Budget Discussions Continue; Earmarks Debated

Senate and House leaders are trying to reach agreement on an “omnibus” continuing resolution (CR) spending bill to fund the federal government for the remainder of fiscal year 2011, which began on October 1st.  The “omnibus” part means that it will combine spending legislation for various parts of the federal government.  Usually, separate appropriations’ bills are passed for 12 separate parts of the government.   The current CR expires at midnight on Sunday, so Congress must act soon.

With that spending discussion, debate about the future of “earmarks” for higher ed and everyone else continues.  Inside Higher Ed provides a great overview of what’s at stake in the process.  For more on what it means specifically for higher ed, see the Chronicle of Higher Education article.

Earmarks the Talk of the Town

Among the many federal budget issues being discussed these days is the fact that the federal fiscal year 2011 budget has not yet been passed.  Considering the federal 2011 fiscal year started on October 1, that’s not such a good thing.

To address that delay, Congress has passed CR’s, or “Continuing Resolutions” to get the government the money it needs.  Essentially that means funding for each federal agency and program continues at its current level until the new fiscal year budget (or a new CR) is passed. 

With that discussion has come debate about how to handle “earmarks”.  The name comes from the practice of making marks in the ears of animals – particularly pigs – to show ownership.

These become pieces of the federal budget that Members of Congress designate, or “earmark”, for particular projects.  Many earmarked projects are highly worthwhile and a good investment of taxpayer money.  Other projects have been more dubious in terms of their benefit to taxpayers.   A number of projects have been associated with the lobbying scandals of recent memory.  Unfortunately, all earmarked projects, worthy and unworthy, have been thus tainted with a bad name.

Republican House members have sworn off earmarks as a way to demonstrate fiscal integrity.  Their counterparts in the Senate have not done so.  Democrats made their own pronouncements regarding earmarks.  No longer would they use them to fund for-profit organizations.  Instead, they will limit their marks for nonprofit entities.

Roll Call recently reported that Appropriations Chairman David Obey offered a FY2011 budget without earmarks…per se.  However, one man’s (or woman’s) earmark is another’s target.  It’s all in the eye of the beholder.  And Obey’s budget solution does little to do away with the debate over what constitutes an “earmark”.

Although the Garden State ranks near last in return on federal dollar, numerous nonprofits in New Jersey have successfully gained earmarks to help fund their programs.  The Courier-Post ran an article and analysis of some of the state’s return through these congressionally-mandated funds.

Will earmarks ever go away?  While it makes for high political theater to claim they will, the reality is that, since its beginning, Congress has directed funds for those projects, or programs, it has deemed most worthy.  While much work needs to be done to ensure greater transparency in the process, it is unlikely that Congress will really give up its “power of the purse” and turn all funding decisions to the Executive Branch.  Some say that silk purse is turning out to be a sow’s ear and filled with unnecessary spending.

Enjoy the debate!

Compromise Tax Bill Means Money for Students

The compromise tax legislation President Obama reached with congressional leaders provides numerous benefits for higher ed and its students.  Several features of the compromise are tax cuts originally enacted during President George W. Bush’s term.

They include a tuition tax credit worth up to $2,500, a student-loan interest deduction worth up to $2,500, and a benefit that allows companies to provide up to $5,250 in tax-free tuition assistance to their employees.  The last item has been discussed on previous issues of this blog under the “Section 127” debate.

As noted in the Chronicle of Higher Education, it also includes two benefits that expired at the end of 2009.  The first is a tuition deduction of up to $4,000.  The other allows Individual Retirement Account owners over the age of 70½ to make tax-free charitable gifts, totaling up to $100,000 per year, to eligible charities, including nonprofit colleges.

Will the IRA wrinkle serve to encourage highly wealthy, older folks to make donations?  Well, for one thing, the estate tax looks like it will be back.

Eliminated in 2010, the estate tax was due to be reimposed at up to a 55% rate on estates valued over $1 million.  Under the compromise language, the rate will max out at 35% and only apply to estates valued at over $5 million.  The threat of a return of the estate tax could entice the very wealthy to ramp up their charitable giving.

Now, President Obama needs to sell the deal to wary Democrats, unhappy with many aspects of the agreement.  According to the New York Times, Senator Frank Lautenberg (D-NJ) said, “I don’t think it’s a fair deal.  I think a ransom was paid, and it was a very high price.”  Obama has sent Vice President Joe Biden on a mission to convince his former Senate colleagues that the deal is a good one.

Will the compromise tax deal help President Obama’s re-election chances in 2012?  Or will it divide the Democrats as they cede control of the House to Republicans?  No doubt that negotiators in the Administration and Congress will seek to reach agreement in the few days left in 2010.  As for now, it appears that higher education advocates have succeeded in making student needs an important part of the discussion.

 

“Lame Duck” session not an inactive one

Anyone who thought that the close of 2010 would mean a quiet end to the year will certainly be surprised.  There’s a lot going on with Washington and higher ed, keeping university officials and their government lobbyists busy during this final month of the year.

First, the Section 127 debate continues.  As Karin Johns of the National Association of Independent Colleges and Universities reports, “Yesterday, (December 2) the House passed a $1.5 trillion, permanent extension of the 2001/2003 tax cuts.  Included in that bill, is a permanent extension of IRC Sec. 127 for both graduate and undergraduate course work.  The Senate bill also makes IRC Sec. 127 permanent for both graduate and undergraduate course work. 

While the bills are still in the early stages of political volleying between the House and the Senate, there’s no better news for Sec. 127 right now than having identical permanent extension language in both versions.”

Meanwhile, Education Secretary Duncan has asked a newly-formed subcommittee to provide recommendations in preparation for the renewal of the Higher Education Act in 2013.  More can be found at http://www.insidehighered.com/news/2010/12/03/naciqi

In Austin this week, higher education lobbyists gathered for their annual conference.  Shrinking state budgets mean less funds for higher education.  How to respond?  Several lobbyists are calling for fewer government regulation, as reported in the Chronicle of Higher Education at http://chronicle.com/article/As-State-Budgets-Shrink/125608/?sid=at&utm_source=at&utm_medium=en

The holidays and year-end does not mean a reduced workload.  With a new Congress about to appear legislators and the executive branch alike are all busy with important tasks affecting higher education.