode well for FY09 appropriations.

President Bush and Congressional Republicans signed on early to support the stimulus package, showing a very rare period of partisan cooperation. However, that period will end, specifically regarding federal funding, as soon as the House and Senate Budget Committees meet next month to draft the FY09 budget resolution. The President will remain staunch on his requested funding levels.

For fiscal year 2008 (FY08), the President vetoed the Labor-HHS-Education bill because it came in at nearly $12 billion over his request. He levied similar threats to all bills that year that he felt were too far above his request. The Democratic majority in the House was not strong enough to override his veto. The situation for FY09 is not any different.

The President will likely remain unmovable on his funding levels once again, and he still has enough Republican support in the House to sustain a veto. The fact that the President and his supporters in Congress signed off on $168 billion over two years for the stimulus package means that the Administration will be even more stringent on spending for the remainder of the year.

Resources:
Jay Heflin, “President Signs Stimulus Package Into Law,” Congress Now, February 13, 2008.
Author: SAS

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Congress Ready to Begin Budget Work (2/15/2008)

President Bush began the fiscal year 2009 (FY09) budget cycle last week when he released his budget request. The wheels are beginning to turn in Congress, and the House and Senate Budget Committee plan to begin work shortly after they return from the week-long President’s Day recess. Despite conceding a lot of ground to the President’s request last year, the Democratic majority in Congress is claiming that it will begin the same fight it lost last year.

Senate Budget Committee Chairman Ken Conrad (D-ND) is promising to turn a budget resolution (BR) out of committee that closely resembles last year’s resolution. Sen. Conrad plans to mark up the BR on March 5th and 6th. Although the House has not scheduled a mark up, House Budget Committee Chairman John Spratt (D-SC) intends to begin work around that same time. Meanwhile, Democrats continue to lambast the President’s budget request, claiming it underfunds too many important domestic priorities.

Sen. Debbie Stabenow (D-MI) is criticizing cuts to the children’s health insurance program and various higher education grants, including elimination of the Perkins loan program, which provides money for low-income students to attend college. She is estimating that the President’s budget would cut about $900 million from higher education programs. Rep. Spratt also joined in by referring to Bush’s budget cuts as “draconian,” especially regarding cuts to entitlement programs. However, U.S. Treasury Secretary Henry Paulson argued that entitlement reform would help raise revenue by nearly $2 trillion a year.

Once both chambers have passed their own BRs, the bills will go to conference and they will put together a joint BR. Once that is approved by both the House and the Senate, it will set caps on discretionary spending, meant to guide Congressional appropriators, who begin work shortly after a joint BR is passed. Since the BR is only used for Congressional purposes, it does not require the President’s signature. Spratt and Conrad hope to have the BR ready in early April, allowing appropriators to begin work shortly after the Easter recess.

Resources:
Vicki Needham, “Conrad: Fiscal 2009 Budget Will Resemble 2008,” Congress Now, February 12, 2008.
Jay Heflin, “Spratt Questions Wisdom of Bush Budget's Parameters,” Congress Now, February 13, 2008.
Author: SAS

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Facility Financing Comes to the Forefront (2/15/2008)

On Wednesday, the House Committee on Education and Labor held a two-panel hearing on school facility financing, entitled “Modern Public School Facilities: Investing in the Future.” The first panel comprised of Members of Congress who have introduced school facility legislation or are involved with the issue. The second comprised of
school facility practitioners and policy experts.

In panel one, eight members of Congress testified on either the importance of the federal role in school facility matters or the inappropriateness of federal involvement. Predictably, the matter fell along party lines. Indicative of those in favor of an expanded federal role, Representative Bob Etheridge (D-NC), a former Superintendent of North Carolina’s public schools, discussed his bill, H.R. 2470, the America’s Better Classrooms Act.

He made the point that inadequate school facilities are not a function of improper management or lackluster efforts. The problem stems from an explosive demand on facilities that outpaces the efforts to keep with the demands. “School officials are striving to provide first class educational opportunities with infrastructure that has not kept up with the times,” said Etheridge. “Simply put, our schools are busting at the seams.”

The Republican testimonies reflected concerns over the fiscal implications of further expansion of the federal role in education. The opportunity cost concerned Representative Mike Castle (R-DE) most. He observed that the federal government has not met many of its current funding obligations, such as fully funding No Child Left Behind, the Individuals with Disabilities Act, and meeting various other requirements imposed by the Environmental Protection Agency. Taking on yet another commitment may not be feasible, he testified. But the concerns over inflated construction costs overshadowed the polite opportunity costs argument.

Republicans spent significant time on the impact of the Davis-Bacon law upon construction costs. The Davis-Bacon mandate applies to any bill that receives federal dollars for construction or renovation. It requires that all laborers and mechanics employed by contractors or subcontractors on all construction and minor remodeling projects to be paid local prevailing wages as determined by the Secretary of Labor. The calculation of the prevailing wage, however, is a matter of debate.

As explained by Representative Steve King (R-IA), the law artificially increases labor costs up to 22% and overall construction costs up to 9%. Because of this increased cost, the Republicans panelists made it clear that they would reject any legislation that would force the Davis-Bacon mandate on school construction and re-modeling. The heated discussion on this debate made it clear that the future of any facility finance bill in Congress this year will turn on its interface with the Davis-Bacon requirements.

The second panel provided the Committee with a practitioner’s view of the federal role in school facility financing. Six panelists informed the Committee about their work in the field and how the federal government has supported their work.
For example, Kathleen Moore, the Director of the School Facilities Planning Division of the California Department of Education, discussed the impact of facilities on student achievement and teacher retention, California’s school facilities needs and successful federal facility programs and the need for continued and expanded federal assistance.

Notably, Moore discussed two federal programs that have helped California: the Qualified Zone Academy Bond (QZAB) program and the Federal Renovation Program. Both, she testified, are models for federal involvement. The QZAB program is a strong model for providing tax credits that allow LEAs the benefit of interest free financing on bonds and the Federal Renovation Program is a good model of a grant that targets urgent repair and renovation.

“The physical condition of school facilities impact student achievement and experience as well as teacher retention and community vitality,” testified Moore. “A quality school facility is but one component necessary for successful learning. Alone it is no silver bullet, but together with rigorous standards, qualified teachers and system accountability, it can positively impact educational outcomes.”

The hearing made two things clear. First, the current role in federal facility financing has been critical for many schools and districts. Second, the expansion of the federal role is possible in this session of Congress, but they must resolve the partisan split if any new bills hope to move forward before the elections in November.

Resources:
School facility bills before Congress.
H.R. 3021, the 21st Century High-Performing Public School Facilities Act, introduced by Representative Ben Chandler (D-KY);
H.R. 3902, Public School Repair and Renovation Act, introduced by Congressman David Loebsack’s (D-IA);
H.R. 3197, the School Building Enhancement Act, authored by Representative Rush Holt (D-NJ);
H.R. 2470, the American’s Better Classrooms Act (ABC), sponsored by House Ways and Means Committee Chair Charlie Rangel (D-NY).
Author: DAD

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President is Calling for WIA Changes (2/8/2008)

President Bush released his fiscal year 2009 (FY09) budget proposal on Monday, February 4th. His $3.1 trillion budget calls for a number of program eliminations and cuts, though some specific programs would receive slight increases. Among his proposals, the President is calling for considerable changes to the funding mechanisms under the Workforce Investment Act (WIA). As a practical matter, the Administration understands many of its proposed changes will not be adopted on Capitol Hill, so President Bush is proposing an alternative plan to fund WIA programs under the current law.

The Administration’s primary proposal for WIA funding includes collapsing the funding from various programs into one large funding stream. Under this plan, funding for adult, dislocated worker and youth employment and training activities is eliminated. That funding is then funneled into Career Advancement Accounts (CAAs).

CAAs are “self directed” accounts of up to $6,000 over two years that would be available to adults and out-of-school youth entering or re-entering the workforce or transitioning between jobs, or incumbent workers in need of new skills to remain employed or to move up the career ladder. This would also replace the current system of separate training programs serving a single state grant for the provision of employment and training services.

Experience has taught the Administration that Congress does not always fall in line when it comes to the President’s budget request. Under the assumption that they lack support in Congress, the White House is also proposing alternative funding levels for the eliminated programs. If Congress decides to continue funding the separate programs, the Administration’s desired funding levels are:

• $712 million for Adult Employment and Training Activities;
• $1.2 billion for Dislocated Workers Employment and Training Activities; and
• $840.5 million for Youth Activities.

Most expect Congress to continue the separate funding streams, though the final funding numbers are still likely to reflect the President’s desired funding levels if they reject the CAA proposal.

Author: SAS

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Reading First FY08 Cuts (2/8/2008)

On January 29th, Secretary of Education Margaret Spellings sent a letter out to all the State Superintendents detailing the impact of the near 61% fiscal year 2008 reduction to Reading First. The letter lamented the loss of the funding, and recommended alternative funding sources that local educational agencies (LEAs) could use; consistent with statutory requirements, to improve literacy instruction in grades K-3. Any questions regarding the letter should be sent to Reading First Director Joe Conaty, who has been heading the office since October of 2006.

What will become of Reading First in fiscal year 2009 (FY09)? President Bush requested Congress to restore the funding to $1 billion, back to fiscal year 2007 levels; but one year ago, appropriations Chairman David Obey (D-WI) promised not to replace the spending cuts until the U.S. Department of Education (ED) answered for the program’s mismanagement. Whether ED has done so to the satisfaction of Obey is not known, but there is considerable support for the program among the state chiefs and education advocacy organizations in Washington. They are asking Congressional appropriators to support the restoration of the program in FY09, but the outcome is far from clear.

This is, after all, President Bush’s program and Chairman Obey is still not on good terms with the President due to a series of political standoffs last year and his recent Executive Order trying to reduce or eliminate earmarks, the protected prerogative of appropriators in Congress. Appropriation hearings begin later this month. At that time, the prognosis for Reading First will become clearer.

Author: DAD

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Farm Bill Negotiations Hit Funding Snag (2/1/2008)

Lawmakers continued negotiations with the White House regarding the Farm Bill this week. Sen. Tom Harkin (D-IA), Chairman of the Senate Committee on Agriculture, Nutrition and Forestry, is working on various compromises, but claims there is still a standoff regarding funding for the bill. Conferees are not likely to bring a conference report out until they can find common ground with the administration, which means multiple non-controversial programs may suffer the consequences.

The first disputes between the two chambers of Congress, as well as the White House, dealt with payments to farmers and other farm subsidy programs. While Sen. Harkin believes that a deal is near on these issues, the White House continues to object to the amount of funding in both proposals, most of which is paid for through various tax increases. Without eliminating specific tax breaks, lawmakers may not be able to find enough funding for the various programs under the Farm Bill, but President Bush is already threatening to veto any legislation that increases taxes. Although the Senate passed its Farm Bill by a veto-proof majority of 79-14, there is very little support in the House for the Senate version of the bill.

While negotiations between all the parties continue, programs like the Fresh Fruit and Vegetable Program (FFVP) expansion may suffer. The program is universally supported, but is not considered vital to the bill’s final passage. If conferees are forced to make cuts in order to reach a consensus, programs like this are often the first to go. School nutrition advocates are continuing to push for the program’s inclusion, but Sen. Harkin and his colleagues will make the final decision.

Resources:
Geof Koss, “Harkin Sees Room for Compromise on Farm Payments, but Funding Standoff Lingers,” Congress Now, January 31, 2008.
Author: SAS

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Congress Begins Work on Stimulus Package (2/1/2008)

Congress began work on an economic stimulus package this week. House leaders negotiated an agreement with the White House on a $145 billion package that would focus on tax rebates for individual income earners as well as investment incentives for businesses. Although the House passed its bill on Tuesday, the Senate continues debate on various additions to the House package, much to the chagrin of House leaders and President Bush.

Last week, the President and House leaders showed a rare sign of cooperation by agreeing to the $145 billion stimulus plan. The President and Congress do not usually see eye-to-eye when it comes to any sort of spending legislation, but both sides believe a stimulus package is necessary to ward off a recession. After a series of meetings, President Bush, Speaker of the House Nancy Pelosi (D-CA), and House Minority Leader John Boehner (R-OH) negotiated a deal which they labeled as, “timely, targeted, and temporary.” No one bothered to run this agreement by Senate Majority Leader Harry Reid (D-NV).

Wednesday, the Senate Finance Committee passed its own stimulus package out of committee, with various additions to the House version. The Committee package would extend unemployment benefits, provide more help for businesses losing money, add $5.6 billion in tax breaks for renewable energy, provide payments to coal companies and add payments for low-income workers. The plan is under heavy criticism from House Democrats and Republicans in both chambers. The White House also warned Congress not to attach too many additional provisions to the negotiated plan.

Despite the opposition, Sen. Reid plans to hold a vote on the committee’s language, though he expects the vote to fail. Afterwards, Reid is planning a series of votes to make two specific amendments to the House package, expanding low-income heating assistance and adding rebate checks for low-income seniors and disabled veterans who would not qualify under the House bill.

Senate Democrats remain hopeful that Republicans will not want to go on record voting against low-income voters, seniors, and disabled veterans during an election year. Unfortunately for education advocates, funding for school construction and repair projects is not on the table under any of the current proposals.

Sen. Reid plans to complete work on the package next week, so Congress can have a final version to the President by February 15. House leaders expect the President will sign the bill, assuming Senate amendments are kept to a reasonable level. Once the President signs the package, the bipartisan efforts displayed over the last week will likely fade away, especially after the President releases his fiscal year 2009 budget proposal on Monday.

Resources:
Richard Rubin, “Senate Narrows Stimulus Bill Changes,” CQ Today, January 31, 2008.
Author: SAS

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President to Release FY09 Budget on Monday (2/1/2008)

Next Monday, the President will release his proposed fiscal year 2009 budget (FY09) and the United States Department of Education (ED) will host its own FY09 unveiling event later in the afternoon. Given the President’s new found focus on fiscal discipline, most expect that the President will either keep funding for ED flat from FY08 or reduce it slightly. The odds now favor nearly flat funding because ED may have inadvertently released FY09 state program allocations. An alert staff member of the Center for Education Funding discovered a hidden column in an ED spreadsheet. Whether it is accurate will be known on Monday. Some of the highlights (which are not confirmed) include:

• ESEA Title I grants to LEAS may increase from $13.8 billion in FY08 to $14.3 billion in FY09;
• School Improvement Grants remains the same at $492 million;
• Reading First State grants are resorted to FY07 levels, $1 billion;
• Special education grants may increase from $10.9 billion to $11.2 billion;
• Title II Teacher quality grants may decrease from $2.9 billion to $2.8 billion; and
• Safe and Drug-Free Schools and Communities may be cut to $100 million from $294 million.

Unfortunately, it also appears that the effort to eliminate Career and Technical Education funding is back. According to the unconfirmed spreadsheet, the programs proposed for elimination include: Career and Technical Education, Tech-Prep Education, Educational Technology, and Even Start. We will report on the President’s proposed FY09 budget as soon as the President releases it on Monday.

Author: DAD

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Executive Order on Earmarks (2/1/2008)

During the State of the Union, President Bush spoke out strongly against earmarks. “I will issue an executive order that directs federal agencies to ignore any future earmark that is not voted on by Congress.” On Tuesday, true to his word, President Bush signed Executive Order 13457, “Protecting American Taxpayers from Government Spending on Wasteful Earmarks.” The order requires all executive agencies to “take the necessary steps” to ensure that agency decisions to commit, obligate, or expend funds for any earmarks are based on the text of laws. Earmarks should be “included in the text of the bills voted upon by the Congress and presented to the President.”

According to the order, the agency decision to commit, obligate, or expend funds for any earmark should be based on statutory criteria and merit-based decision making. No oral or written communications concerning earmarks shall supersede statutory criteria, competitive awards, or merit-based decision-making.

To facilitate the agency decision, the order directs agency heads to refer to Office of Management of Budget (OMB) Memorandum M-07-10, dated February 2007. In this memorandum, former OMB Director Robert Portman directs agencies to act with transparency and according to government-wide and agency regulations governing the selection of grant recipients or contractors.

“In the application of authorized discretion,” wrote Portman, “each agency shall use transparent and merit-based determinations to achieve program objectives, consistent with the purpose of the statute and Administration policy (including the President's Budget).” In the event of additional lobbying from Congress in favor of an earmark, the order requires all agencies to post all “written communications” from Congress recommending the inclusion of an earmark on the Internet, not later than 30 days after receipt of such communication.

In short, the executive order strongly directs executive agencies to encourage transparency in the way they manage earmarks (which is a good thing), but in no way does it eliminate the activity. The matter remains a Congressional practice stemming from the power of the federal purse under Article I, Section 8, Clause 1 of the United States Constitution. Members of Congress must, ultimately, regulate this practice themselves. How they plan do that, however, is a political hydra that is still emerging. We will continue to monitor and report on the matter as this election year develops. Please find the Executive Order attached to this email.

Resource:
“President Bush Signs Executive Order Protecting American Taxpayers from Government Spending on Wasteful Earmarks,” The White House, Press Release, http://www.whitehouse.gov/news/releases/2008/01/20080129-3.html.
Author: DAD

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State of the Union (1/28/2008)

In his final State of the Union Address, President Bush laid out a broad domestic agenda that included an emphasis on economic growth, federal fiscal discipline, a request to strengthen and reauthorize the No Child Left Behind Act (NCLB) and to provide parents with more school choice.

Beginning with the economy, the President urged Congress to pass the economic stimulus package agreed to by Speaker of the House Nancy Pelosi (D-CA) and House Majority Leader John Boehner (R-OH). The package, estimated at about $145 billion, is aimed at putting more money into the hands of American consumers to help stimulate the stagnant U.S. economy. Although the Senate is expected to make additions to the stimulus package, there is currently no language for any school construction funding, which is a priority for education advocates.

The President's willingness to sign off on such an expensive stimulus package means that he will be less agreeable to increased spending during the fiscal year 2009 (FY09) appropriations process. The President will release his FY09 budget proposal on Monday and, like last year, it is likely that there will be many program reductions and an estimated 44 program cuts for the United States Department of Education (ED).

President Bush next announced his disappointment at Congress' failure to reign in the practice of earmarking funding for special projects in members' Congressional districts. The President championed fiscal restraint by announcing an executive order to federal agencies to ignore any future earmarks that are not written specifically into bill language. Under the order, future earmarks would be subject to public scrutiny and votes and he promised to veto any spending bill that does not succeed in cutting earmarks in half from fiscal year 2008 levels.

Focusing on education, the President called on Congress to strengthen and reauthorize his key domestic legacy, NCLB. "No one can deny its results," said Bush. "Last year, fourth and eighth graders achieved the highest math scores on record. Reading scores are on the rise. And African-American and Hispanic students posted all-time highs." Building on this success, the President identified four ways that Congress, with his approval, could strengthen the law. "We must work together to increase accountability, add flexibility for States and districts, reduce the number of high school dropouts, and provide extra help for struggling schools." Working together, however, will prove challenging in 2008. The President has already stated his intent to veto any bill that would weaken the law's accountability provisions and he has clearly stated his displeasure with the draft proposed by the Chairman of the House Committee on Education and Labor, George Miller (D-CA), last summer. The conventional wisdom is that the House and Senate will both introduce draft language in 2008, but a conference and final passage will likely roll over into 2009, after the 2008 elections.

Speaking to his conservative base, the President next addressed school choice. According to the President, inner city non-public schools are disappearing at an alarming rate. To address this, he proposed to convene a White House summit aimed at strengthening the supply of these schools so parents of "poor children trapped in failing public schools" could have better options. To help children access these schools, the President proposed a new $300 million program called Pell Grants for Kids. But like last year's proposed Promise Scholarships and Opportunity Scholarships, the Pell Grants for Kids has little chance of success. This idea will not likely gain considerable support in this Democratic Congress.

Finally for education, the President called on Congress to fund his American Competitiveness Initiative. Congress passed H.R. 2272, the 21st Century Competitiveness Act last year that authorized over $33 billion over the next three years to support 25,000 new math and science teachers through professional development and graduate education assistance as a part of the President's initiative. Yet, due to the contentious budget battles between the President and Congress much of the funding was not appropriated. The President would now like to see those initiatives funded in order to "ensure America remains the most dynamic nation on earth."

The President's State of the Union truly begins the second session of the 110th Congress. Pundits will review and analyze the speech in the coming days and many of his initiatives will become clearer when the President releases his FY09 budget proposal on Monday, February 4th. We will continue to monitor and analyze the developments as they occur.

Resources:
"2008 State of the Union Policy Initiatives,"The White House, http://www.whitehouse.gov/stateoftheunion/2008/initiatives/index.html
"President Bush's State of the Union Addresses," Washington Post, January 28, 2008, http://www.washingtonpost.com/wp-dyn/content/article/2008/01/28/AR2008012802536.html?sid=ST2008012802201
State of the Union, http://stateoftheunion.onetwothree.net/
Authors: SAS, DAD

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Future of Earmarks Discussed at GOP Retreat (1/25/2008)

House Republicans are meeting this weekend to discuss their policy platforms for the legislative session. One of the first topics is how the GOP plans to address earmarks in the near future. Although there are a number of proposals, and the issue is murky at best, House Minority Leader John Boehner (R-OH) plans to come back to Washington with a “caucus-wide position.”

In January of 2006, the former Republican majority was entrenched in the fallout of a number of lobbying and ethics issues. Following the fall of former powerhouse lobbyist Jack Abramoff, the American public began to pay more attention to the way Congress conducts business. While the public scrutiny of lobbying practices rose, a special focus on the spending practices of Congressional leaders became a top priority for reformers. People wanted to know who was asking for special spending projects, and who was receiving that money. Republicans began looking into reforming the earmarking process.

Once the new Democratic majority took over in 2007, lobbying and ethics reform was on the list of top priorities. New rules were put in place that required members to put their name on their requests, which could no longer be added in conference. However, some reformers noted that knowing who is asking for these funding projects does not do anything to keep earmarks from getting out of hand. Rep. Jeff Flake (R-AZ) made it his personal mission to dispute most of these earmarks on the House floor, bringing more scrutiny to how Congress spent taxpayer dollars. Both parties want to keep the practice of earmarks in play, because bringing funding to a congressional district is a good way to work towards reelection. However, most lawmakers agree the process still needs to be reordered.

Republican leaders in the House are discussing ways to handle the issue. One suggestion is to put a year-long moratorium on earmarks for FY09 until a long-term solution is reached. However, with elections coming up in November, most members of the House will not be willing to let go of such a powerful campaigning tool. A more practical suggestion is to create a joint committee to oversee the process, hopefully making spending projects more transparent.

Earlier this month, Office of Management and Budget (OMB) Director Jim Nussle announced that he would review the more than 11,000 earmarks in the fiscal year 2008 omnibus bill, and see if there was any Executive authority to eliminate those deemed too wasteful. However, considering the fact that all lawmakers enjoy the political benefits of earmarking, Republican support for those projects is likely to keep Director Nussle from eliminating a significant number of earmarks. There is little doubt that the whole process will continue, the only question is how Congress will choose to regulate itself when it comes to targeted spending.

Resources:
Alan K. Ota, “GOP Seeks Consensus on Earmarks at Retreat,” CQ Today, January 24, 2008.
Author: SAS

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House Leaders Ready to Start in Stimulus Package (1/25/2008)

On Thursday, House leaders unveiled the framework for a $150 billion economic stimulus package, intended to boost consumer spending and confidence. Although the legislation’s immediate focus is turning around a stagnant economy, its effects will impact the appropriations work for fiscal year 2009 (FY09) and beyond. The details of the stimulus package seem to signal a possible year-long suspension to the highly touted “Pay Go” rule in Congress.

During the 2006 midterm election, the Democratic minority continually lobbed criticisms at the Republican majority regarding spending on new programs without equitable offsets in other areas. When the Democrats took control last year, their first order of business was instituting a rule that required offsets for any new payments, known as the Pay Go rule. Despite its initial popularity, the rule was waived a number of times to accommodate a number of legislative priorities.
Now, under the umbrella of trying to ward off recession, Congress is getting ready to pass a large fiscal bill without any major offsets, setting a precedent for the year that has some fiscal conservatives worried.

By waiving the Pay Go rule so early in the legislative session, Congress may be even more willing to keep the rule off the table, especially regarding FY09 appropriations. All work on appropriations this year will be in reference to the stimulus package, therefore Congressional leaders may continue to operate under the assumption that Pay Go is not necessary, since all efforts are going towards stimulating the economy.

Although the President has unofficially signed off on the legislation, the bipartisan effort that has brought the stimulus package to this point is not likely to continue once appropriators start their work later this year. When the President releases his budget on February 4th, his request is not expected to increase from previous years. Some Democrats fear that his budget request may be even tighter than before.

Traditionally, a budget request in the last year of a President’s term tends to act as more of a policy statement than any other year in his term. Lately, the Administration’s policy fights have centered on keeping the Democratic-controlled Congress from over spending. As such, the President’s FY09 request could be billions below previous years, especially in light of his signing off on a $150 billion stimulus package.

Although actual language is not currently in place, Speaker of the House Nancy Pelosi (D-CA), along with House Minority leader John Boehner (R-OH), laid out the general highlights of the bill, including tax rebates for all levels of income earners. The bill also includes a number of business oriented tax cuts. In recent weeks, some lawmakers discussed the possibility of adding funds for school construction and repair as part of the economic stimulus package. No such funding is included in the highlights from Speaker Pelosi, but might be added during the bill’s trip through both chambers of Congress.

The Senate, for example, expects to make significant additions to the bill, focusing more on supporting businesses and lowering the unemployment rate, rather than individual tax payers. Experts claim that school construction and repair will lead to as many as one million new jobs over the next year, which would fit in with Senate objectives.

Speaker Pelosi expects to bypass the committee process and bring the bill to the House floor as early as next Tuesday. Most Democrats and a good number of Republicans have already signed on to support the bill, so the House should clear the package without much of a fight next week. Senate Majority Leader Harry Reid plans to have the bill in hand by the first week in February.

The Senate may spend considerably more time on the bill, adding on various provisions aimed at further stimulating the economy. Once the House agrees to those changes, the President expects to sign the bill, quite possibly having the whole process finished before March. Once the stimulus package is signed, Congress will get the ball rolling on the FY09 budget resolution, starting a new cycle of partisan squabbling.

Resources:
Jennifer Bendery, “Pelosi Details Costs of $150 Billion Economic Stimulus Plan,” Congress Now, January 24, 2008.
Richard Rubin, “Senate Considers Adding to Stimulus,” CQ Today, January 24, 2008.
Author: SAS

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Earmarks Under Review (1/18/2008)

The fiscal year 2008 budget debates have not ended. Last week we detailed how the U.S. Department of Education revised the numbers produced by Congress due to slight calculation errors. While the changes were not significant, they were enough to give fiscal administrators pause.

This week, the discussion turned to the earmarks in the final appropriation bill continued. Before signing the fiscal year 2008 (FY08) appropriations bill on December 26th, President Bush stated his intention to scrutinize all the earmarks in the bill. “I am instructing budget director Jim Nussle to review options for dealing with wasteful spending in the omnibus bill.” Now Congress returns over the next two weeks expecting an executive order, or some administrative measure, by the President to direct agencies to ignore spending earmarks.

This will not go over well with the Congressional appropriators, neither Democrat nor Republican, who will certainly resist any infringement on their legislative prerogative. The National Journal reports that President Reagan was the last President to threaten earmarks in such a manner. In 1988, Reagan ordered his budget director Jim Miller to scrutinize earmarks in a legislative measure, but the Congressional leadership in both parties trounced the effort.

Many expect the same result from President Bush’s effort. It is certain that, if Bush executes such an order, that the chairmen and ranking members of the appropriations committees and the Republican and Democratic leadership will reject any limitations to their power of the purse. This is not a tolerable precedent for Congress. That much is certain.

Resource:
“Congress Braces For Potential Anti-Earmark Executive Order,” National Journal, January 14, 2008.
Larry Kudlow, “Bush’s Very Good Year,” National Review Online, December 21, 2007, http://article.nationalreview.com/
Author: DAD

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Congress, President Work on Stimulus Package (1/18/2008)

Congressional Leaders are cooperating with President Bush to create a $145 billion economic stimulus package that could include a number of tax and finance reforms. Although the bill will not include making President Bush’s tax cuts permanent, the President is urging for quick passage for the bipartisan legislation. Although, at this point, there are few details regarding the bill, there is talk about possible funding for school construction in the stimulus package.

A number of states around the country are dealing with budgetary shortfalls and tight fiscal constraints. As such, many states and local school districts have had to put school construction projects on the backburner, awaiting more prosperous times to move forward. Federal funding from the stimulus package could provide states with the opportunity to finish much-needed construction projects.

On Wednesday, Lawrence Mishel, President of the Economic Policy Institute, testified before the Joint Congressional Economic Committee. In his testimony, Mishel listed infrastructure spending on items such as school repair and construction as a way to provide over a million jobs within a year, providing the exact kind of economic turnaround lawmakers are looking for.

Congressional leaders from both parties are working together with the President to draft legislation that can win majority support from both parties, and that the President will not veto. Speaker of the House Nancy Pelosi (D-CA) and House Minority Leader John Boehner have both expressed their desire to work together, and participated in a conference call with President Bush over the spending measure.

Rep. Boehner maintains that Republicans are planning to support the legislation, so long as it does not become a carrier for every Democratic spending project that did not make it into the fiscal year 2008 omnibus appropriations bill.

A number of moderate Democrats in the House are worried about staying with the Pay Go rules the House imposed last year, which requires that any new spending is offset somewhere else. While some offsets are likely, finding enough money to offset the $145 billion expected in the stimulus bill may prove to difficult to pull off.

Additionally, any spending that is not offset may come back and haunt Democrats when the fiscal year 2009 appropriations cycle starts up again this year. President Bush and the fiscal conservatives in Congress are going to remain more steadfast on their spending policies in light of the stimulus package, making them a roadblock to any additional spending increases that the majority might push for. The stimulus legislation should reach the House floor before the end of the month.

Resources:
Jay Heflin, “Congressional Leaders Hopeful on Stimulus Package After Talks With Bush,” Congress Now, January 17, 2008.
Jay Heflin, “Bush Backs Stimulus Bill, Says Making Tax Cuts Permanent Should Be the Next Step,” Congress Now, January 18, 2007.
Author: SAS

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Road Map for Next Legislative Session (1/18/2008)

The House reconvened this week, and the Senate is expected to come back into session after the Martin Luther King, Jr. holiday. As Congress gets back into its groove, the first item on the agenda is a $145 billion economic stimulus package, which may
include funding for school construction and repair. The bill seems to have bipartisan support in Congress and in the White House, though the particulars of the bill may prove to be contentious. Once the stimulus package is finished, there are a number of other items Congress is likely to consider this year.

No Child Left Behind

On January 28th, the President is scheduled to give his State of the Union address, which often acts as a springboard for most of the year’s legislative priorities. While the President is expected to focus on Iraq, immigration reform, and other recent, hot-button issues, he is also expected to again call for Congress to reauthorize No Child Left Behind, his landmark K-12 education legislation.

As 2008 is the President’s last year in office, and he begins to consider the legacy his administration leaves behind, he will want to try and end on the seemingly positive note of reauthorizing NCLB, a program that he considers his biggest domestic success over the last eight years.

While he will focus on what the law has done over the past few years, he will also warn Congress not to weaken the law that is intended to have all students in the U.S. performing at proficient levels in math and reading by 2014. However, because the law is a divisive issue in Congress, as well as among the 2008 Presidential candidates, politics will most likely push NCLB into the backseat, until after a new Congress and a new President begin their work in 2009.

Higher Education Act

The Senate passed its reauthorization of the Higher Education Act (HEA) last summer, but the House has been dragging its feet, bogged down in a number of other legislative efforts. House Education and Labor Chairman George Miller (D-CA) did finally pass a reauthorization bill out of committee towards the end of last year, but the House has not moved forward with the committee’s bill.

Senate leaders, chiefly Senate Health, Education, Labor and Pension (HELP) Committee Chairman Edward Kennedy (D-MA), are calling for the House to bring its bill to the floor as soon as possible so that the two bills can go to conference. The sense of urgency comes from the fact that as soon as Congress gets bogged down in both fiscal year 2009 (FY09) appropriations and the 2008 Congressional elections, time will run out for the HEA to be reauthorized by the 110th Congress.

Farm Bill

The Senate passed its Farm Bill package in December, finally catching up with the House, which passed its bill earlier in the year. While some negotiations have gone on behind the scenes, the bill has yet to go to conference, keeping farmers, agricultural groups, and school nutrition advocates waiting on the largest agricultural bill in the country. School nutrition advocates are looking forward to the proposed expansion of the Fresh Fruit and Vegetable program (FFVP) into all fifty states.

School nutrition coalitions are advocating for the final bill to include the Senate’s expansion, which calls for $225 million for fiscal year 2008, with each state receiving 1% of the total appropriation. The rest will be divided up among the states based on the total number of students eligible for free and reduced price lunches. Advocates are also calling to include the House’s provision that sets aside 5% of each state’s allocation for administrative purposes.

One item that did not make it into the Farm Bill is Sen. Tom Harkin’s (D-IA) amendment that would impose national nutrition standards on all public schools in the United States. Sen. Harkin has made it his personal quest to make these standards part of the law, but chose not to bring it into the Farm Bill, which is already in the middle of tough negotiations.

Harkin worries that even if the House and Senate come to terms on the bill, Congress will not be able to work out a deal with the White House regarding differences over the bill. As such, much of what goes on in conference will include both the differences between the House and the Senate as well as worries from the White House, so that the final version of the bill will have the best possible chance to make it through the veto threat already levied against the bill.

Appropriations

The President will release his FY09 budget proposal on February 4, starting the next appropriations cycle. Experts expect last year’s battle to be repeated again this year. The same forty or more education programs that the President has tried to eliminate in past years will be slated for elimination again this year, accompanied by leaner budget estimates.

The President proved last year that with Democrats in control of Congress, he is willing to stand firm on his proposed numbers, and will veto any bills that go too far above and beyond his requests. His willingness to work on the economic stimulus package will further cause him to be tight with his budget outlook for the rest of the year, and he will continue to have enough Republican support in Congress to sustain a veto.

Last year, The President forced appropriators to bring their total level of spending down to his desired levels, after a lot of posturing and grandstanding. If Congress want to avoid that for FY09, they will have to wait until the next president takes over in January 2009, an option that neither party is happy with. Ignoring the fact that the majority cannot guarantee that its party will win the Presidency, there is also a lot of bad publicity that comes with holding off appropriations until the start of the following year.

In 2006, when former Senate Majority Leader Bill Frist (R-TN) decided to punt the spending bills until 2007, he was lambasted by both parties in each chamber of Congress. The Democrats may not want to risk the public backlash from delaying appropriations so late for two consecutive years, meaning it is possible that they could give in to the President’s request a little earlier this year. Needless to say, appropriations will, as always, be a tough process this year.

Author: SAS

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Report Shows Higher Ed Spending Up, Despite Budget Issues (1/11/2008)

Last year proved to be a difficult year for states regarding budget concerns. As of now, 2008 is not looking any better. Many states of various sizes and locations are facing budget shortfalls and fiscal crises, forcing them to either keep education funding at current levels, or possibly consider serious education cuts. However, despite this disturbing trend, a report released by the Illinois State University Center for the Study of Education Policy shows that state spending on higher education is rising. Public college and university officials and employees are experiencing a good year, but other forecasts show that this could be very short lived.

State appropriations for higher education are up 7.5% for the 2008 fiscal year. This is the largest percentage increase for colleges and universities in a decade, according to the report. Total state support for higher education this year is currently projected to be over $77.5 billion. That number is based on state operating support, but it does not include funds for facilities or funds that are provided by students through tuition. Over the last decade, the percentage change in total state support has fallen as low as a 2.1% annual decrease, but has rebounded recently. However, other studies released in the last month, as well as grim budget forecasts in many states, suggest that this may be a peak year, with some troubled times ahead.

The recent increases in funding mirrors national concerns regarding both the increasing cost of higher education, and a focus on keeping American students competitive globally. However, as budget constraints become tighter, education is often one of the first areas to suffer stagnation and cuts. Unfortunately, current trends indicate that tighter times are ahead. A study by the National Governors Association and the National Association of State Budget Officers warns of “significant deterioration” of state budgets. The National Conference of State Legislatures also warns that there are rough fiscal waters ahead, so institutions of higher education may want to enjoy the good times now, while they still can.

Resources:
Scott Jaschik, “State Appropriations Are Up ... for Now,” Inside Higher Ed, January 11, 2008.
Author: SAS

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