Budget Surplus, Tax Cuts Could Drain Education Funding - Higher Education
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Budget Surplus, Tax Cuts Could Drain Education Funding

by Black Issues

Budget Surplus, Tax Cuts Could Drain Education Funding

WASHINGTON — Congress and President Clinton, with rhetoric and threats flying back and forth between them, have set the stage for a budget showdown again this year, one education advocates fear could hurt millions of college students if  lawmakers fail to produce a bipartisan budget before Oct. 1.
Several major programs are in danger of starting the new fiscal year with temporary funding or no funding at all, as both parties engage in a high-stakes budget and tax game here on Capitol Hill.
Ironically, the funding problems come at a time when government officials are predicting a whopping $3 trillion surplus for the federal government over the next 15 to 20 years. But that’s a major part of the problem.
Given a government more flush with money now than at any time in recent memory, Congress is considering a 10-year, $800 billion tax-cut package that could be the first in a long-term commitment to more budget cuts and smaller government.
But Clinton has opposed such a massive tax cut, saying it’s too much given America’s needs right now. He’s promised Republicans he will veto such a plan. That places one-year funding for Pell grants, federal student loans and other financial aid programs at risk.
“The American people won’t be fooled,” says Rep. William Clay, D-Pa., a senior Congressional Black Caucus member, about a tax bill he says will hurt education and other major programs. “This bill provides very little for the average working family.”
Democratic leaders in the U.S. House of Representatives complain that the current tax-cut measure under consideration would force cuts in the federal budget that would adversely affect 4 million low- and middle-income college students.
The GOP goal is to contain Clinton’s demands for more than $25 billion in spending beyond what Republicans want, and to accuse him of attempting to pay for the excess by raiding a political sacred cow — Social Security surpluses.
Yet Congress has only a matter of weeks to resolve that issue and other key topics for educators.
Top congressional Republicans say they won’t deal. “We’re just not prepared to trade with the president with the American people’s money, a spending buck for me, a tax reduction for you,” says House Majority Leader Dick Armey, R-Texas. Here’s the outlook for action on some of the high-priority issues this fall.
nTax cuts: The Republicans’ $800 billion tax cut plan is the engine driving the budget and tax debate. Proponents see it as a way to return money to taxpayers and rein in a government that could find endless ways to spend a budget surplus. Opponents, including many educators, say the plan could force major cuts in vital domestic programs.
Clay contends that Americans  in the bottom 60 percent income bracket will see only about 8 percent of the bill’s tax cuts — or about “$10 a month.” In comparison, the richest 10 percent of Americans will reap 70 percent of the bill’s benefits.
The White House also has turned up the volume on this issue, claiming that the GOP tax cut would deprive poor children of Head Start services and a quality education. According to the Clinton administration, more than 430,000 families could lose Head Start and early childhood services.
Proponents of the tax cuts point to some potential advantages for students, such as larger tax credits on interest from education loans and more flexibility to use tax-free education savings accounts. However, those items represent a small percentage of the bill’s net loss to the U.S. Treasury.
nEducation budget: The federal government is running a surplus estimated at $100 billion this year, but that figure is not reflected in Congress’ spending allocations for domestic programs next year. At issue is whether to lift tight budget caps enacted in 1997 before the government escaped its annual red ink. Democrats and some moderate Republicans want to lift the cap, while GOP leaders oppose such a move.
The budget caps are particularly onerous for higher education because new programs enacted since those 1997 caps largely have benefited K-12 education —  not colleges and universities.
Last year, for example, Clinton and Congress agreed to provide $1.2 billion in a new program to hire more teachers and cut school class sizes. The president wants to boost that by another $1.4 billion for fiscal 2000.
College lobbyists, seeking a greater voice in the debate, sought help from Republicans earlier this year. In fact, the GOP House overwhelmingly approved a non-binding resolution to raise the top Pell grant by $400 next year — a level far beyond the president’s request.
Still, failure to lift the budget caps would leave no money for the K-12 or Pell grant spending goals — and leave other education programs open to cuts. Lobbyists’ best guess? Congress enacts temporary spending bills for October, while both parties try to win the best possible budget compromise.
nK-12 education: This fall the House and Senate will return to work on their required review and reauthorization of the Elementary and Secondary Education Act.
Among the major issues for consideration: GOP insistence on greater flexibility for states and school districts and Democratic calls to expand the law’s reach in areas such as preschool education, safe schools and secondary school reform. 

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