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Federal File

Coverage of legislation and regulatory activity that affects higher education

By Liz Clark

Congress Protects Student Aid, Trims IRS in 2014 Budget 

In December, Congress and the White House agreed to a top-level spending number of $1.012 trillion for FY14, in a much-lauded federal budget deal. Congressional appropriators were left to sort out the details over the holidays in order to come to agreement on a spending plan by January 15.

A short-term stopgap measure was signed into law in order to give lawmakers additional time to review and vote on the deal. Ultimately, on January 16,  Washington lawmakers adopted a federal budget that increases spending for student aid programs as well as some federal research agencies, and sent the budget to the White House for the president's signature.

The 2011 Budget Control Act (BCA) had set the stage for dramatic cuts across the federal government, beginning in FY13. Unable to come to any agreement last year to halt the cuts, President Obama, as required by the BCA, issued a sequestration order that cut FY13 spending by $85 billion, resulting in across-the-board reductions of approximately 7.8 percent for defense programs, and 5 percent for nondefense programs.

The December 2013 agreement prevents sequestration orders from going forward in FY14 and FY15—without it, lawmakers would have been required to cut an additional $109 billion from the federal budget this year, leaving both defense and domestic programs vulnerable to deep spending cuts.

Student Aid Funding

In the final agreement, budget writers trimmed the Department of Education (ED) slightly, from $14.487 billion in FY13 to $14.385 billion in FY14. They protected Pell grants, with the overall program level-funded at $22.78 billion. Because of mandatory inflationary adjustments, the maximum Pell award will likely see a bump of $85, to $5,370. ED will make a final determination based on Consumer Price Index data expected to be released in February.

According to the office of Sen. Tom Harkin (D-IA), the number of Pell Grant recipients is estimated to increase by 186,000, from 9,125,000 in 2013-14 to 9,311,000 in 2014-15. Also written into the FY14 budget legislation is the requirement that ED now collect and provide more information about Pell recipient graduation rates.

For FY14, the bill includes good news for two campus-based aid programs: a $49 million increase for the Federal Work-Study program and a $37 million increase for the Supplemental Educational Opportunity Grant program.

Lawmakers did not include in the FY14 budget any funding for a new Race to the Top for higher education, despite a request from the Obama administration. However, the bill includes $75 million to enable ED to create a new "First in the World" initiative, providing grants to colleges and universities to implement innovative strategies to improve educational outcomes and reduce the net price paid by students and families. Additionally, Congress provided the National Research Council $1 million for a study on the impact of federal regulations and reporting requirements.

Innovation Deficit Persists

The National Institutes of Health (NIH) will see a boost of $1 billion over its FY13 funding. At $29.9 billion for FY14, however, scientific research advocates in Washington note that even this NIH funding level does not fully reverse cuts made in recent years. Nevertheless, according to Sen. Harkin, at the FY14 level, all current research programs should be able to continue, and approximately 385 new studies and trials can begin.

At the Department of Energy, scientific research is given a boost to $5.1 billion for science research, an increase of $195 million (4 percent) above the FY13 enacted level. The National Science Foundation is slated for an $82 million cut from the 2013 spending level of $7.25 billion.

IRS Faces Increased Oversight

Congressional appropriators provided $11.3 billion for the Internal Revenue Service (IRS), a level below its FY09 appropriation level. Additionally, $92 million is specifically set aside for improvements to taxpayer services and to address refund fraud, identity theft, and overseas compliance. Language in the funding bill also prohibits the IRS from targeting groups for regulatory scrutiny based on their ideological beliefs or exer-
cising their First Amendment rights. Budget writers are also requiring extensive reports on IRS spending, training, and bonuses.

The Road Ahead

Budget writers will have some additional flexibility in FY15, as the December budget agreement not only set firm the limit of $1.012 trillion for FY14 but also set $1.014 trillion as the spending limit for the following year. The annual appropriations process was somewhat upended by the questions surrounding sequestration in recent years. However, with a topline number already set in law, it is possible that the FY15 budget-setting process will return to a more normal timeline.

Election-year politics will, as always, complicate matters, but many inside the Beltway are hoping for a return to FY15 budget hearings in the spring, subcommittee and committee markups in the summer, and floor approval for the bills before September 30 that will comprise the FY15 federal budget.

NACUBO CONTACT Liz Clark, director, congressional relations, 202.861.2553