Washington Update: Briefing on Federal Legislation and Policy Issues

1. Washington Update: Briefing on Federal Legislation and Policy Issues 2011 Higher Education Government Relations Conference Brian Flahaven, CASE Jim Hermes, AACC Bob Moran, AASCU Jennifer Poulakidas, APLU

2. FY 2012 Appropriations Status of federal funding for Fiscal Year 2012 Began 1 October No FY12 bills passed at that point Operated under Continuing Resolution(CR) until 18 November

3. FY 2012 Appropriations Some Success! “Mini-bus” of 3 bills: Ag, C-J-S, T-HUD And some further procrastination… Extended CR until 16 December

4. FY 2012 Appropriations What we know USDA AFRI: $264.5m (flat) NSF: $7.03b (+2.5%) NASA: Science directorate $5.09b (+2.9%) Aeronautics research $570m (+6.5%) Education programs $138m (-4.8%) NOAA: $4.89b (+6.4%) NIST: Manufacturing Extension Program $128.4m (flat) Technology Innovation Program $0 (-100%) HUD Sustainable Communities: $0 (-100%)

5. FY 2012 Appropriations Still Pending Labor-HHS-Ed (Pell, other student aid, NIH) Energy & Water (energy research) Defense (defense research) Interior-Environment (NEH, USGS, EPA) State-Foreign Operations (USAID higher ed programs)

6. FY 2012 Appropriations Labor-HHS-Ed Student Financial Aid: Pell max maintained at $5550 SENATE eliminates in-school interest subsidy for undergrad loans during 6-mo grace period HOUSE Pell changes: 18 to 12 semesters eligibility; zero family contrib income up to $30k from $15k; eliminate eligibility for less than half-time; IPA allowance HOUSE bill also cuts and eliminates other higher ed programs New accounting spin re Pell, $1.3b shortfall NIH SENATE $30.5b HOUSE $31.7b

7. FY 2012 Appropriations Outlook… anybody’s guess! Within 2 weeks with big package of remaining spending bills Before end of year in super package of remaining spending bills, expiring tax provisions, sequestration limits CR until Feb/March 2012 Year-long CR

8. Budget Control Act • Negotiated measure to address the nation’s debt ceiling issue. • Raised the ceiling $2.1 trillion in a two-step process under certain conditions. • $900 billion immediately • $1.2 trillion subject to Congressional action/inaction • Vote on a Balanced Budget Amendment • Creation of Joint Committee on Deficit Reduction

9. Budget Control Act First Step - $900 billion • Agreement established $900 billion in discretionary savings by setting security and non-security spending caps for the next 10 yrs. • Gave the President ability to immediately raise the debt ceiling by $400 billion. • President can request an additional increase of $500 billion, subject to a vote of disapproval.

10. Budget Control Act

11. Budget Control Act Second Step - $1.2 trillion - $1.5trillion • President may request an additional $1.2 trillion – subject to disapproval. • President may request an additional $1.5 trillion if both the House and the Senate pass a Balanced Budget Amendment to the Constitution for ratification by the states. • President may request amount between $1.2 and $1.5 trillion subject to Joint Committee.

12. Budget Control Act Joint Select Committee on Deficit Reduction (Super Committee)

13. Budget Control Act Joint Select Committee on Deficit Reduction (Super Committee) “GOAL—The goal of the joint committee shall be to reduce the deficit by at least 1,500,000,000,000 over the period of fiscal years 2012 to 2021.”

14. Timeline • Sept. 8: First organizational meeting held and rules for operation of committee established. • Oct. 14: House and Senate committees must submit recommendations to the committee by this date. • Nov. 23: Deadline for the committee to vote on a plan with $1.5 trillion in deficit reduction. • Dec. 2: Deadline for the committee to submit bill to the president and Congress. • Dec. 23: Deadline for both houses to vote on the committee bill.

15. Timeline • March 2012 – Approximate time when the first $900 billion in the debt ceiling increase runs out. • Year End 2012 – Approximate time when the additional $1.2 billion in the debt ceiling runs out. • January 2013 – Sequestration begins – if necessary.

16. BCA Sequestration • Sequestration requires OMB to cut $984 billion ($1.2 trillion minus $216 in interest savings) for fiscal years 2013 - 2021. • $109 billion per year – split evenly between defense and non-defense. • Discretionary funding will experience an across the board cut for fiscal year 2013. For fiscal years 2014 – 2021, caps will be lowered and it is at the discretion of appropriators where to cut.

17. BCA Sequestration • Mandatory funding is subject to across-the-board cuts through 2021. • Complex formula to determine exact amounts, dependent on previous year’s outlays. • Many programs exempt from sequestration, including Pell Grants (discretionary portion 2013 only). • Because of exemptions, roughly 75% of cuts would come from discretionary programs. • Cuts of approximately 15% to discretionary spending from the current baseline.

18. BCA: Looking Ahead • BCA Sequestration Not Until January 2013, Leaving Congress One Year to “Fix” Things • Obama vow to veto legislation reducing cuts. • Attempts to avoid defense cuts – could produce additional pressure on discretionary programs. • Further attempts at “Grand Bargain”? • Election year politics. • Other, intertwined issues • Payroll tax cut. • Unemployment insurance extension. • Bush tax cuts.

19. Govt. Relations at CASE Higher Education Charitable Sector Tax Issues - CASE

20. Issues • Charitable Deduction • Estate Tax • IRA Charitable Rollover • State Charitable Solicitation Laws • Higher Ed Tax Incentives

21. Charitable Deduction Cap • Current Law • Taxpayers making over $200,000 (married couples $250,000) - itemized deductions at 33 percent or 35 percent rate • Pres. Obama’s FY12 budget plan • Taxpayers making over $200,000 (married couples $250,000) - itemized deductions capped at 28 percent rate • Deficit Commission • Elimination of charitable deduction, replace with 12 percent nonrefundable credit • CASE opposes charitable deduction cap

22. Charitable Deduction Cap • American Jobs Act - Raises $400B of $467B needed - “Fairness” • Super Committee - Sen. Toomey proposal - Dem. proposal

23. Charitable Deduction Cap • Tax Reform • Democrats – “Fairness” Argument • GOP – Eliminate deductions, lower rates • Bush Tax Cuts • Outlook • Very vulnerable • What makes charitable deduction different? • Nonprofit coalition

24. Estate Tax • Extended through 2012 - $5M exemption - 35 percent tax rate • President Obama: extend 2009 levels ($3.5M exemption; 45 percent tax rate) • Bequest giving & education • What will happen in 2012?

25. IRA Charitable Rollover • Originally enacted in 2006 • Taxpayers Age 70 ½ or older • $100,000 annual limit • Two years (2006, 2007) • Don’t have to count towards income • Tax Deal of 2010: Two-year retroactive extension of IRA charitable rollover through Dec. 31, 2011. • Extra month – January 2011 • Outlook: Tax Extenders

26. State Charitable Solicitation Laws • To protect public from fraud & abuse • Exemptions from state laws • Institutions vs. IRFs • Form 990 • Progress • Oklahoma in 2010 • Hawaii in 2011

27. Other Washington Activity • Department of Education announce intention to conduct negotiated rulemaking • Teacher education programs and TEACH Grants • Student loan program integrity