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White House Releases Details of Ambitious Budget Cutting Plan

May 31, 2017

Last week, the White House unveiled details of its budget request for FY18. A preview, or “skinny budget,” was released in March.

College and university business officers should note that the president’s budget request is simply that: a request, or statement of position. Congress holds the responsibility for crafting and passing annual spending, or appropriation, legislation. Few lawmakers—Democrat or Republican—have wholly endorsed the White House proposals. However, NACUBO advises business officers to be a part of campus communications with federal elected officials about programs and policies that impact their schools.

Economic Assumptions Built on Heavy Lifts

In a departure from the Obama administration, President Donald Trump proposes lowering the spending caps on discretionary spending (which includes federal student aid and research programs) and lifting the caps on the defense budget to boost military spending. The ambitious plan also projects elimination of the federal deficit in 10 years, based on the assumption that Congress and the White House will enact tax cuts, ease regulations, and rein in entitlement programs (primarily Medicaid).

Defending the White House FY18 budget plans, Office of Management and Budget Director Mick Mulvaney and Treasury Secretary Steven Mnuchin appeared before House and Senate committees last week. Mulvaney faced questions about budget assumptions that appear to double-count tax revenue and rely upon optimistic expectations for the rate of economic growth—Trump’s plan assumes economic growth of 3 percent annually within 10 years, while the nonpartisan Congressional Budget Office has projected average annual growth of only 1.9 percent. Mnuchin, when questioned by lawmakers on tax reform plans, stated that "we have no intention of doing something that would add trillions of dollars to the deficit," and contended that economic growth would keep the costs of tax cuts neutral.

These assumptions set forth an ambitious agenda for the Republican-led Congress, which is already taking on a heavy lift: passage of the American Health Care Act (ACHA), legislation aimed at repealing and replacing the Affordable Care Act. The Congressional Budget Office estimates, as currently drafted, the ACHA would lower federal deficits by $119 billion over the coming decade but would leave 23 million people uninsured. While the House of Representatives passed the measure, Republicans would likely be unable to muster enough votes to pass the legislation in the Senate in its current form.

Trump is eager to uphold campaign trail promises and Republicans are keen to demonstrate to American voters that they can use their majority to govern. However, passage of the ACHA, a tax reform plan, FY18 spending bills, and legislation lifting the federal debt ceiling will prove difficult as the GOP caucus is not united. Some Republican members are hardline fiscal conservatives, some unflinching social conservatives, and others are more moderate, pro-business, or defense hawks.

The bottom line is that there is a bumpy road ahead and headlines in September could once again point to a fiscal cliff. A federal government shutdown on October 1 is not out of the question, and should the Treasury Department run out of “extraordinary measures” to cover federal debt obligations (which it is currently using and estimates will last until sometime this fall), the prospect of a federal government default looms.

The plan released last week includes some additional details but largely sticks to the outline that was released in March. Here is a summary of research and student aid-related proposals:

Department of Education Funding

  • The Department of Education budget supports a projected maximum Pell Grant of $5,920 as well as year-round Pell Grant awards.
  • Federal Work-Study would be decreased 49.5 percent from FY17’s funding level.
  • Supplemental Education Opportunity Grants would be eliminated to “reduce complexity” in federal student aid programs.
  • Public Service Loan Forgiveness, a debt forgiveness program for public servants, would be eliminated, citing a 10-year cost savings of at least $27 billion.
  • The subsidy on federal student loans would be eliminated for new borrowers.

The budget also proposes a number of reforms to address student debt, college costs, and student financial aid programs. The administration would consolidate the various income-based repayment programs into a single plan for undergraduate borrowers.

The Office for Civil Rights (OCR) budget would be cut by $1.7 million, resulting in an estimated decrease of 46 employees, 8 percent of its workforce.

Research Funding

Notably, the budget proposes a 10 percent cap on facilities and administrative (F&A) or “indirect” costs for National Institutes of Health (NIH) grants in an effort to institute “policies to ensure that Federal resources maximally support the highest priority biomedical science by reducing reimbursement of indirect costs (and thus focusing a higher percentage of spending on direct research costs).”  The budget plan also calls on the Department of Health and Human Services (HHS) and NIH to, in 2018, “develop policies to reduce the burden of regulation on recipients of NIH funding consistent with the Administration’s initiatives on regulatory reform and the goals articulated for the new Research Policy Board established in the 21st Century Cures Act.” 

The budget provides funding for NIH at $26.9 billion, a decrease of $7.2 billion, or 21 percent, from the FY17 level.

Other proposals include:

  • $349 million for the Agriculture and Food Research Initiative (AFRI), a $ 7.5 percent decrease.
  • $2.2 billion for Department of Defense basic research, a 2.1 percent reduction.
  • $4.47 billion for the Department of Energy Office of Science, a 17 percent cut.
     - Elimination of the Advanced Research Projects Agency–Energy (ARPA-E).
  • $42 million for the National Endowment for the Humanities (NEH), a $108 million, or 72 percent, decrease from FY17, with a plan to begin shutting down the agency in 2018.
  • $6.65 billion for the National Science Foundation, an $819 million, or 11 percent, decrease from FY17. 

Contact

Liz Clark
Director, Federal Affairs
202.861.2553
E-mail