Budget battle leaves colleges trembling

United States universities and colleges were caught in a waiting game this week as President Bill Clinton and Republican leaders struggled to agree on spending cuts to balance the budget within seven years.

The future of one of President Clinton's favourite programmes, the AmeriCorps programme to encourage students to do good works at home in exchange for subsidies on college fees, is in doubt.

"It is a waiting game for everybody, behind closed doors with a handful of players and a lot of programs," said one education lobbyist.

Republicans continue to demand a tight cap on direct government loans to students - popular with both students and colleges for their simplicity and speed - in favour of a loan guarantee system.

President Clinton is strongly backing the direct loan program, but Republicans claim that the limits would help save as much as $4.5 billion over seven years. In the budget horse-trading the president may have to give something up. Tax breaks for continuing education were among the threatened items as talks between the warring sides were deferred for a week.

Provisions that allow employers to claim tax deductions for what they spend on employee's education are estimated to cost about $620 million a year in lost taxes. While it brings in business to colleges, their lobbyists are struggling to defend the concessions.

Student grants and loans have been generally safe from the deadlock because they are "forward funded" a year ahead, officials say.

For exchange students, struggling to get passports and visas after processing slowed to a virtual dead stop, the partial agreement between President Clinton and Congress to at least reopen the government for business brought relief.

But many state colleges are nervously watching the outcome of the budget battles, it is reported. The generosity of local legislators may falter when Washington hands down its much-awaited budget cuts in medical help and welfare support for the poor.