The Congressional Budget Office has released a cost estimate on
a bill (HR-1765) awaiting a House floor vote to make tax-free
the student loan reimbursement program for federal employees.
The program, designed as a recruiting and retention incentive,
allows reimbursements of up to $10,000 a year and $60,000
lifetime–with service agreements required.
According to CBO, enacting the bill would reduce federal revenues
by $9 million in one year, $37 million over 2006 to 2010 and
$78 million over 2006-2015, including reduced payments by employees
of Social Security and Medicare taxes. Offsetting that somewhat
would be lower government payments into Social Security and
Medicare now required when payments are made, of $3 million, $10
million and $20 million, respectively.
Sponsors of the measure believe that changing the tax status of the
payments will encourage agencies to make greater use of the
program. In 2004, 28 agencies participated in the program, paying
out $16.4 million to 2,945 employees (for an average payout of
about $5,600), up from 24 agencies paying $9.1 million to 2,077
employees in 2003 (an average of about $4,400). However, about
four-fifths of the payments were made by just five agencies: the
State, Justice and Defense departments, Securities and Exchange
Commission, and Government Accountability Office.
According to an Office of Personnel Management report earlier this
year, agencies told OPM that they generally consider the program
an effective tool but that barriers remain to using the authority
more widely, including a lack of funding caused by budget
limitations, recipients’ tax liability, and the service agreement.
With the CBO estimate–generally a prerequisite to moving
legislation of this sort–in hand, sponsors may try to schedule
a House vote in the near future. The bill cleared the Government
Reform Committee in June.
It’s unclear whether the CBO estimate is good or bad news for
chances of enacting the proposal. The amounts are relatively
small in the context of the federal budget, but with fiscal
pressures mounting, any new spending initiative not related
to emergency or military purposes faces difficult prospects,
and budget leaders are reluctant to drain off any income from
the Social Security and Medicare trust funds.
