Written by: Barmak Nassirian
Published: 09/28/2005

Cuts to Graduate Students Proposed as Savings to Pay for Hurricane Costs

With costs of federal efforts associated with hurricane Rita still uncertain, concern about the budgetary impact of disaster spending is mounting in Congress. Federal relief and rebuilding costs for hurricane Katrina already top $70.7 billion, with some $6 billion in tax relief (P.L. 109-73) and $62.3 billion in two emergency appropriations bills (P.L. 109-61 and P.L. 109-62) enacted on September 2 and 8. Of the $62.3 billion directly appropriated by Congress to date, some $44 billion remain available in federal disaster relief funds.

In addition to the larger expenditures, a series of smaller targeted provisions have been enacted and others are moving through the legislative process. On Sept. 21, President Bush signed both the Pell Grant Hurricane and Disaster Relief Act (H.R. 3169) and the Student Grant Hurricane and Disaster Relief Act (H.R. 3668). These bills allow the Secretary of Education to waive regulations requiring the return of federal student aid funds to students who are forced to withdraw from classes because of Hurricane Katrina. On September 16, the U.S. Department of Education (ED) issued a press release outlining $1.9 billion in proposed education relief, most of it going to the K-12 sector. Only about $227 million of the $1.9 billion would be directed at colleges and universities, with most of it going to help students who have been displaced because their institution has closed. Very little funding has thus far been designated for reconstruction or repair of campus facilities.

In a clear parting of ways with their Mississippi neighbors, Louisiana Senators Mary Landrieu (D) and David Vitter (R), introduced a package (S. 1766 and S. 1767) that would direct $250 billion in federal funding for rebuilding effort in the state. The Mississippi political leadership—which includes Gov. Haley Barbour (a former GOP national party chairman), and Republican Senators Thad Cochran (Chairman of Senate Appropriations Committee) and Trent Lott (former Senate Majority Leader)—is also certain to push for significant federal expenditures for that state, albeit in a less public manner. Beyond the costs of Katrina, significant new resources will be needed to assist with clean-up after hurricane Rita, whose impact on Texas is already estimated by Governor Rick Perry to exceed $8 billion.

As the size and scope of hurricane costs begin to sink in, fiscal conservatives in Congress are gearing up to push for offsets. On September 21, the Republican Study Committee (RSC), representing fiscally conservative members of the GOP in the House, launched “Operation Offset” to press for cuts to various federal programs to offset the costs of recovery. The detailed list of proposed cuts in the RSC package include the elimination of interest subsidy for student loans for graduate students, a one-year delay in implementation of the new Medicare drug benefit, and the repeal of “earmarks” (specific projects in members’ districts written into the law) in the recently adopted transportation bill. While these proposals are unlikely to be adopted, pressure is clearly building in favor of budget cuts. Senate Majority Leader Bill Frist (R-TN) has asked Senate Budget Committee Chairman Judd Gregg (R-NH) to convene a meeting of Republican Senators to discuss how hurricane costs might be offset, and called on the President to propose a list of possible program cuts for congressional review. Democrats have weighed in with their demand that before it contemplates any cuts to federal spending programs, Congress should reject the nearly $70 billion in tax cuts embedded in the 2006 budget agreement (H Con Res 95). The budget choices ahead for Congress and the Administration may include such extreme measures as across-the-board cuts, entitlement reform, impoundment of federal funds already appropriated, and tax changes.