College loan subsidy proposal by Senator Scott Brown could fall short of $6 billion funding
WASHINGTON -- A proposal by Senator Scott Brown to pay for college loan subsidies by recovering improperly dispersed government funds may fall far short of raising the necessary $6 billion to extend the subsidies, a report by the Congressional Budget Office suggests.
While the CBO has yet to analyze Brown’s proposal, its analysis of similar legislation shows that reducing payment mistakes would recover only “several million dollars.”
On Tuesday, Democrats failed to muster a filibuster-proof majority to consider a one-year extension of Stafford loan subsidies that would keep interest rates for more than 7 million college students from rising -- from 3.4 percent to 6.8 percent -- on July 1.
Senate Democrats lost the effort 52-45, far short of the 60 votes needed for their proposal to advance, and today again brought the matter to the floor.
During a speech on Tuesday, the chamber’s top Democrat, Senator Harry Reid of Nevada, called Brown’s proposal “all for show.”
“One Republican has talked about -- we understand they have an amendment all ready to go -- but he claims it would pay for this bill. But according to the CBO, his bill pays for nothing,” Reid said. “We need $6 billion for one year.”
Democrats had sought to pay for the subsidies by closing payroll tax loopholes that allow some to avoid some Social Security and Medicare taxes.
But Senate Republicans proposed using money from a prevention fund in the president’s health care law, as House Republicans did when they approved their version of the legislation last month.
Brown, who sided with his party in opposing a direct vote on the Democratic proposal, offered his own proposal as an alternative.
Brown’s legislation directs the Office of Management and Budget to identify which agencies account for most improper payments and would expand programs to audit and recover improper payments.
“Senator Brown believes that working together, we can find the $6 billion of improper payments and return the money to the Treasury to pay for the cost of the student loan rate increase,” said Marcie Kinzel, Brown’s director of communications. “He is open to working with anyone of good will to cut this wasteful spending and make sure that Congress gets the student loan fix done in a fiscally responsible way.”
According to the Government Accountability Office, federal agencies made $115 billion in improper payments in 2011, with 93 percent of those payments processed by just 10 federal programs, most for senior programs such as Medicare.
In October, the Senate Committee on Homeland Security and Governmental Affairs, of which Brown is a member, requested a CBO analysis of the “Improper Payments Elimination and Recovery Improvement Act of 2011,” authored by Senator Tom Carper, a Democrat from Delaware.
In its analysis, the CBO noted that “Not all improper payments involve fraud or result in a loss to the federal government.”
The CBO analysis said that the Centers for Medicare and Medicaid Services already have audit and recovery pilot programs in place to correct claims and recover incorrect payments.
One demonstration program cost about $200 million to operate and returned about $695 million to the Medicare trust funds, the CBO said. A similar program was launched between 2008-2011, netting $140 million in saved funds.
Government officials say the vast majority of improper payments are dispersed unintentionally, or are legitimate payments but were categorized as improper because proper paperwork was lacking.Bobby Caina Calvan can be reached at firstname.lastname@example.org. Follow him on twitter @GlobeCalvan.