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Legislative Update

July 1, 2005

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Legislative Activity

The Senate took action early this morning by passing the 2005-07 biennial budget bill on a vote of 17-16 (Cowles, Ellis, and all Democrats voting against). Senate amendments would:

Reduce the UW System appropriation by another $34 million over the biennium. This would take our GPR ending balance to a negative number from our 2004-05 base. Allowed the UW System to request restoration of up to $17 million a year at a meeting of the Joint Finance Committee. The bill is currently written in a way so that the Governor cannot veto the language and restore the funding to our budget -- contrary to some legislators’ stated intent.
Target a $1 million reduction to UW-Madison administration.
Require a 1.5 percent contribution by all unclassified employees into their pension accounts. This would mean our prized and committed faculty and staff would receive one half of one percent pay increase instead of the 2 percent proposed for 2005-06.
Add a TABOR like provision to limit future spending of the state (see pages 1-3 of Senate Amendment 50, http://www.legis.state.wi.us/2005/data/AB100-SA50.pdf).

Several of these provisions do not reflect the majority position of legislators. They were supported as necessary to secure the final two votes needed to pass the budget.

Next steps: The State Assembly must concur with these changes or reject them and form a conference committee to work out the differences between the houses. The Assembly will meet sometime after the Fourth of July holiday.

The good news is that the 3 percent tuition cap was defeated by a bi-partisan group of 25 Senators. A substantial number of Democrats were among this group and all deserve our appreciation (see roll call at link http://www.legis.state.wi.us/2005/data/votes/sv0137.pdf ). Senators who spoke against the cap included Senators Lassa, Robson, Risser, Jauch, Miller, Harsdorf and Erpenbach. Senate Democrats also supported a package of restorations to our budget which failed on a party line vote (see Senate Amendment 8 http://www.legis.state.wi.us/2005/data/AB100-SA8.pdf). The Republicans did allow for the potential recovery of the $34 million cut through a Joint Finance approval process. Although this was part of their package, a majority did not support this provision, but allowed inclusion of the proposal to move the process to the next step. Unfortunately, the Finance approval process does not let us know yet, how to plan, or not, for the $17 million reduction before students arrive on our campuses in September.

Federal Update

AAU reports that the Bush Administration has made the following recommendations for HEA reauthorization:

Secretary of Education Margaret Spellings last month sent to Congress the Administration's recommendations for changes to the Higher Education Act (HEA). Most of the proposals call for changes to federal student aid programs, including the Pell Grant, student loan, and campus-based aid programs. There are also recommendations that would change the method the government uses to determine student aid eligibility and that would create new programs to encourage academic credit articulation agreements and to encourage students to study math and science. The recommendations build upon proposals outlined in the President's FY06 budget.

The Administration calls for changes in the federal student loan programs that would save approximately $12 billion over five years. Most of the savings would come from reductions in government subsidies provided to lenders and guarantee agencies that participate in the Federal Family Education Loan program. Approximately $5 billion of the savings would be used to raise the maximum Pell Grant to $4,550 by increasing it $100 a year for the next five years.

The Administration proposes several other changes to the HEA of interest to research universities.

For Pell Grants, the Administration proposals would:

allow for year-round Pell Grant awards;
limit how long students could receive Pell Grants to eight years or the equivalent of 16 semesters; and
eliminate so-called "tuition sensitivity," which limits the amount of Pell funding that students may receive while attending low-cost institutions.

For Other Grant Programs, the Administration proposals would:

eliminate the base guarantees in the formula used to distribute funds under the Federal Work-Study and Supplemental Educational Opportunity Grant programs;
create a new Presidential Mathematics and Sciences Scholarships program that would award grants to institutions, nonprofit organizations, and partnerships, which would in turn give scholarships to needy students studying in math and science fields; and
create a new grant program to help states and higher education institutions create comprehensive academic credit articulation agreements to facilitate transfer of academic credit.

For Student Loan Programs, the Administration proposals would:

eliminate the Perkins Loan program and require participating institutions to return by October 1, 2006, the federal share of their Perkins revolving loan funds;
increase subsidized loan limits for first-year students from $2,625 to $3,500 and for second-year students from $3,500 to $4,500;
increase undergraduate aggregate student loan limit to $25,000 to correspond to the increases mentioned above;
increase unsubsidized loan limits for graduate students from $10,000 to $12,000;
increase the graduate aggregate student loan limits to $67,500 to correspond to the increases mentioned above;
maintain the current variable interest rate formula (capped at 8.25 percent) for all new Stafford Loans in lieu of current law, which converts the formula to a fixed 6.8 percent interest rate as of July 2006;
convert consolidation student loans to a variable interest rate from the current fixed rate now used;
permit borrowers to re-consolidate or refinance their loans and impose a one-percent origination fee on all reconsolidated loans;
increase the current one-time lender fee on all new consolidation loans from 0.5 percent to one percent;
expand student loan extended repayment options to all federal student loans;
reinstate expired provisions that exempt institutions with a student loan cohort default rate of less than 10 percent from the requirements that loans to first-year students not be disbursed until 30 days after enrollment and that all loans be issued in at least two separate disbursements;
expand loan forgiveness for math, science, and special education teachers serving low-income communities from $5,000 to $17,500.
eliminate permanently the 9.5 percent lender subsidy on certain student loans;
eliminate the "90-10 rule," which requires that at least 10 percent of an institution's revenue come from non-federal sources in order for an institution to participate in federal student aid programs;
eliminate the "50% rule" that applies to distance education programs and restricts eligibility to participate in federal student aid programs; the rule requires that 50 percent of a program's courses be offered on campus; and
clarify the current ban on students receiving federal aid who have been convicted of a drug-related offense so that the ban applies only to students who commit a drug-related offense while enrolled in college, thus exempting incoming students.

Notably, the Administration's proposals do not include a recommendation to create a national student-unit record system as proposed by the National Center for Education Statistics earlier this year.

It is unclear at this time how the House and Senate committees that have jurisdiction over the HEA are factoring the Administration's HEA recommendations into the legislation they are developing for consideration in July.