Policy Update: June 13, 2012
Currently, the mood in Washington, DC is pessimistic because no one is sure how the “fiscal cliff” will play out. The cuts would come in January 2013 if “sequestration” proceed, resulting in 9% cuts across the board to most domestic discretionary programs, plus the possible elimination of the Bush tax cuts. Washington is increasingly concerned about the economic situation in Europe and it's potential negative impact on the U.S. Economy. At the same time, Congress and the Administration have been trying to come to a comprimise over the possible increase in student loan interest rates from 3.4% to 6.8%, which will take place July 1 if nothing is done. Congress is moving some of the Appropriations bills that fund the research agencies, but it is not clear yet if they will even be able to pass the Labor, Health and Human Services, Education appropriations bill, which funds both the Department of Education and the NIH. Most believe nothing will get done on the macro political issues until after the election, and then there will be a “lame duck” session, which will likely be very busy right up until Christmas. While most hope Congress will address the fiscal cliff during that time, it will not be easy to do. If these issues are not addressed, the negative impact on higher education would be dramatic.
House moves FY'13 appropriations bills
Both Houses of Congress are slowly moving the FY'13 Appropriations bills, which fund the research funding agencies and higher education programs.
The U.S. House has now passed 5 of the 12 appropriations bills for FY'13: Commerce-Justice-Science, Energy and Water, Homeland Security, Legislative Branch, and Military Construction-Veterans. Three others passed the full committee: DoD, State-Foreign Operations, and Transportation-HUD. Two bills, Agriculture and Financial Services, have been approved at the subcommittee level. However, two House bills have not been moved in subcommittee - Interior-Environment and Labor-HHS-Education.
The Senate has approved 7 of its 12 funding bills in Committee, but none have reached the Senate floor, including: Agriculture, Commerce-Justice-Science, Energy & Water, Homeland Security, Military Construction-Veterans, State-Foreign Operations, and Transportation-HUD. Still pending in subcommittee are DoD, Financial Services, Interior-Environment, and Legislative Branch.
Senate moves Labor, Health and Human Services, Education Appropriations bill
On June 12th, the Senate Labor Health and Human Service, Education and Related Agencies Appropriations Subcommittee reported out its fiscal year (FY) 2013 appropriations bill by a vote of 10 to 7, along party lines. The bill provides funding for the Department of Health and Human Services (HHS), the Department of Education (ED), and the National Institutes of Health (NIH), among other agencies. While full details of the Senate proposal are not expected to be available until the full Senate Appropriations Committee considers the bill—as early as Thursday, June 14—top-line details were released during the subcommittee markup.
The bill totals $158.8 billion, and the NIH would receive $30.723 billion, an increase of $100 million above both the FY 2012 level and the President’s budget request. In addition, the maximum Pell grant award would increase $85 to $5,635 for the 2013-2014 academic year.
For more information, please see the Committee's press release.
House passes Energy-Water Development Appropriations bill
On June 6, the House passed the FY'13 Energy and Water Development Appropriations bill (H.R. 5325) on a bipartisan vote of 255 to 165.
The House-passed bill would provide $32.1 billion to fund the Army Corps of Engineers, Bureau of Reclamation, Department of Energy (DOE), and other independent agencies for FY 2013. The House bill overall is $965 million below the President’s budget request. Because the House decided to reduce spending for the annual appropriations bills $19 billion below the overall level set in last year’s Budget Control Act (debt limit agreement), the House allocation for this bill is $1.26 billion below the Senate bill.
During House consideration of the bill, Chairman Rodney Frelinghuysen (R-NJ) and RankingMember Peter Visclosky (D-IN) were largely united in fending off amendments to the bill. A few amendments that would reallocate funding within the bill without adding to the cost of the bill were adopted.
House Democratic members attempted to reallocate funding to the President’s DOE priorities and largely failed. Of note, an amendment offered by Rep. Mazie Hirono (D-HI) to reallocate $133.4 million from the Fossil Energy R&D program to the Advanced Research Projects Agency-Energy (ARPA-E) was defeated on a 131 to 257 vote. A similar amendment was offered to increase DOE’s Energy Efficiency and Renewable Energy (EERE) programs by reducing funding for Fossil Energy R&D, which also failed. Restrictions were also placed on the Advanced Research Projects Agency-Energy (ARPA-E) on the use of funding for certain activities relating to advertising, promoting the products or services, or raising capital not allowed under current regulations.
As with other House appropriations measures, the White House has indicated that the President’s senior advisers would recommend he veto this bill for reductions below the overall spending levels in the Budget Control Act and over various provisions in the House-passed Energy-Water bill, including reductions in funding for the DOE Office of Science, EERE programs, and ARPA-E.
Student loan interest rates
Congress has been working to try to avoid an increase in student loan interest rates from 3.4% to 6.8%, but until late last week it was looking like they might miss the July 1 deadline. Senate Majority Leader Harry Reid (D-NV) offered a possible compromise by proposing to pay for the measure with some of the proceeds that would come from a change to rules for contributions to employer pension funds and an increase in employer premiums for the insurance provided by the Pension Benefit Guaranty Corporation. The two proposals would generate a total of $17.5 billion, which Senator Reid says would cover costs of both the one-year extension of the current 3.4-percent interest rate on subsidized student loans and the pending reauthorization of the surface transportation programs. It is not clear yet if this compromise will be able to pass in time to prevent the increase in interest rates.
Higher education tax issues
Three Democratic Senators, including Senator John Kerry, introduced legislation last week that would consolidate and permanently reauthorize several higher education tax benefits, including the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC). The legislation would:
- Eliminate the need for two separate credits (AOTC and LLC) by creating a bifurcated credit: one for students enrolled at least half-time and one for students enrolled less-than-half-time.
- Increase the maximum credit to $3,000 (from $2,500 in AOTC/$2,000 in LLC) and make the credit permanent.
- Change the income phase-out. The current phase-out begins at $80,000/$160,000 and reaches zero at $90,000/$180,000; the new AOTC would begin its phase-out at the same place but end at $100,000/$200,000.
- Change lifetime limits from the number of years claimed (four years in the currentAOTC) to the maximum monetary amount claimed ($15,000).