Given Calls for Tax Cuts, E.D. Programs May Be Vulnerable

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From President Clinton to his Republican adversaries in Congress, the most popular resolution in Washington this new year is to cut taxes and downsize government.

That pledge--though appealing to many voters--is an ominous sign for federal education funding, and may even threaten the existence of the Education Department.

"They could get cold feet, but the potential for substantial cuts, including entire departments, is greater than at any time in my life," said William B. Niskanen, a former economic adviser to President Reagan and the chairman of the Cato Institute, a Washington-based libertarian think tank.

In an ironic twist, President Clinton may now be able to cut two dozen small education programs he tried unsuccessfully to eliminate last year. And the President joins G.O.P. leaders in supporting a plan to replace dozens of federal job-training programs with block grants.

Another cost-saving measure popular among conservative reformers would end government subsidies of student-loan interest that accrues while borrowers are in school.

"Prospects for reductions and program eliminations are truly real and troubling, especially at a time when states are looking for money," said Michael Edwards, the interim director of government relations for the National Education Association.

Said one Republican staff aide: "The education community ought to look at reality and decide their priorities."

The Federal Role

Indeed, the House Economic and Educational Opportunities Committee is already planning hearings on the federal role in education. The committee's chairman, Rep. Bill Goodling, R-Pa., has said he wants to review all federal education programs. (See Education Week, 11/23/94.)

It is unclear if former Secretaries of Education William J. Bennett and Lamar Alexander will testify at the hearings, a spokesman said. The former secretaries--who are drafting proposed education legislation at the request of the new Speaker of the House, Rep. Newt Gingrich, R-Ga.--may propose abolishing the Education Department and folding most education programs into block grants.

Not to be outdone, Senate Republicans last week said they will cut an unspecified 100 federal programs.

The likely fate of education funding in coming years will become clearer when President Clinton and G.O.P. leaders release competing budget proposals, probably early next month.

In the meantime, Republicans are already drafting reconciliation and rescission bills to help pay for tax cuts and other plans, including those in the House G.O.P.'s "Contract With America."

Reconciliation bills, usually passed at the end of a session along with appropriations bills, seek to alter program language in existing laws in order to save money.

The goal of a rescission bill is to cancel discretionary funding that has been appropriated but not yet obligated. Rescissions typically target overfunded programs and small pet projects, though it is possible to cripple unpopular programs through this mechanism.

Everything on the Table

Neither type of legislation is unusual, but the scope of this year's targets could be unparalleled.

"All we can say is that everything is on the table," said Bruce Cuthbertson, a spokesman for the chairman of the House Budget Committee, Rep. John R. Kasich, R-Ohio.

The fiscal 1995 alternative budget drafted last year by Republicans on the budget panel offers a blueprint of G.O.P. priorities, he said.

That means "in school" subsidies for student loans could be targeted. The idea was endorsed in the 1995 alternative budget because it would save $9.6 billion over five years. Critics, however, say the average cost of a four-year loan would jump 17 percent and hope a public outcry will help douse the idea.

As for rescissions, one Republican aide said the cuts could total $5 billion, and added: "I would not be shocked by $19 billion."

Education programs are particularly vulnerable to rescission proposals because many of their funds are allocated late in the budget cycle.

The House Appropriations Committee will hold hearings this month on a rescission bill.

Despite the rhetoric, not all the proposed cuts are motivated solely by a desire to rein in the federal deficit. The Republican victory in November, combined with the proximity of the 1996 Presidential election, has escalated the bidding on tax cuts as well.

Tax-Cut Fever

Last month, for example, Mr. Clinton outlined a proposed "Middle-Class Bill of Rights" that includes $60 billion in tax cuts over five years. He proposed tax credits of up to $500 for each child younger than 12 in families earning up to $60,000; a tax deduction of up to $10,000 for college tuition or other postsecondary education costs for families earning up to $120,000; and deductions for contributions to individual retirement accounts. Money from the accounts could be withdrawn tax-free for college costs, the purchase of a first home, a catastrophic illness, or to care for an elderly parent.

Mr. Clinton also proposed consolidating federal job-training programs and folding some of them into block grants. The plan would reserve up to one-third of Pell Grant funds for "skill scholarships" of up to $3,000 that would help needy individuals pay for job training.

"My rule for the next two years will be country first and politics-as-usual dead last," Mr. Clinton said in his Dec. 15 speech. "I hope the new Congress will follow the same rule, and I hope you will, too."

Compared to other family-based tax-cut plans on the table, including Mr. Gingrich's, Mr. Clinton's is less generous, but would cause the least loss of government revenue.

Education advocates, generally wary of tax cuts that could lead to reduced federal funding, are critical of Mr. Clinton's tuition deduction on other grounds as well.

It will not help the neediest young people go to college and would favor affluent families, said Edward M. Elmendorf, the vice president of government relations for the American Association of State Colleges and Universities.

Grants for low-income students should be raised instead "so you don't have to borrow your brains out to get a college education," he added.

But a top education official called President Clinton's plan an investment in "intellectual capital for economic growth."

David A. Longanecker, the assistant secretary for postsecondary education, said the deduction would not prompt an influx of new students, but would reduce tuition burdens on middle-class parents. The Administration also hopes to increase the maximum Pell Grant from about $2,340 a year to around $2,600, he added.

E.D. A Target?

Mr. Clinton's tax cuts would be paid for by $24 billion in savings over five years obtained by downsizing the Housing and Urban Development, Transportation, and Energy departments, as well as the General Services Administration and the Office of Personnel Management. The President would save $52 billion more by extending the existing freeze on domestic discretionary spending for two years through 2000.

Officials say the President wants to spare the Education Department large-scale downsizing. And, despite some rumors, it apparently did not make the short list to be one of the Administration's sacrificial lambs.

"I think it says there is terrific support by this Administration for education," said Marshall S. Smith, the undersecretary of education.

Still, the department is joining the aggressive streamlining effort led by Vice President Gore's National Performance Review. For example, Mr. Smith said, the department hopes to save more than $4 billion over five years through changes to the federal student-loan program. He predicted that streamlined contract and grant procedures will be in place later this year.

But Mr. Smith stressed that reform should not come at the expense of other key initiatives. He said the Administration's fiscal 1996 budget will emphasize new programs under the Goals 2000: Educate America Act and the newly reauthorized Elementary and Secondary Education Act.

"We're not going to change purposes," he said. "We want to stimulate local and state reform around high standards."

But pundits question the relevance of Mr. Clinton's budget, which some say will be dead on arrival in the Republican-controlled Congress.

"The real question for observers is, Will the last two years be erased?" said the N.E.A.'s Mr. Edwards. "Without funding to make the [E.S.E.A.] provisions reality, they're a bunch of empty promises."

Indeed, the President would risk being irrelevant if he simply proposed a "hold-the-ground budget," Mr. Longanecker agreed.

"But bold ideas in the budget will require a response," he said. "The President does not want to follow, and the budget is one way you lead."

Vol. 14, Issue 16

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