Transcript Budget Control Act

Washington Update: Briefing on
Federal Legislation and Policy
Issues
2011 Higher Education Government
Relations Conference
•B r i a n F l a h a v e n , C A S E
•J i m H e r m e s , A A C C
•B o b M o r a n , A A S C U
•J e n n i f e r P o u l a k i d a s , A P L U
FY 2012 Appropriations
 Status of federal funding for Fiscal Year 2012
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Began 1 October
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No FY12 bills passed at that point
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Operated under Continuing Resolution(CR) until 18 November
FY 2012 Appropriations
 Some Success!
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“Mini-bus” of 3 bills: Ag, C-J-S, T-HUD
 And some further procrastination…
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Extended CR until 16 December
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%)
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NOAA: $4.89b (+6.4%)
NIST:
• Manufacturing Extension Program $128.4m (flat)
• Technology Innovation Program $0 (-100%)
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HUD Sustainable Communities: $0 (-100%)
FY 2012 Appropriations
 Still Pending
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Labor-HHS-Ed (Pell, other student aid, NIH)
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Energy & Water (energy research)
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Defense (defense research)
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Interior-Environment (NEH, USGS, EPA)
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State-Foreign Operations (USAID higher ed programs)
FY 2012 Appropriations
 Labor-HHS-Ed
Student Financial Aid: Pell max maintained at $5550
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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
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SENATE $30.5b
HOUSE $31.7b
FY 2012 Appropriations
 Outlook… anybody’s guess!
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Within 2 weeks with big package of remaining spending bills
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Before end of year in super package of remaining spending
bills, expiring tax provisions, sequestration limits
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CR until Feb/March 2012
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Year-long CR
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
Budget Control Act
First Step - $900 billion
 Agreement established $900 billion in
discretionary savings by setting security and nonsecurity 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.
Budget Control Act
$1,400
$1,353
$1,319
$1,285
$1,300
$1,251
$1,234
$1,218
$1,186
$1,200
$1,182
$1,159
$1,156
$1,134
$1,131
$1,109
$1,100
$1,208
$1,107
$1,087
$1,043
$1,086
$1,047
$1,066
$1,000
$900
$800
FY2012
FY2013
FY2014
FY2015
FY2016
FY2017
FY2018
FY2019
FY2020
FY2021
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.
Budget Control Act
Joint Select Committee on Deficit Reduction
(Super Committee)
Democrats
Republicans
House
Chris Van Holland (MD)
James Clyburn (SC)
Xavier Becerra (CA)
Jeb Hensarling (TX)
Dave Camp (MI)
Fred Upton (MI)
Senate
Patty Murray (WA)
Max Baucus (MT)
John Kerry (MA)
Jon Kyl (AZ)
Rob Portman (OH)
Pat Toomey (PA)
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.”
Timeline
 Sept. 8: First organizational meeting held and rules
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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.
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.
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 nondefense.
 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.
BCA Sequestration
 Mandatory funding is subject to across-the-board cuts
through 2021.
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Complex formula to determine exact amounts, dependent on
previous year’s outlays.
 Many programs exempt from sequestration, including Pell
Grants (discretionary portion 2013 only).
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Because of exemptions, roughly 75% of cuts would come from
discretionary programs.
 Cuts of approximately 15% to discretionary spending
from the current baseline.
BCA: Looking Ahead
 BCA Sequestration Not Until January 2013, Leaving
Congress One Year to “Fix” Things
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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.
Govt. Relations at CASE
Higher
Education
Charitable
Sector
Tax Issues - CASE
Issues
 Charitable Deduction
 Estate Tax
 IRA Charitable Rollover
 State Charitable Solicitation Laws
 Higher Ed Tax Incentives
Charitable Deduction Cap
 Current Law
o Taxpayers making over $200,000 (married couples $250,000)
- itemized deductions at 33 percent or 35 percent rate
 Pres. Obama’s FY12 budget plan
o Taxpayers making over $200,000 (married couples $250,000)
- itemized deductions capped at 28 percent rate
• Deficit Commission
o Elimination of charitable deduction, replace with 12 percent
nonrefundable credit
 CASE opposes charitable deduction cap
Charitable Deduction Cap
 American Jobs Act
- Raises $400B of $467B
needed
- “Fairness”
 Super Committee
- Sen. Toomey proposal
- Dem. proposal
Charitable Deduction Cap
 Tax Reform
o Democrats – “Fairness” Argument
o GOP – Eliminate deductions, lower rates
o Bush Tax Cuts
 Outlook
o Very vulnerable
o What makes charitable deduction different?
o Nonprofit coalition
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?
IRA Charitable Rollover
 Originally enacted in 2006
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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.
o Extra month – January 2011
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Outlook: Tax Extenders
State Charitable Solicitation Laws
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To protect public from fraud & abuse
Exemptions from state laws
Institutions vs. IRFs
Form 990
Progress
o
o
Oklahoma in 2010
Hawaii in 2011
Other Washington Activity
 Department of Education announce intention to
conduct negotiated rulemaking
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Teacher education programs and TEACH Grants
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Student loan program integrity