Balanced-Budget Law May Force Huge Reduction in Aid to Schools

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Washington--The Education Department raised Guaranteed Student Loan fees last week in anticipation of an 8.5 percent budget cut under the revived Gramm-Rudman-Hollings deficit-reduction law.

Meanwhile, education lobbyists contemplated the possible destruction of gains made in pending appropriations bills, and the Congress continued work on a reconciliation package that could avert the cuts.

According to a report issued by the Office of Management and Budget, the Education Department would lose $1.4 billion in spending authority if the automatic cuts, or sequester, go into effect as scheduled on Nov. 20.

That would mean, for example, a $350-million cut in the Chapter 1 compensatory-education program and a $485-million cut in student aid other than Guaranteed Student Loans.

Susan Frost, executive director of the Committee for Education Funding, said that would be "a massive disaster"--a cut twice as large as the one implemented under Gramm-Rudman-Hollings in 1986.

Fiscal 1988 appropriations measures recently passed by both the House and Senate include about $21 billion in education funding, a $1.5- billion increase from current levels. If the Congress manages to pass a spending bill that includes those appropriations levels, the automatic cuts would be taken from the higher base. But Ms. Frost said she would not view that as a victory.

"That would essentially wipe out the increase," she said. "No more children would be served, despite the high priority Congress has placed on education."

A Congressional resolution that provides funding at fiscal 1987 levels expires Nov. 10, but lawmakers have until Nov. 20 to avert cuts by enacting a package of tax increases and budgetary savings totaling $23 billion.

Ms. Frost said she remained hopeful that alternatives to Gramm-Rudman would be worked out, since President Reagan has reportedly agreed to negotiate with Congressional leaders on the issue, something he had refused to do until the Oct. 19 crash of the stock market.

Delayed Impact Seen

"I think there will be a sequester, but I think it will be reduced" by Congressional action, said Bruce Carnes, deputy undersecretary for planning, budget, and evaluation in the Education Department. "I don't see huge problems."

"In terms of our day-to-day administration, we will obviously have to tighten up," but personnel cuts are unlikely, Mr. Carnes said. "In terms of program operation, most don't pay out until spring or summer, so any impact that's going to be felt will be delayed and people have time to prepare for it."

Mr. Carnes said student-loan limits would not be cut. The department, he explained, raised origina8tion fees on gsl's from 5 percent to 5.5 percent and slightly cut the special allowance paid to lenders in the program, steps that would be rescinded if the automatic cuts do not take place.

The higher borrower fee "amounts to about 10 bucks," he said. "I don't see anybody not going to college because of that."

Congressional Moves

House and Senate tax-writing committees have approved separate revenue-raising measures designed to avoid Gramm-Rudman-Hollings cuts.

In a last-minute change to its $12-billion tax bill, the House Ways and Means Committee on Oct. 16 reversed its decision to repeal the federal tax exemption on motor fuel for state and local governments. The repeal, which would have cost school districts thousands of dollars each, was orginally proposed by the President to raise $600 million in new revenues.

The committee approved the bill on a straight party-line vote, 23-13. Republicans in the House and Senate have refused to participate in the drafting of the tax bills, arguing that the federal deficit should be offset through spending cuts rather than tax increases.

In the Senate, the repeal of the fuel-tax exemption was not included in the Finance Committee's budget-reconciliation bill, which was approved in a 13-7 vote. Two Republicans, Senators John H. Chafee of Rhode Island and John Heinz of Pennsylvania, crossed over and voted with the Democrats for the bill.

But lobbyists said last week that without more Republican support, prospects for passage of both bills were uncertain. In the House, for example, some additional support may be lost among conservative Southern Democrats, who have voiced opposition to the attachment of a ma4jor welfare proposal to the bill. (See related story on page 11.)

If the Ways and Means bill is downed by the full House, action in the Senate could be stymied because all revenue-generating legislation must originate in the House.

Although he has recently softened his stance, President Reagan has repeatedly promised to veto any tax-raising bill. Observers say gaining support for a veto override could be nearly impossible.

Vol. 07, Issue 08

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