Federal Update for June 16

Congressional Schedule and Floor Activity

Congress is in session this week. The Senate plans to continue consideration of tax extenders/social safety legislation. It is still unclear what will be included in the package and whether there will be enough votes to reach passage by the end of the week. Provisions of interest to higher education include:

The bill would extend through the end of 2010:

"Roll over" of Individual Retirement Accounts (IRAs) for charitable purposes, including donations to institutions of higher education

· Research and development tax credit

· A modified above-the-line tuition deduction

The tuition deduction is modified in that it would be "unavailable to a taxpayer for whom a credit for higher education under section 25A (the Hope and Lifetime Learning Credits) would have provided a greater net reduction in tax liability, without regard to any disallowance or reduction in value of the credit as a result of the alternative minimum tax." APLU reports that they understand this to mean that the cost of this provision is less than a deduction without the stipulations.

Additional issues addressed in the bill include:

Build America Bonds

The current version of the legislation would also extend the Build America Bonds (BABs), originally created by the American Recovery and Reinvestment Act (ARRA) and scheduled to expire this year, for two years with lower subsidy rates.

FMAP

The current extenders bill would provide $24 billion to states for an additional six months of the increased federal Medicaid assistance payments (FMAP), which were also created by ARRA and are scheduled to expire at the end of 2010. While FMAP may not be directly related to higher education, given the size of the potential payments to individual states, the failure to extend the payments may lead to large cuts in other state services, including public higher education, to compensate for these budgetary holes. Moreover, many states have assumed the continuation of these federal payments in their budgets for FY2011. Without continued FMAP, those states will need to fill large holes in their budgets. This is a provision that UW System would want to support: it would help the state move through the coming year, potentially without the need for a mid-year lapse and, going forward into the next biennium, could put UW System in a better position.

The following table prepared by the National Council of State Legislatures (NCSL) includes information about which states had assumed the extension of the payments in their FY2011 budgets and the size of the potential payments: http://www.ncsl.org/default.aspx?TabId=20453#State_Budget_Update .

In the House, the Majority Leader's schedule includes possible further action on H.R. 4899, the Supplemental Appropriations Act, but the outlook and details for the Supplemental are also uncertain.

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Office of Management and Budget FY 2012 Guidance

This past week, the White House and Office of Management and Budget (OMB) sent a letter to all federal agencies asking that they go through their budgets line by line and identify the least critical programs to advancing their agency missions. Concurrently, OMB released the FY 2012 budget guidance to help agencies prepare their 2012 budget submissions, which are due on Sept. 13, 2010. OMB Director Orszag asked agencies to submit a budget request five percent below the discretionary total provided for that agency for FY 2012 in the FY 2011 Budget. OMB states this is to ensure that the FY2012 President's Budget keeps to an overall non-security discretionary freeze while providing flexibility for new initiatives and contingencies.

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Water Resources Research Act

Legislation reauthorizing the Water Resources Research Act (WRRA) has been introduced in the U.S. House. This is the companion bill to S. 3363 in the Senate. The House Natural Resources Committee is planning a hearing on H.R. 5487 and WRRA on June 17th. There are no Wisconsin Members who are co-sponsors of the bill. Because water and water research has implications across the UW System, UW System Office of Federal Relations will be working with our delegation to secure co-sponsorships. If you have information that would be helpful in advancing this work, please advise the UW System Office of Federal Relations.

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Following are notes from the June 10 hearing of the House Research and Science Subcommittee (link to: http://science.house.gov/subcommittee/research.aspx). Subcommittee Chairman Lipinski opened the meeting with a brief opening statement discussing his belief that innovation and research will be the driving force of future economic growth. He also discussed his recognition that "A merica's international competitiveness and economic growth will increasingly depend on successful technology transfer from lab to marketplace. " Chairman Lipinski also discussed the increase in R&D funding in China and highlighted how many of our international competitors are copying the United States system of basic research. He then moved into highlighting the difficulty faced by innovators at universities attempting to commercialize their inventions.

Ranking Member Dr. Ehlers talked about how beneficial partnerships between universities and industry can be. He discussed the R&D tax credit offered by Congress to encourage companies to engage in R&D and drive economic growth. Dr. Ehlers said he is saddened that he has only managed to pass the tax credit on a year-to-year basis, commenting that for the credit to reach its full potential, business owners must be able to plan in advance and know the credit will exist. He said he hopes Congress will grant a long-term authorization to the R&D tax credit. Dr. Ehlers also discussed the unintended consequences that could arise as university research becomes more commercially focuses and highlighted his concern that student could be exploited as cheap labor by industry.

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Race to the Top

Recently the U.S. Department of Education announced that 35 states and the District of Columbia submitted applications to be considered for Phase 2 of the Race to the Top competition. The Department will select the Phase 2 winners over the summer, using the same process as Phase 1. Depending on the size of the winning states, 10 to 15 states could win Race to the Top grants.

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Committee on Measures of Student Success

The Education Secretary has announced the appointment of the 15 members to serve on the Committee on Measures of Student Success. Created under the Higher Education Opportunity Act, the committee will develop recommendations for two-year institutions of higher education to comply with the law's completion and graduation rate disclosure requirements. It will also develop recommendations regarding additional measures of student success that are comparable alternatives to the completion or graduation rates, taking into account the mission and role of such institutions.

(APLU, U.S. Department of Education, and the UW System Office of Federal Relations contributed to this report.)