Congress Gets to Work on Economic Recovery Legislation
January 29, 2009
Seeking to fulfill campaign promises and pass legislation to address the nation’s current economic woes, President Obama and Congress are working to move bills through the House and Senate quickly, with a goal of delivering a compromise bill to the White House by late February.
The statement of purpose included in H.R. 1 indicates the broad agenda of Congressional Democrats: "1) to preserve and create jobs and promote economic recovery, 2) to assist those most impacted by the recession, 3) to provide investments needed to increase economic efficiency by spurring technological advances in science and health, 4) to invest in transportation, environmental protection, and other infrastructure that will provide long-term economic benefits, 5) to stabilize state and local government budgets, in order to minimize and avoid reductions in essential services and counterproductive state and local tax increases."
H.R. 1, adopted January 28th by the House of Representatives by a vote of 244-188, would provide approximately $550 billion in new spending, and about $275 billion in tax cuts. The emerging Senate legislation is likely to have a higher price tag as the legislation is drafted and amended on the Senate floor during debate next week.
Both the House and Senate bills would direct significant resources to the states, and dramatically increase the funding administered by the U.S. Department of Education, likely more than doubling its current level of approximately $60 billion annually. While much of this increased funding would be directed at elementary and secondary education, higher education would also see additional resources from the developing legislation.
Increased Aid to Students. Although the details differ and will be changing rapidly, both the House and Senate would increase by as much as $500 the maximum Pell grants that students can receive. Additional funding would also be provided for Federal Work-Study (House bill only) and for Perkins Loans (Senate bill only). Both the House and Senate bills would provide funds to help higher education institutions modernize their facilities, although the amounts available differ. The significant funding provided in both bills to shore up state budgets generally will also likely reduce pressure to cut funding provided to public colleges and universities.
Research. Both the House and Senate are expected to provide increased funding for federal research support. For example, the House bill would increase funding for NIH-sponsored biomedical research by $1.5 billion, and energy research efforts would receive an additional $4 billion in funding.
The emerging legislation places a premium on promptly spending the new resources by instructing federal agencies and departments to allocate formula grants within 30 days of enactment, and competitive grants within 90 days. In addition, in order to increase transparency of how the funds are spent, the federal web site www.Recovery.gov would announce all grant competitions, all formula grant awards, all awards made under competitive grant programs, and all contracts for awarded grants (federal agencies could redact certain information included in the contract).
Tax Relief. The bills would offer approximately $275 billion in tax relief. More than half the value of this relief would come in the form of tax relief for workers. H.R. 1 would provide a refundable tax credit equal to 6.2 percent of earned income, up to a maximum of $500 ($1,000 for joint returns). The credit would start to be delivered shortly after the bill is enacted by requiring the Treasury Department to issue new payroll tax schedules. As a result, employers (including colleges and universities) would begin deducting fewer taxes in each pay check for the remainder of 2009 and all of 2010. The credit would be phased out beginning at $75,000 ($150K for joint returns).
Expanded and Simplified Education Tax Credit. H.R. 1 would also alter and make more generous the HOPE tax credit. The changes would allow families to claim this education tax credit for 4 years, rather than the current 2. The maximum credit would increase from $1,800 to $2,500 per student, and the formula used to calculate the credit would change as well. Under current law, the credit equals 100 percent of the first $1,200 in tuition and required fees, and 50 percent of the next $1,200. Under the legislation, the new credit would equal 100 percent of first $2,000 in tuition, required fees, and certain other expenses (including books), and 25 percent of next $2,000.
The revised education tax credit would be available to more families. The House legislation would allow up to 40 percent of the credit to be refundable--meaning families with no income tax liability would receive a payment from the Treasury. Comparable legislation approved January 27th by the Senate Finance Committee would allow up to 30 percent of the credit to be refunded to taxpayers. The legislation would also raise the income ceilings that restrict eligibility for the credit.
Subsidized COBRA Benefits. Individuals eligible under COBRA to continue to purchase health insurance from their former employer would be required to pay 35 percent of the required premiums, and the remaining 65 percent would be reimbursed to the employer, in the form of a reduction in payroll taxes required to be submitted to the federal government.
Three Percent Withholding Requirement. Finally, the House legislation would repeal the 3 percent withholding requirement imposed on state and local government agencies, while the Senate Finance Committee-approved version has a one year delay, until 1/1/2012, for the new rule.
- Senator Releases Survey Results on Sexual Assault
- ED Unveils 2014 College Cost Watch Lists
- Inflation-Adjusted Net Tuition Revenue at Private Institutions Flat
- ON-DEMAND: Call the Internal Consultants: Lessons from Business Practice Improvement
- ON-DEMAND: FASB's Proposed NFP Reporting Changes
- ON-DEMAND: VIRTUAL: Student Financial Services Conference
- ON-DEMAND: VIRTUAL: Higher Education Accounting Forum
- ON-DEMAND: VIRTUAL: Global Operations Support and Compliance Forum
- A Guide to College and University Budgeting: Foundations for Institutional Effectiveness, 4th ed. - by Larry Goldstein
- NACUBO's Guide to Unitizing Investment Pools - by Mary S. Wheeler
- Managing and Collecting Student Accounts and Loans - by David R. Glezerman and Dennis DeSantis