Background

As reported in the April 2005 Insider, the federal budget this year has been complicated by the reconciliation process. For the first time since 1997, the Congressional budget resolution passed in April contains “reconciliation instructions.” This year’s budget resolution authorizes deep cuts of $35 billion over five years to mandatory, or entitlement, spending. Examples of mandatory spending include child care funding, Medicaid, food stamps and student loans. At the same time, the budget resolution also contains $70 billion worth of tax cuts over five years, that will primarily benefit businesses and higher-income taxpayers.

Under the laws governing this federal budget process, Congress must pass a budget reconciliation bill in September. This bill will in effect reconcile, or square, the actual mandatory funding levels with those set in the budget resolution.The reconciliation process is designed to ensure that Congress achieves the spending and revenue goals laid out in their budget resolution.Often reconciliation is used as a deficit-reduction measure or as a way to enact tax cuts. For a detailed explanation of the process, see the House Committee on Rules.

In addition to this reconciliation process, Congress is also busy working on annual appropriations. Appropriations bills set discretionary funding levels for all departments and agencies in the federal government. Congress must enact appropriations bills each year to continue the flow of federal dollars that support these various programs. Examples of discretionary spending include Perkins, Workforce Investment Act, and adult basic education.

The House of Representatives passed their appropriations bill funding labor, education and human services programs on June 24; see the June Insider for more details. The Senate will likely pass their version of this spending bill upon their return from August recess in September.

Reconciliation: Key Issues to Watch

The Congressional budget resolution passed in April contains reconciliation instructions to cut funding for Medicaid by $10 billion over five years. To do this, the Senate Finance Committee and the House Committee on Energy and Commerce, which both have jurisdiction over Medicaid, must produce legislation that carves out $10 billion from the program by September 16. To accomplish this, these committees are looking to the recently appointed Medicaid Commission and the National Governors Association (NGA) for recommendations. Unfortunately, any changes to the eligibility requirements or benefits will disproportionately affect low-income women and their families. See this issue’s article on Medicaid for more information.

The budget resolution also directs House and Senate committees to cut student loan programs. The House Education and Workforce Committee has already passed legislation that would reduce funding by $11 billion over five years—see this issue’s HEA article for more details. In addition, Rep. Wally Herger (R-CA), Chairman of the House Subcommittee on Human Resources, has recently announced that the House will take up TANF reauthorization as part of the budget reconciliation bill in September. This approach to reauthorization could result in potentially devastating cuts to the program; and in particular, child care funding.

After a marathon three-day session ending on July 22, the House Education and the Workforce Committee voted 27-20 to approve H.R. 609, the College Access and Opportunity Act of 2005. The Act authorizes $4.6 billion in spending for FY06, a slight increase over the $4.3 billion for FY05. The bill also allows legislators to determine how much funding is necessary through FY11 for discretionary programs.

H.R. 609 would reauthorize the student loan programs offered by the federal government known as Direct Loan and Federal Family Education Loan (FFEL). Direct lending allows students to borrow directly from the U.S. Treasury while the FFEL program uses private lenders. Schools would continue to be allowed to choose the program that best meets their needs. A bipartisan amendment that would have rewarded schools and students for selecting the less costly Direct Lending program was defeated along party lines. This amendment, sponsored by Congressmen Thomas Petri (R-WI) and George Miller (D-CA) would also have increased Pell grant funding by $17 billion over 10 years.

Among the most controversial topics of debate during the extended session was the issue of student loan interest rates. Under an amendment adopted by the committee, students would be permitted to choose between a fixed interest rate, or a market variable interest rate capped at 8.25%, when they consolidate their loans. However, in 2002 Congress pledged a 6.8% cap. The fixed rate would be set at 9.25%, plus a one-time fee of 0.5% of the loan. A Democratic amendment to establish the lower 6.8% cap, saving students an average of $6,000 over the life of their loans, was defeated.

An amendment, offered by Rep. Rush Holt (D-NJ) that would have increased funding for the CCAMPIS (Child Care Access Means Parents in School ) program was defeated. This program provides funding for campus-based child care centers that provide services to low-income adult parents. The bill would also make Pell Grants available year round to students who attend community colleges.

The Senate's Committee on Health, Education, Labor and Pensions has held several hearings on HEA reauthorization and is currently working to produce a bipartisan bill.   It is unclear when reauthorization will be completed. Women Work! will continue to report on any new developments.

Since its inception in 1965 Head Start has helped level the playing field for children living in poverty by preparing them for school through high-quality education, health, nutrition and parenting services. The inclusion of parents and local community members as volunteers and teachers is key to the Head Start program. The availability of high quality, low-cost school readiness programs allows low-income parents be sure their young children will be healthy and prepared for school at the same time parents are free to participate in the workforce.

Women Work! will continue to monitor the progress of this legislation in both the House and the Senate. The Head Start program has been under-funded for years and it is unlikely that either a Head Start reauthorization bill or an appropriations bill will make positive changes for Head Start in this session of Congress.

This summer, as Medicaid celebrates 40 years of providing health care to low-income Americans, two new threats to the program have emerged. After a two month delay, Health and Human Services Secretary Michael Leavitt appointed all voting and non-voting members to the Medicaid Commission, on July 8th. The commission is charged with providing recommendations on ways to slash $10 billion from the Medicaid program over the next five years, in order to comply with this year's federal budget requirements. Despite bipartisan requests for an independent commission, the Bush Administration has loaded the commission with former and current administration officials. No program beneficiaries or health care providers will serve as voting members. The commission’s recommendations are due September 1, leaving little time for in-depth consideration of program participants' needs.

A second challenge to the Medicaid Program emerged July 15, at a meeting of the National Governors Association (NGA), where a Medicaid reform proposal was formally adopted by the powerful association. The proposal includes a provision allowing individual states to set Medicaid co-payments regardless of beneficiaries' medical need or ability to pay. As states have faced increasing financial pressure, and as cuts to federal Medicaid funds loom, states have turned to “cost-sharing” as a way to mange the program's costs. Essentially, cost-sharing creates undue burden on Medicaid beneficiaries by charging them more for the health care services on which they rely.

Currently, Medicaid beneficiaries who are in great need are exempt from cost-sharing, but the NGA's proposed changes would remove existing exemptions to cost-sharing from populations including pregnant women, children and hospital patients. Though cost-sharing measures have been shown to reduce program costs in the short term, they do so only by discouraging those most in need from using health care. In the long run, cost sharing policies increase financial burdens on other parts of the health care system, as beneficiaries seek expensive emergency care, rather than lower cost preventative care under the Medicaid program.

Health care advocates have identified a numbers of ways to save money, which do not pass on the costs of Medicaid to the programs low-income beneficiaries. Solutions include changing the reimbursement rates to pharmacists for dispensing drugs, changing the formula for calculating Medicaid “best price” and Medicaid rebates, and cutting administrative costs of the drug rebate program. For more information on these and other recommendations, visit the National Women’s Law Center or the Families USA websites.