Mexico floods will not affect proposed 2013, 2014 budget deficits -government

MEXICO CITY, Sept 28 | Sat Sep 28, 2013 3:13pm EDT

MEXICO CITY, Sept 28 (Reuters) - Mexico's proposed budget deficit goals for this year and 2014 will not be affected by some of the worst storm damage in decades, the Finance Ministry said on Saturday.

Mexican President Enrique Pena Nieto had previously said Congress would revise its proposed 2014 budget in the wake of the storms this month, which killed at least 147 people and left large swaths of the country under water, buckling bridges and destroying highways.

However, the Finance Ministry said the government would now shuffle existing funds to pay for the cleanup - estimated by Mexico's insurers' association to top 75 billion pesos ($5.7 billion), the highest bill ever from a natural disaster in the country.

"The costs associated with reconstruction will be met with available resources through the reorientation of some funds, but without affecting in any way the public deficit proposed for this year, or next," the ministry said in a statement.

The government has a 12.5 billion peso emergency fund, but will seek to divert 5 billion pesos from road-paving to spend on reconstruction, it ministry said.

Mexico's government will therefore stick to its aim, announced earlier this month, of widening the budget deficit next year to 1.5 percent of gross domestic product.

The government has also asked Congress to approve a deficit of 0.4 percent of GDP for 2013 after an economic slowdown this year hurt government revenue. Congress had passed a balanced budget for 2013 last year.

Finance Minister Luis Videgaray said on Friday that tropical storms Ingrid and Manuel will likely knock off about 0.1 percentage point from growth in 2013 and would temporarily boost inflation by no more than 0.15 percentage points.

Videgaray also said the economy, which contracted between April and June, would see stronger growth in the third quarter.

Mexico's economy is heading for its weakest performance since 2009, barely growing in the first half of the year and sparking fears that the country is flirting with recession.

Pessimism about prospects for Latin America's second biggest economy has increased due to the flooding, a poll of analysts this week by Reuters showed. ($1 = 13.17 Mexican pesos) (Reporting by Gabriel Stargardter; Editing by Simon Gardner and Christopher Wilson)

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Budget for Unexpected Personal Expenses in College

Consider fluctuating costs for personal expenses and necessities like gas and food as you plan your college savings strategy.

The cost of college beyond tuition and fees, textbooks and room and board can come as a shock to many parents and students.

University of Nebraska—Lincoln senior Sadid Carrillo says he's been able to budget for his college years because he "tried not to be wasteful."

He avoids eating out most of the time, and says dining off campus is the downfall for most students' budgets. "Especially in Lincoln you're a block away from where all the restaurants are at, so it's hard not to go out and eat everyday, which a lot of students do," he says.

[Learn how to create a student budget.]

"Families don't normally plan for these expenses, but they do occur," says Paul Goebel, director of the Student Money Management Center at the University of North Texas. His office offers budgeting help to parents, students and alumni.

"Whenever the price of gas goes up, so do the number of consultations students schedule with our office," says Goebel. "Transportation is often an underestimated cost," whether students come to campus for classes, drive to jobs or go home.

"An increase of any personal expense can easily throw a student's budget into the red," he says.

Parents and students should not only remember to save for these expenses, but to save more than they estimate.

"One reason for this is personal expenses are the great unknown," says Bob Burger, an Arizona-based financial planner. The rising costs of tuition and fees and room and board have been well-documented in studies – including those published by the College Board and the Department of Education – but the rising costs of transportation and personal expenses aren't as well known.

Experts suggest parents plan to save for these costs outside of 529 plan accounts, because withdrawals for nonqualified expenses like gas from these tax-advantaged college savings accounts can carry steep penalties. On a $2,000 withdrawal from a 529 account, the penalty would be $200 on investment earnings before any taxes.

Both Burger and David Blain, a certified financial planner from North Carolina, recommend parents incorporate saving for college as part of their overall financial planning.

Parents shouldn't neglect their own needs while planning for their children's. Financial goals such as retirement shouldn't be disregarded.

"Very few parents are going to say 'Nope, you have this amount in your 529 plan, I'm not helping with anything else,'" Burger says. He's told parents of current college students, "'You're going to run out of retirement if you pay for these college expenses,' and they still do it."

The best defense is planning ahead and setting limits. Blain tells parents to put money in their children's names that they will never need for themselves.

[Encourage children to save for college with these tips.]

Burger says any money left over after parents pay educational expenses can be used for a wedding, a down payment on a future home or another way to make an adult child's life easier.

To decide how much to save for a child's personal expenses, Blain and Burger recommend slightly different strategies. Burger says he takes an estimate of the current cost of these expenses and adds 3 percent per year for each year until the child is expected to use the funds to account for rising prices.

For parents of young children, Blain generally estimates these expenses will run about 20 percent of tuition and fees and room and board per year, and then he adds the cost of inflation. However, he also tells parents to decide just how much they want to spend. At a school that costs $14,000, he recommends parents expect $1,500 to $3,000 in extra expenses.

[Discover more ways to save on college costs.]

"The higher the cost of the school, the more students will likely need for personal expenses such as extracurricular activities," he says.

For parents of teens about to head to college, Blain asks specific questions: "Are they going to have a car? Is the parent's insurance rate going to go up? Does the college offer health care, or are they going to stay on the parent's plan?"

Whatever amount parents decide to set aside for a student's personal expenses, Goebel recommends they hold the student responsible for sticking to it.

"The college years are a time for all students to learn how to become more independent, both personally and financially," Goebel says.

Trying to fund your education? Get tips and more in the U.S. News Paying for College center.

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Examine Budget Proposals' Impact on Student Loans

Proposed House legislation would limit the maximum Pell Grant award to $5,645 for the next 10 years.

Back in April, we took a look at the president's budget proposal and what it might mean for postsecondary education. The House and the Senate have also released vastly different fiscal year 2014 budget resolutions.

Just like the president's proposed budget, congressional budget resolutions are not law. But they do show Congress' priorities and serve as self-imposed taxing and spending guidelines.

The most important benchmarks established by the budget resolutions are the overall appropriations funding levels they set. The total amount of funding will determine in turn how much every committee – including the Senate Health, Education, Labor and Pensions Committee and the House Education and the Workforce Committee – can spend and therefore if specific programs can be increased or if they will either be cut back or eliminated entirely.

[Learn the perks, pitfalls of student loan repayment proposals.]

This is also one of the biggest differences between the House and Senate proposals. The House's budget resolution sets an appropriations limit of $966.4 billion. That's about $18 billion less than the fiscal year 2013 postsequester funding and $477 billion less than the presequester funding.

In addition – as the New America Foundation points out in its Federal Education Budget Update – the House intends to divert money from nondefense to defense programs. This will further reduce the amount available for education programs.

The Senate, in contrast, sets a nearly $1.1 trillion appropriations limit. This amount of spending would require the budget passed by Congress to amend the Budget Control Act – known also as the sequester – in order to exceed the limits it sets. It's also about $92 billion more than the House wants to spend. That's a large gap to bridge.

It is clear Congress is also deeply divided in the policy realm as well. The House, led by Rep. Paul Ryan, R-Wisc., has produced what it calls The Path To Prosperity: A Responsible Balanced Budget that aims to balance the budget in 10 years. According to the resolution, a key problem with education funding is that federal student aid – led by Pell Grants – is driving up tuition costs and results in graduates having to make large student loan repayments.

[Understand efforts to stop the student loan interest rate increase.]

Many of the policy responses outlined in the House bill are devoted to cutting costs, including limiting the maximum Pell Grant award to $5,645 for the next 10 years, rolling back changes made in the College Cost Reduction and Access Act of 2007 that broadened the eligibility of needy families for student aid and moving to fair-value accounting for student loans. The resolution also implies it would be good to reinstate the wasteful Federal Family Education Loan program.

The Senate budget resolution produced by Sen. Patty Murray, D-Wash., – which sports the equally anodyne title of Foundation For Growth: Restoring the Promise of American Opportunity – also identifies the increased cost of college as a key problem, and "assumes Congress will enact proposals to reduce college costs while expanding college access and completion."

However, it calls for increasing the nation's investment in education and proposes solutions that are almost diametrically opposed to those in House budget resolution.

[Get tips on student loan repayment for college dropouts.]

Specifically, the resolution implies the Senate would expand Pell Grants and lauds the ending of the FFEL program. It also proposes getting rid of the student loan fee increases that were created by sequestration, retaining subsidized loans that help needy families and ensuring student loan interest rates are affordable.

It's possible the House and Senate will bridge these and other gaps and produce a joint budget resolution – perhaps though the budget reconciliation process – but it seems highly unlikely. Instead, those interested in the education budget have to wait out the larger budget battle that will be waged this summer to see if our nation will invest, or divest, in postsecondary education.

Isaac Bowers is a senior program manager in the Communications and Outreach unit, responsible for Equal Justice Works's educational debt relief initiatives. An expert on educational debt relief, Bowers conducts monthly webinars for a wide range of audiences; advises employers, law schools, and professional organizations; and works with Congress and the Department of Education on federal legislation and regulations. Prior to joining Equal Justice Works, he was a fellow at Shute, Mihaly & Weinberger LLP in San Francisco. He received his J.D. from New York University School of Law.

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