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House Rejects Deficit-Reduction Plan, Raising Prospect of FederalShutdown

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Washington--The House early last Friday morning overwhelmingly rejected the bipartisan budget agreement crafted by White House and Congressional negotiators, raising the specter of a government shutdown and massive, across-the-board cuts in federal spending.

The 254-to-179 vote to reject the package, which sought to trim $40 billion from the fiscal-1991 budget deficit and a total of $500 billion over five years, cut across party lines. Conservative Republicans objected to its $134 billion in tax hikes over the five years, while many liberal Democrats argued the tax increases and Medicare cuts and premium increases would unfairly burden the poor and the elderly.

Negotiators had set a deadline of midnight Oct. 5 for the Congress to approve the agreement that was announced Sept. 30, one day before the start of the fiscal year. Lawmakers had already passed a stopgap spending resolution that extended the government's authority to spend money until the deadline.

Speaker of the House Thomas S. Foley of Washington vowed that the Congress would consider another spending bill before the deadline, although President Bush earlier had said he would not sign such a measure.

Education's $8.1-Billion Cut

If the Gramm-Rudman-Hollings deficit-reduction law takes effect as a result of the Congress's inability to pass a budget, Education Department programs, funded at $23 billion in fiscal 1990, stand to lose $8.1 billion for the fiscal year that started Oct. 1. The resulting cuts would include the following: student financial aid, $2.1 billion; Chapter 1 compensatory education, $1.8 billion; special education, $885 million; and impact aid, $247 million.

But because most of the department's programs are "forward funded," which means money appropriated in a fall budget is not released until the following summer, those who manage and benefit from such aid would have a better chance to cope with the loss, say education lobbyists. Hardest hit would be school districts that depend on impact aid, which is funded in the current year.

The sequester also would make up to 5,000 Education Department employees subject to 22-day furloughs.

The budget agreement, which would have made Medicare recipients, alcohol drinkers, cigarette smokers, frequent drivers, farmers, and the buyers of luxury goods shoulder much of the burden of increasing revenue and reducing subsidies, was not heavily opposed by most education groups here.

The American Federation of Teachers joined with the afl-cio in strongly opposing the plan, saying its tax increases and spending cuts would fall too heavily on the middle class, including teachers. Otherwise, education lobbyists said they were mildly pleased with the plan.

The budget package did not include across-the-board spending cuts, and the lobbyists predicted that under it the appropriation levels for education programs this year would be comparable to the $26.1 billion allocated by a House appropriations subcommittee and the $26.5 billion allocated by its Senate counterpart.

"We're waiting and watching along with everybody else. We certainly hope they can come up with something," said Nicholas J. Penning, director of legislation for the American Association of School Administrators and treasurer of the Committee for Education Funding.

Education lobbyists were unsure, however, how the budget agreement rejected by the House would have afed education funding over the next several years. The agreement called for defense and domestic discretionary spending to be cut by $182.4 billion over five years.

"What we won't be able to figure out is a reading on the out-years,'' said Susan Frost, executive director of the cef

Student Loans Targeted

Included in the deficit-reduction proposal was a call to eliminate $2 billion from the student-loan program over the next five years. Congressional aides are looking at ways to achieve such cuts.

Negotiators have suggested tightening eligibility provisions, for example by requiring aid applicants to have completed high school or pass an equivalency exam, eliminating correspondence schools and schools with default rates of 30 percent or greater from the program, and providing that loans not be disbursed to students until 30 days after the start of school.

Moreover, the agreement contained several money-raising measures that would significantly affect school districts. The agreement called for phasing in Medicare taxes for state and local employees not paying the tax prior to April 1, 1986, and making the tax apply to incomes up to $73,000. The current cap is $51,300.

In addition, school districts would be called on to pay Social Security taxes on employees not enrolled in a retirement system, such as substitute teachers, food handlers, and bus drivers. Finally, a 12-cent fuel tax intended to go into effect after July 1, 1991, would have an impact on districts' transportation budgets.

As soon as a budget is approved, Congressional committees are expected to carve out funding levels for federal programs.

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