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Senate Spending Bill Blocked; Loan Cuts Advance

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Stymied by partisan divisions, the Senate last week postponed action on a fiscal 1996 spending bill that would provide funds for most Department of Education programs and includes $1.5 billion more in education funding than the counterpart House bill.

The delay guaranteed that Congress would miss its Oct. 1 deadline for passing the 13 appropriations bills that fund government operations. But the House and Senate allayed fears of a shutdown by passing identical versions of a 44-day stopgap spending plan.

President Clinton was expected to sign off on the plan, which he helped negotiate.

In other budget action, Senate and House committees passed separate reconciliation proposals designed to save more than $10 billion from federal student-loan programs over the next seven years.

Those student-loan plans will be packaged into broad budget-reconciliation bills that seek long-term savings in entitlement programs called for in the GOP plan to balance the federal budget by 2002.

Congress hopes to complete work on the reconciliation legislation by late this month.

The week's frantic pace stalled on the Senate floor Sept. 28 when Democrats threatened to filibuster the $62.8 billion labor, health and human services, and education appropriations bill.

Besides protesting cuts in education and other social programs, Democrats wanted to remove a provision that would allow companies doing business with the federal government to permanently replace striking workers.

The threat moved Senate Majority Leader Robert J. Dole, R-Kan., to call two cloture votes, both of which failed 54-46. Sixty votes are needed under Senate rules to close off debate and proceed to a final vote.

Veto Threat

"Talk about dumbing down America," Sen. Tom Harkin, D-Iowa, said during floor debate. "Congress is not meeting its obligation to education in this country."

The bill would appropriate $24.7 billion for Education Department programs, $2 billion below last year's level. The House version would appropriate $23 billion.

President Clinton has said he would veto either version.

But the Senate bill, in addition to providing more money overall, would allocate $310 million for the Goals 2000: Educate America Act, the program at the heart of the Clinton administration's education agenda. House Republicans voted to abolish Goals 2000 in its education spending bill, agreeing with critics who say the goals-based reform effort promotes federal meddling in local schools.

"We've funded Goals 2000 because we believe that standards and goals are important to American education," said Sen. Arlen Specter, R-Pa., the chairman of the appropriations subcommittee that drafted the bill.

The Senate also attacked the president's domestic agenda earlier in the week by passing, 55-45, a separate fiscal 1996 appropriation bill that would provide $81 billion for the departments of Veterans Affairs and Housing and Urban Development and a list of independent agencies.

That bill would stop funding for Mr. Clinton's cherished AmeriCorps national-service program, as well as Learn and Serve America, which promotes service learning in schools. The House bill would also end funding for the programs.

Sen. Barbara A. Mikulski, D-Md., and Sen. Edward M. Kennedy, D-Mass., offered an amendment that would have provided $425 million for the beleaguered service initiatives. The amendment was rejected 52-47.

Senate Student-Loan Plan

With a backdrop of student protests and partisan sniping, Senate and House panels passed separate reconciliation plans last week that would meet the 1996 budget resolution target of slightly more than $10 billion in savings from student-loan programs over seven years.

The Senate Labor and Human Resources Committee's proposal, approved on an 8-7 party-line vote, would:

  • Create a loan-origination fee for colleges equal to 0.85 percent of their federal student-loan volumes, saving an estimated $2 billion over seven years. Opponents said colleges would pass on the cost of that fee to students.
  • Eliminate federal interest subsidies during the six-month grace period after a borrower graduates, adding up to $9 per month to payments over the lifetime of a four-year undergraduate loan and saving $2.7 billion. The provision would go into effect on Jan. 1, 1996.
  • Shrink the Clinton administration's direct-lending program by limiting it to 20 percent of all new student-loan volume, saving $600 million. Republicans joined Democrats to defeat an amendment that would have killed the program, as the counterpart House bill would do.
  • Seek $3 billion in savings from private lending agencies and guarantors through higher fees and lower payments on defaulted loans.
  • Cut $750 million from administrative costs.
  • Save $1.5 billion by increasing interest rates on Parental Loans for Students.

"I want to emphasize that my primary objective in designing this package was to minimize costs to students," said Sen. Nancy Landon Kassebaum, R-Kan., the chairwoman of the Senate committee.

Several students in the hearing room hissed when she said the bill would not limit the availability of student loans.

"This is an extreme measure that will impact families, students, and institutions for a tax break for the wealthiest Americans," Sen. Kennedy said. "I urge the president to veto it."

House Hits Direct Loans

In the House, the Economic and Educational Opportunities Committee passed a reconciliation plan that would eliminate the direct-lending program outright, a move they say would save $1.2 billion over seven years.

It passed 23-14. Rep. Tom Petri, R-Wis., joined all the Democrats present in voting against the plan.

Mr. Petri said direct lending cuts bureaucracy and eliminates the need for guarantee agencies, which he charged are now "an open invitation for abuse." He warned his colleagues that if the GOP kills direct lending, President Clinton will tell voters that they thwarted a "conservative loan program" to preserve a competing program that benefits "special interests."

"That argument will resonate with the American people because that argument will be right," Mr. Petri said.

Democrats complained that they were not allowed to offer amendments; Republicans said Democrats were not prepared to offer substantive changes to student-aid programs that would reach budget targets.

Republicans reiterated their contention that they can meet the savings target without limiting access to student aid and their argument that students will be better off in the long run if Congress balances the budget.

"All of the talk has been about how bad these cuts are," Rep. Howard P. "Buck" McKeon, R-Calif., the chairman of the Subcommittee on Postsecondary Education and Training, said at a news briefing. "Nobody talks about what will happen if we don't make these cuts."

Rep. Bill Goodling, R-Pa., the chairman of the House committee, came to its meeting wearing a T-shirt that bore the word "deficit" crossed out by a red slash. About two dozen members of a Young Republicans group attended the meeting in identical shirts.

Above Mr. Goodling, an electronic counter clicked every few seconds as it tallied the mounting federal debt.

Besides eliminating direct lending, the committee's plan would:

  • Cut $5.1 billion from lender profits.
  • Save $3.5 billion by eliminating the grace-period interest subsidy. Unlike the Senate language, the House bill would affect all borrowers currently in the system.
  • Save $450 million by increasing the interest rate on Parental Loans for Students.

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