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President to President
Molly Corbett Broad's weekly email newsletter to higher education leaders.

Federal Shutdown Looms Over Spending Dispute

Sept. 23-27, 2013 ~ Vol. 14, No. 30

  • Federal Shutdown Looms as Congress Wrestles With Spending Bill
  • White House Officials Discuss Obama Affordability Initiative at ACE Board Meeting
  • Final Rule on Municipal Advisors Exempts College and University Board Members

The news in Washington this week remains focused on the showdown over the budget: The deadline is nearing for finalizing a spending plan for FY 2014, which begins Oct. 1. If there is a government shutdown (something that has happened 15 times over the past 40 years), it is likely to be brief and campuses should not feel a major impact.

The House last week approved a temporary spending measure that would finance the government through Dec. 15 at the current FY 2013 spending levels. House leaders were compelled by their conservative wing to strip funding for the Affordable Care Act—Obamacare—to gain passage.

This week’s action occurred mainly in the Senate. After a marathon speech by Sen. Ted Cruz (R-TX) ended Wednesday, that chamber voted 100-0 to begin debate on the House bill. A cloture vote—this one to cut off debate—is scheduled for this morning. The chamber then will proceed to up to 30 hours of post-cloture debate and votes on amendments before moving to final passage, probably on Saturday. Majority Leader Harry Reid (D-NV) is expected to formally introduce a new version of the House bill without the language defunding Obamacare and only funding the government until Nov. 15.

If that bill is approved, House Speaker John Boehner (R-OH) would have a matter of hours to decide between three options: (1) have the House vote on the Senate’s spending bill over the opposition of his conservative wing, (2) add new Republican policy provisions to the spending bill, or (3) pass a weeklong spending extension to buy time to resolve the debate over the longer extension. If the House adopts the second approach and sends the bill back to the Senate, it is not clear if that chamber would have enough time to act by Oct. 1.

If the government does shut down for a relatively brief period, there should not be long-term consequences for students and campuses. However, you can expect that processing new applications for student financial aid will be delayed, federal oversight of colleges and lenders will lapse, and work at the Department of Education (ED) will halt. Pell Grants (because they are an entitlement) and federal student loans (because they are revenue-generating) should not be affected. Research funding should be impacted only minimally; while new grants and contracts could not be awarded during a shutdown, existing work could continue uninterrupted.

In 2011, the last time the government was this close to the edge, ED released guidelines on federal student aid communications and general departmental policies in the event of a shutdown. The White House has ordered agencies to do the same this year, but ED has yet to release its plan.

We hosted several members of the Obama administration this week at the ACE Board meeting to discuss President Obama’s plans to address college affordability.

As you’ll remember, the president introduced his initiative in late August at several colleges and universities in New York state and Pennsylvania. The element of the plan that has received the most attention is the idea of ranking colleges and universities based on some as yet undefined measures of “value” and “affordability.” Eventually, the president would like to tie these rankings in some fashion to institutional eligibility for federal student aid programs. The initial rankings are scheduled to be published by fall 2015. The Department of Education has yet to release a plan, but is under orders to develop one.

Cecilia Muñoz, director of the White House Domestic Policy Council, gave a general overview of what the White House has planned, although she did not provide specifics beyond what Secretary of Education Arne Duncan referenced in his speech last Friday at the TIME Summit on Higher Education. Muñoz expressed the urgency with which the administration intends to pursue implementation of these proposals, while acknowledging that a dysfunctional Congress will require creativity in charting a path forward for portions of the plan that require congressional approval.

Good news from the Securities and Exchange Commission (SEC) last week: The commission has exempted college and university board members acting within the scope of their official capacity from the final rules pertaining to “municipal advisors.” 

The exemption applies to both elected and appointed trustees, and covers both public and private nonprofit institutions. The exemption also covers college and university staff acting within the scope of their employment. The SEC rules, first released as a proposal for public comment in January 2011, are part of several compliance regulations the SEC must finalize to implement the Dodd-Frank Wall Street Reform and Consumer Protection Act. (See ACE’s comments here.)

Many thanks to the Association of Governing Boards of Universities and Colleges, which provided strong leadership in helping convince the SEC to reverse the initial proposed rule and exempt public and private trustees from the final rules.

Molly Corbett Broad
President of ACE