Legislative Update: March 9, 2006

Congress has reconvened and, with the release of the President’s budget in late February, is focusing on the Fiscal Year 2007 Budget. Along with the beginning of the budgeting cycle, Congressional Leaders are concentrating on lobbying reform and other key pieces of legislation. Higher Education legislation could be revitalized in the House before the two-week recess in April.

Reauthorization

With the election of Rep. John A. Boehner, R-Ohio, as the House Majority Leader, and the subsequent appointment of Rep. Howard McKeon, R-Calif., as the House Education and Workforce Committee Chair, there is speculation that the House will bring up the tabled Reauthorization bill this spring. The timing of this has been delayed due to the restructuring of the committee’s new staff. A number of past committee members moved with Boehner to his new post, or left the committee, and McKeon has been occupied with the task of getting his new staff in place. The projected timeline calls for the Reauthorization bill to be raised in the House in late March, just prior to the Congressional two-week recess in April.

The new chair of the 21st Century Subcommittee, a position vacated by McKeon, is Rep. Ric Keller, R-Fla. Keller is well known throughout the community for his avid and unrelenting support of and focus on the Pell Grant and increasing the maximum amount available. He is seen as a strong, young leader and should serve the committee well.

The Senate, as you recall, passed the Title IV sections of its Reauthorization bill with the Fiscal Year 2006 Budget Reconciliation bill. The non-Title IV provisions are yet to be passed and, depending on the actions of the House, the Senate may have to pick the bill back up for reconsideration. It has not been determined if the Senate will place the bill on a priority status for floor time this spring.

Request for Maximum in Pell Grant Award

Thirty-six Democrats and seven Republicans sent a letter March 8 to Senate Budget Committee leaders urging them to include a provision in their Fiscal Year 2007 Budget Resolution that would raise the maximum Pell grant award from $4,050 to $4,500. The letter cites Congress' failure to increase Pell-grant funding for the fifth consecutive year, and borrowers’ growing reliance on loans to finance higher education.

Fiscal Year 2007 President’s Budget

The President’s Budget once again reflects a significant decrease in funds for education and the elimination of a number of “not performing” programs. Overall, President Bush requested $54.4 billion in discretionary appropriations for Fiscal Year 2007 for the Department of Education, a decrease of $3.1 billion or 5.5% of the current year’s level.

Some of the programs related to higher education that are slated for elimination in the President’s budget are:
1) TRIO, Upward Bound, GEAR UP
2) International Education Domestic Programs
3) Supplemental Educational Opportunity Grants (SEOG)
4) Leveraging Educational Assistance Partnership (LEAP)
5) Federal Perkins Loans
6) Federal Support for Galludet University
7) BJ Stupak Olympic Scholarships
8) College Assistance Migrant Program
9) Byrd Scholarships
10) Federal Work Study
11) State Grants for Occupational and Employment Information
12) Strengthening Historically Black Colleges and Universities (lack of evaluation data for assessing program effectiveness)

Several new programs are also in the budget:

1) $850 million for Academic Competitiveness and National SMART Grants to provide up to $1300 in grants to high-achieving first- and second-year students who have completed a rigorous high school curriculum. Third- and fourth-year students majoring in math, science, technology, engineering or critical foreign languages and maintain a 3.0 average are eligible to receive up to $4,000.
2) $17,500 per teacher in expanded teacher loan forgiveness for highly qualified math, science, and special education teachers serving challenging low-income communities.
3) $12.7 billion for Pell Grants to maintain the maximum award at $4050. The program will see an increase of 59,000 students in 2006.

Congressional Budget

Following the release of the President’s Budget, Congress began its work on spending packages. In stark contrast from last year’s $32 million in mandatory savings, this year’s budget proposals do not have any tax or spending reconciliation instructions. The marks do include reconciliation protections for a bill that allows oil and gas explorations in Alaska’s National Wildlife Refuge (ANWR). On the Senate side, Budget Chairman Gregg, R-N.H., has proposed capping discretionary spending at $873 billion, about $30 billion more than Fiscal Year 2006 levels. There are no mentions of reductions this year because of strong objections by Democrats, but a press release noted reductions will be addressed next year. It should be noted that this year is an election year for the House and one-third of the Senate.

In the House bill, $91.03 billion has been marked for emergency Fiscal Year 2006 spending for Iraq/Afghanistan operations and additional post-hurricane relief. House Budget Chairman Lewis, R-Calif., will likely include an amendment addressing the foreign-owned port issue. This year’s budget process will also likely entertain the controversial line-item veto option, which would allow the President to remove single lines from spending and earmarks from a bill.

Solomon’s Amendment

“The Supreme Court Rules Against College’s Right to Ban Military Recruiters” was the headline of a breaking news story reported on March 7. It referenced the Supreme Court’s March 6 session, in which it voted unanimously to uphold the law. This holds in place the law that threatens federal funding for institutions that limit the access of military recruiters to campus. Chief Justice Roberts wrote the opinion and stated that the law does not infringe on the free speech rights of the universities, the central claim of the action. The law schools who brought the suit forward claimed that the Solomon Amendment forces them to endorse the “don’t ask don’t tell” policy barring openly gay people from the military which is at odds with most colleges’ anti-discrimination policies.

Tax Relief Act of 2005

In February, the Senate passed the Tax Relief Act of 2005, and the act is now moving to conference. There are several provisions related to higher education that are of interest as this moves forward. Many higher education groups are encouraging the conferees to adopt the Senate language. Provisions of interest include:
1) IRA rollover provision, which allows older Americans to make contributions from their retirement accounts without incurring adverse tax consequences.
2) Above-the-line deduction for qualified tuition and related expenses, which expired at the end of 2005. The bill would provide a four-year extension.

Provisions of Concern:
1) Section 301 would modify current law to allow non-itemizers to deduct cash charitable contributions in excess of $210 for singles and $420 for join filers. It would restrict deductions by itemizers to contributions in excess of the amounts applicable to non-itemizers. Although giving the deduction for non-itemizers is intended to provide incentives for charitable giving, imposing a “floor” on the deduction for itemizers actually constitutes an annual tax increase. There is concern that the help for non-itemizers will decrease the amount itemizers, which is approximately 80 percent of the total amount given to charity.
2) UBIT – Public Disclosure of 990-T: This would require tax-exempt organizations make these forms available to the public. The public already has access to information about exempt organizations’ unrelated business income tax (UBIT). This provision will require universities to disclose more information than is required by other taxpayers. The form includes a description of an exempt organization’s unrelated business activities and the amount of revenue derived from such activities.
3) Certification of UBIT. This will require 501(c)(3) organizations with gross income and receipts or assets over $10 million to file their returns with a certification by an auditor or counsel. This is another unfunded mandate, requiring institutions to incur the additional cost of this specific certification when many institutions already have an outside service prepare their returns. This requirement is not imposed on for-profit institutions.
4) Donor-advised funds: This bill’s intent is to limit abuse of these funds but some of the provisions impose new regulations funds for colleges and universities.
1) Treasury regulations may exempt donor-advised regulations if promulgated, yet may choose not to do so. This provision would enforce colleges to comply with a number of regulations that for-profits already comply with.
2) If the provisions are retroactive and existing gifts are not “grandfathered,” this could cause universities to review all restricted gifts and revise the terms on which they are given.
3) The bill excludes money determined for scholarships, and grants for travel or study. These gifts are typically not considered donor advised. The language would be beneficial if it limits the donor’s advisory powers to participation in a committee that the donor does not control. These provisions would also require a sponsor to obtain IRS approval for every single fund that awards scholarships.

Student Visas

The Department of State has extended the length of time foreign students may be issued student visas. Students applying for initial-entry F-1, F-2, and M-1, M-2 visas may now be issued those particular visas up to 120 days before their academic program’s start date (as compared to 90 days under previous regulations). J-1 and J-2 visitors may be issued visas at any time before the beginning of their programs.

These changes only apply to initial-entry students. Continuing students may apply for new F or M visas at any time, as long as they have maintained their student status and their SEVIS records are current.