January 30, 2008

 

In this issue:

 

Previous Updates

 

2008 Outlook

 

Congress has returned – barely – from its extended holiday recess and is focusing on a handful of issues as the Second Session of the 110th Congress limps into a wide-open Presidential election season.  Most of the federal government is immersed in the process of piecing together an economic stimulus package that is aimed at jumpstarting the economy by putting more money in consumer’s pockets (see “Stimulus Package” below).  Beyond that, it is hard to predict what else will be accomplished this year.

 

Separate from the stimulus package, Speaker Pelosi has stated that the House will focus on creating "new, knowledge-based jobs" through innovations in education, addressing global warming, rebuilding the nation's infrastructure, and improving health care by doubling the federal investment in cancer research and creating easily accessible medical records.  During her pitch for increasing attention to innovation, the Speaker stated that "[w]e must ensure that our children are not just learning basic skills but critical thinking and the ability to apply knowledge to new challenges.”  Senate Majority Leader Reid added to this list his interest in putting more federal resources into the pursuit of renewable energy.

 

While no specifics have been released, two items of interest for the short-term Congressional agenda are the reauthorization of the Higher Ed Act (see “HEA” below) and further attempts to provide competitiveness funding at key research agencies (see “2007 Wrap-Up” below).  Two of the more lofty goals in these areas are to invest in 25,000 new highly-trained science, math, engineering, and technology teachers, and 100,000 students in the fields that fuel the “Innovation Economy” as the Speaker refers to it, along with a doubling of basic R&D funding and a focus on “high-risk, high-reward early-stage research.”

 

In his final State of the Union address, President Bush presented a modest agenda for his last year in the White House.  In addition to urging Congress forward on the economic stimulus package, foreign intelligence matters, and renewal of NCLB, the President vowed to veto any appropriations bill that fails to cut in half the number and value of last year's earmarks, and he promised to issue an executive order today instructing federal agencies to ignore earmarks that appear in legislative reports instead of the text of bills.

 

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Stimulus Package

 

In an effort to prop up the economy, the White House and Congressional leaders on the House side have reached a tentative agreement on a $150 million package that could essentially become the budget vehicle for the year.   As one analyst put it, the bipartisan turnaround from where the FY 2008 budget ended up is like a “Get Out of Jail Free” card, meaning that the Congress and the Administration will be able to do almost anything without worrying about the political consequences.

 

While most of the details of the plan are still being hammered out, even as the House prepares to consider the package today, the foundation of the proposal is to secure rebates for workers who earn too little money to pay income tax and to set rebate checks for middle-income workers at $600 for individuals and $1,200 per couple.

But don’t buy that flat-screen television just yet.  The Senate may be headed in a different direction, raising the uncertainty of timely resolution.  For instance, Finance Committee Chairman Baucus unveiled a more expensive version Monday, adding low-income seniors and laid-off workers to those who would benefit from a previously agreed-upon House proposal.  In addition, key Senators have promised to add heating assistance for the poor, food-stamp money, more business tax incentives, road-resurfacing funds, and expanded unemployment benefits (possibly up to thirteen weeks worth).

 

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HIGHER eDUCATION act reauthorization (hea)

 

The House introduced its HEA legislation just before Thanksgiving and approved in Committee the following week.  Floor action has been postponed until early this year, after which differences between this version and the bill approved by the Senate earlier in 2007 will be resolved in conference.

 

The House bill is divided into three primary categories:  1) provisions related to college cost; 2) new unfunded mandates; and, 3) potential changes to the accreditation process that could potentially federalize it.  The following report from AAU accurately summarizes higher education’s reaction to the bill:

Of particular concern to the higher education community is the large number of new reporting requirements in both bills. In the House measure, a minimum of 189 new requirements address such topics as college cost, student loans, file sharing, and textbook pricing. 

In the area of college costs, H.R. 4137 creates a “higher education price index” that will reflect annual changes in tuition and fees at individual institutions. Schools whose tuition or fee increases exceed the index would be placed on a “watch list” and required to convene a “quality-efficiency task force” to review their operating costs as compared to similar institutions; results of the task force review would be published on the Department of Education’s College Navigator web site. 

Colleges would also be required to publish net price information by income in all application materials. In order to meet this requirement, institutions would be required to adopt the Department’s net price calculator or develop their own.

In response to the recent scrutiny regarding student loans, the bill includes several new requirements for institutional disclosure regarding financial aid. Colleges and universities must compile an annual report for each lender with which they have education loan arrangements and include details of the lender disclosure form provided to students and an explanation of why the terms and conditions of each type of loan under the agreement are beneficial to student and parents. Institutions with preferred lender agreements must provide a list of such agreements and relevant details, including why the lender was selected. 

The bill also requires institutions to provide policies and procedures related to illegal downloading or peer-to-peer file sharing to students and staff, as well as to develop plans for alternatives to illegal downloading and “technology-based” deterrents to prevent such activity. 

Other reporting requirements include reports on retail prices for required and recommended texts and related materials for all courses offered, expansion of crime reporting categories, fire safety disclosures and logs, and the identification of the names and addresses of any entities or individuals who contribute $1 million or more under Title VI to any institution.

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2007 Wrap-up

 

FY 2008 Appropriations

While several research agencies' budgets received increases in the omnibus bill, the overall results are very disappointing in light of the emphatic and bipartisan support that was voiced throughout the year for robust increases in research as components of a broader competitiveness agenda.  Among the key research agencies and programs:

• National Science Foundation:  Receives an increase of 2.5 percent, down significantly from the President's request of an increase of 8.5 percent and Congressional recommendations of an increase of more than 10 percent.
• Department of Energy Office of Science:  The final bill calls for an increase of 6.7 percent for the Office of Science, but the original request sought an increase of approximately 18 percent.  Once earmarks are factored out the increase is only 2.6 percent.
• National Institutes of Health: Budget will increase by $132 million, or less than 0.5 percent, far below what is needed to keep up with biomedical research inflation.
• Collaborative Research Support Program (CRSP):  The omnibus funds CRSPs at $28 million, which is a significant and positive development. 

 

Congress passed all of the domestic spending programs together as part of a $555 billion "omnibus" appropriations bill.  At the end of the day, Congress yielded to the President's overall requested spending numbers, $22 billion less than the Congressional target for FY2008 funding.  The key elements of each Appropriation bill within the Omnibus are as follows:

• Commerce-Justice-Science
  $53.7 billion, $1.3 billion (2%) more than the current level and $789 (1%) more than the President’s request.

• Energy & Water
  $31.5 billion, $579 million (2%) more than the President’s request and $665 million (2%) more than FY 2007. 

• The Army Corps of Engineers
  $5.6 billion, which is $716 million (17%) more than the President’s request and $1.4 billion (7%) less than FY 2007.

• Homeland Security
  $38.7 billion for the Homeland Security Department, $3.2 billion (9%) more than requested and $1.6 billion (4%) less than current funding.
  
  Included is $2.7 billion in emergency spending for border security and other projects.

• Interior-Environment
  $26.9 billion, $1.2 billion (5%) more than requested, but $486 million (2%) less than current funding.

• Labor-HHS-Education
  $144.8 billion in discretionary spending and $455.3 billion in mandatory spending for the departments of Labor, Health and Human Services (HHS), and Education, $316 million more than the current level, but $3.9 billion (3%) more than requested.
  
  The allotment provides $544 million (2%) less than the previously vetoed bill for the National Institutes of Health and $240 million (4%) less for the Centers for Disease Control.

Department of Education/Student Aid Programs

• Accreditation Regulations.  The bill contains a provision prohibiting the Department of Education from issuing regulations on accreditation until after Congress reauthorizes the Higher Education Act.  
• Pell Grants.  The omnibus provides a modest increase ($555 million) for the Pell Grant program compared to FY07, but is less than both the House-passed and Senate-passed bills.  The modest increase means a cut in the Pell Grant maximum award by $69, bringing the maximum to $4,241 (less than the FY07 level of $4,310).  However, because the College Cost Reduction Act provided a mandatory increase of $490, the maximum Pell Grant would increase to $4,731 in FY08.  Without the mandatory increase, enactment of this legislation would have meant a drop in the Pell Grant maximum award in FY08.   
• SEOG, Perkins Loan cancellations, and LEAP funding would drop below their FY07 levels because of the 1.747 percent across-the-board cut.  SEOG is funded at $757.47 million, a reduction of $13.5 million below FY07.  Perkins Loan cancellations are funded at $64.3 million, a cut of $1.1 million.  LEAP is funded at $63.9 million, a cut of $1.1 million.
• Federal Work-Study funding would increase by $138,000 over FY07, for total funding of about $980.5 million. 
• TRIO and GEAR UP are level-funded at $828.18 million and $303.42 million, respectively.  The across-the-board cut eliminated the increases provided in both the House- and Senate-passed bills. 
• Graduate Education Programs.  The Javits fellowship and Graduate Assistance in Areas of National Need programs are funded below their FY07 levels because of the across-the-board cut.  Javits would receive $9.53 million; GAANN would receive $29.54 million. 
• International Education and Foreign Language programs would receive an increase of about $3 million above FY07, for total funding of $108.98 million. Domestic programs receive a $2.4-million, or 2.7 percent, increase above FY07.  Overseas programs receive slightly less than $1 million, or 6.1 percent, above FY07. The Institute for International Public Policy receives a $.1 million, or 4.4 percent, increase above FY07.

 

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health program extension

 

On December 19, the House cleared S. 2499, a bill which forestalls a scheduled 10% reduction in physician payments from Medicare, and provides extensions for various health programs.  The bill includes other Medicare and Medicaid provisions, generally to continue current policy by deferring potential administrative regulatory action.  The Senate filed and passed legislation by unanimous consent the previous day.  The bill is estimated by the Congressional Budget Office to cost $6 billion, of which $1.5 billion is offset by removing that amount from the stabilization fund for the Medicare Advantage program.

 

The bill:

• Provides a 0.5% payment increase for physicians through June 30, 2008 in lieu of a 10.1% reduction scheduled for January 1.  The six-month extension is likely to be revisited by Congress next year.
• Continues the State Children’s Health Insurance Program through March 31, 2009.  The program is provided $5 billion in funding for each fiscal year 2008 and 2009, to be provided to states under the current law formula for allocation to states, which relies heavily on the number of low-income children and uninsured children in each state.  States are also allowed to retain their unspent allocations from previous years (for two years beyond the initial allocation).  These provisions are favorable for providing sufficient federal funds for the Texas Children’s Health Insurance Program.  In addition $1.6 billion is provided for states whose spending in FY 2008 exceeds their federal allocation and funds available from prior years.  For FY 2009, $275 million is provided for the first 6 months of the year.
  
  Medicaid provisions of interest include:
• A six-month delay in regulations proposed by the Centers for Medicare and Medicaid Services (CMS) related to school-based services and rehabilitation services.  Texas independent school districts receive approximately $12.6 million annually in federal funding for school-based administrative services, with additional funds for transportation services that would have been curtailed.  The rehabilitation rule would curtail federal funding for early childhood intervention services, rehabilitative mental health services, adult day health care, and other services in Texas.
• A six-month extension (through June 30, 2008) of the Transitional Medical Assistance (TMA) program for persons leaving the Temporary Assistance for Families (TANF) program due to earnings.  Because the fiscal year began October 1, 2007, this and the following two extensions fund their respective programs for ¾ of the fiscal year. 
• A six-month extension (also through June 30, 2008) of the Qualifying Individual program (QI) which subsidizes Medicare Part B (physician and outpatient services) premiums for low-income persons.
• Extends the mandatory Abstinence Education program for six-months (through June 30, 2008).
• Extension of various payment provisions which primarily assist rural health care providers
• Regulatory relief for long-term care hospitals and inpatient rehabilitation facility services
• Extension of certain physician pathology service payments
• Extension of therapy cap exception process
• Additional funding for agencies which provide Medicare beneficiary outreach and assistance.

 

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endowments

 

Last week, Senators Max Baucus (D-MT) and Charles Grassley (R-IA) of the Senate Finance Committee sent letters to 136 colleges and universities with endowments above $500 million requesting information about their policies and practices concerning endowments, tuition, and institutional financial aid.  The Senators’ request followed Thursday’s public release of NACUBO’s report on college and university endowment performance.  The report showed that endowments averaged a 17.2 percent return on their investments last year and that the total value of institutions’ endowments, including gifts, grew by 21 percent to $411.2 billion.  The average spend-out rate for all endowments was 4.6 percent, while that for endowments of over $1 billion was 4.4 percent.

 

The letters are a continuation of Senator Grassley’s stated interest in requiring college and university endowments to abide by the five-percent payout rate that is required of foundations. 

 

 

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grantee conflict-of-interest reporting

 

A new report from the Office of Inspector General (OIG) at the Department of Health and Human Services (HHS) calls on the National Institutes of Health (NIH) to better monitor conflicts of interest reported by grantee institutions and to require grantees to report details to NIH on the conflicts they report. 

Specifically, the HHS IG recommends that NIH: 

• Step up oversight of grantee institutions to ensure compliance with financial conflicts-of-interest regulations;
• Require grantee institutions to provide specifics on financial conflicts of interest cases and how they were managed, reduced, or eliminated; and
• Require that NIH institutes forward to the Office of Extramural Research (OER) all financial conflict-of-interest reports received from grantee institutions and ensure that OER's conflict-of-interest database contains information on all conflict-of-interest reports provided by grantee institutions.

According to the report, NIH concurred with two of the recommendations but did not agree with the recommendation to require grantee institutions to provide details about individual cases of financial conflicts of interest and their resolution.

 

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the final word

 

"Well first, I'm from Venus."
     -- Education Secretary Spellings, explaining Thursday why she has lasted through President Bush's second term while fellow Texans Alberto Gonzales, Scott McClellan and Karl Rove have not.

 

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