Lawmakers Reach Compromise on $300 Billion Budget Deal

Congressional negotiations over FY18 appropriations for programs like federal student aid and research have been in a logjam over disagreements about topline spending numbers. Without a deal to lift spending limits that were set in 2011, the appropriations process had reached a stalemate.

Last week, Congress agreed to lift the caps on both defense and non-defense budgets. Democrats are claiming a win for domestic programs-the deal eases previous spending limitations on programs that include everything from rural broadband to the National Institutes of Health. Republicans are taking credit for a significant boost for the Pentagon's budget needs. The spending caps are now set at:

• FY18 Defense: $629 billion ($700 billion total, including other funds not limited by the cap) 
• FY19 Defense: $647 billion ($716 billion, including other funds not limited by the cap)
• FY18 Discretionary: $579 billion
• FY19 Discretionary: $597 billion

Debt Limit Lifted. The spending package will have a direct impact on the federal deficit, forcing the need to address the nation's debt limit. Thus, lawmakers also agreed to a one-year suspension of the debt limit, through March 1, 2019. This action also prevents lawmakers from having to cast a separate vote on lifting the debt ceiling before the midterm elections in November.

$4 Billion Over Two Years for Higher Ed. Lawmakers included "$2 billion for FY18 and $2 billion FY19 for student-centered programs that aid college completion and affordability, including those that help police officers, teachers and firefighters." There are no additional details, however, spending allocations for such programs will be determined in the more detailed appropriations bills. In all likelihood, lawmakers will finalize the FY18 budget in March. The FY19 budget details will be negotiated by Congress once it completes work on FY18.

Deal Includes Numerous Tax Provisions. Lawmakers were unable to include some desired changes in the recently passed Tax Cuts and Jobs Act (TCJA) because of procedural limitations. Some are included in this deal, along with a number of retroactive tax extenders. Provisions of interest to NACUBO members include:

• Extension of above-the-line deduction for qualified tuition and related expenses. Retroactively extends, for 2017, the above-the-line deduction for qualified tuition and related expenses for higher education. The deduction is capped at $4,000 for individuals with adjusted gross income (AGI) up to $65,000 ($130,000 for joint filers) and $2,000 for individuals with AGI up to $80,000 ($160,000 for joint filers).
• Extension of energy efficient commercial buildings deduction (Section 179D).Retroactively extends, for 2017, the deduction for the cost, up to $1.80 per square foot, of energy-efficient commercial building property (e.g., certain depreciable interior lighting, heating, cooling, ventilation, and hot water systems). The deduction also allows certain government entities to allocate the deduction to taxable project partners, effectively matching the cost recovery treatment provided by expensing for entities like public universities and state governments.
• Expands exemptions from the excise tax based on investment income of private colleges and universities. This provision amends the 1.4-percent "endowment tax" on private colleges and universities to apply only to applicable education institutions that have at least 500 tuition-paying students and have more than 50 percent of their tuition-paying students located in the United States. This provision was eliminated from the TCJA for procedural reasons. It is widely recognized as an effort to exclude Berea College, which charges no tuition, from the newly established excise tax.

The massive deal also addresses a number of other issues that had been the subject of intense debate between lawmakers in recent months. Some of the other agreements include:

• An additional four years of authorization for the Children's Health Insurance Program.
• Almost $90 billion in emergency supplemental appropriations for response and recovery from recent hurricanes, wildfires and other disasters.
• $6 billion over two years to address opioid addiction and substance abuse.

Passage of the legislation ended a very brief government shutdown on February 9 and will keep the federal government open until March 23. In the meantime, the appropriations committees will focus on rewriting FY18 spending bills under the new, higher spending levels. At that time, NACUBO will have more details on specific allocations for federal student aid programs and research budgets.