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President to President

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President to President
Molly Corbett Broad's weekly email newsletter to higher education leaders.

President to President, February 13-17, 2012

Vol. 13, No. 5

  • ​Obama FY 2013 Budget Includes Substantial Funding Increases for Higher Education
  • House Approves Payroll Tax Cut Extension
  • Initiative Encourages Improved Licensing Portability for Military Spouses
  • ACE's Annual Meeting Will Include Day of Service in Los Angeles

President Obama released his FY 2013 budget on Monday, paying a visit to Northern Virginia Community College to discuss the higher education provisions in the plan, which include an $8 billion community college job training program and a substantial funding increase for the Department of Education (ED).

The line items in the $3.8 trillion proposal were not a surprise, given the president's State of the Union address and subsequent speech on his higher education plans at the University of Michigan. However, we received the first details about the Community College to Career Fund, which would provide $8 billion over the next three years to community colleges and states to form partnerships with businesses to train workers in high-demand areas. The fund would be administered jointly by the Departments of Labor and Education, pending congressional approval. In addition to the training partnerships, it would fund paid internships for low-income community college students.

The president's budget includes a total of $69.8 billion for ED, an increase of $1.7 billion over FY 2012. The higher education funding in that total can be broken down into the following categories.

Initiatives That Require Legislative Action:

  • Race to the Top for Higher Education: $1 billion. This program is modeled after the K-12 Race to the Top initiative, one of the administration's signature elementary and secondary programs. The competition would reward states that keep tuition down at public universities. To win money, states would have to maintain funding levels for higher education and help promote on-time graduation.
  • Perkins Loan Program: $8.5 billion. The president is proposing to convert the Perkins Loan Program into a new direct loan program. If it is approved, the loans would create a new federal revenue stream that would make $8.5 billion in funds available for institutions to disburse and also help defray the cost of the Pell Grant Program. The existing Perkins Loan Program operates as a revolving loan pool at colleges and universities that includes contributions from both institutions and the federal government. This would be a significant change requiring congressional action.
  • Make the American Opportunity Tax Credit (AOTC) permanent: $7.9 billion per year (estimated cost). The $2,500 AOTC is 40 percent refundable for individuals in the lowest income ranges, and provides up to $10,000 over four years to almost 9 million taxpayers. The credit currently is scheduled to expire in 2012. This change must be approved by Congress as part of a tax bill.
  • Suspend the scheduled interest rate increase for one year for subsidized Stafford Loans: $3.9 billion (estimated cost). Rates for newly-issued loans currently are scheduled to increase from 3.4 percent to 6.8 percent as of July 1, 2012. This suspension would ensure the rate remains unchanged until July 1, 2013.
  • Overhaul the TEACH Grant Program and replace it with a new Presidential Teaching Fellows Program: $185 million. The new program would provide grants to states that would be distributed as scholarships to students attending "top tier" teacher preparation programs who are planning to teach high-need subjects in high-need districts for at least three years.

Initiatives That Require Appropriation Action by Congress:

  • Pell Grant Program: $36.1 billion (in discretionary and mandatory funding). The president's request would sustain the already-scheduled $85 increase in the maximum Pell Grant award, which will raise it to $5,635 for the 2013-14 academic year.
  • First in the World Fund: $55 million. These funds would be in the form of grants to help colleges and non-profit organizations develop and test "breakthrough" strategies to boost productivity and scale up innovative and effective practices. Both public and private institutions can apply for these grants, which would be administered by the Fund for the Improvement of Postsecondary Education. Up to $20 million within the fund would be reserved for projects involving Minority-Serving Institutions.
  • Federal Work-Study (FWS): $1.2 billion, $150 million more than FY 2012.
  • Title VI International Education Programs: $68.3 million, $1.7 million more than FY 2012. The new funding is intended to support programs that increase global competencies among all students.
  • STEM Education Initiative: $140 million in new funding requests, including $80 million to expand effective models of teacher preparation in STEM; $30 million each from ED and National Science Foundation (NSF) to support evidence-based research to strengthen mathematics education.

Other Key Appropriations:

  • Supplemental Educational Opportunity Grants (SEOG): $735 million, the same as FY 2012.
  • Federal TRIO Programs: $839.9 million, the same as FY 2012.
  • Gaining Early Awareness and Readiness for Undergraduate Programs (GEAR UP): $302.2 million, also level-funded from FY 2012.
  • National Institutes of Health: $30.7 billion, the same as FY 2012.
  • NSF: $7.37 billion, $349 million above FY 2012.
  • National Endowment for the Humanities: $154 million, $8 million above FY 2012.

Note: As I've discussed, the president has also proposed changing the formula used to award campus-based aid (FWS, SEOG and Perkins Loans) to reward schools that "keep net tuition down, provide good value, and serve needy students well." It is still unclear what these three criteria mean in operational terms, but one possibility is that a maximum permissible tuition increase will be set and campus-based aid would be denied to institutions that exceed that rate. It also is unclear what the rate will be, how it will be set or how it will be altered by the "good value" and "serve needy students" language.

Next Steps: The president's budget in the best of political times is just the opening shot in the annual process to determine how the federal budget is spent. The next step is the preparation of House and Senate budget resolutions, which must then make their way through the usual legislative process. The resulting plan serves as a blueprint for funding each government agency. The actual funding decisions about how much money each program gets are made by the appropriations committees, generally in the summer or fall. In theory, it's all supposed to be done by Oct. 1. In practice, it rarely is.

In the current political environment, it's even more complicated. Congress has failed to pass a budget resolution for the past three years, and given the upcoming election, few expect either the House or Senate to finish a plan this year. With no floor vote on a comprehensive budget package, members up for election are saved from difficult votes on deficits, tax hikes or spending cuts that could hurt their chances. (See the Inside Higher Ed piece, "A Symbolic, But Pleasing, Budget" and The Christian Science Monitor article, "No Budget? No Problem!" for more on the budget's prospects.) In all likelihood, action on most of these matters will occur after the election. The big issue on this list that can't wait is the student loan interest rate, which changes July 1.

All the same, we expect the administration's higher education plans to remain front and center throughout the presidential election. While the specific budget items might not go anywhere for now, the proposals themselves are still very much alive. We will be watching developments closely in the coming months.

The House this morning voted 293-132 on a bill to extend the payroll tax holiday and unemployment benefits set to expire at the end of this month.

The $150 billion bill would continue a 2 percent cut in the Social Security payroll tax, renew jobless benefits averaging about $300 a week for people on the unemployment rolls, and protect doctors from a cut in Medicare reimbursements.

The measure would be partly financed by new auctions of telecommunications spectrum to wireless companies and by requiring newly hired federal workers to contribute more toward their pensions. Republican leaders jump-started the talks last weekend by dropping a demand that the tax cut be paid for with spending cuts.

The Senate is expected to pass the bill later today. President Obama has said he will sign the measure into law as soon as it reaches his desk.

First Lady Michelle Obama and Dr. Jill Biden are sponsoring a new initiative to encourage states to improve the portability of licenses held by military spouses.

The first lady and Dr. Biden on Wednesday helped announce the release of a joint report from the Departments of Defense and the Treasury that outlines best practices for supporting military spouse employment and license portability. As they point out, military families can move up to 10 times as often as civilian families, and when military spouses move to a new state, there can be a delay getting licensed for certain professions (i.e., teaching, nursing). They are challenging all 50 states to pass legislation addressing these issues by 2014.

Eleven states—many with sizable military populations—have already adopted laws that support military spouse license portability: Alaska, Arizona, Colorado, Florida, Kentucky, Missouri, Montana, Tennessee, Texas, Utah and Washington. Thirteen other states have legislation either pending or waiting to be introduced.

I am looking forward to seeing you all in three weeks at ACE's 94th Annual Meeting in Los Angeles. This year, we are planning something a little different for the conclusion of the meeting: an afternoon of service to the community that is hosting the event.

"Leaders That Serve: ACE Service to the Community" is scheduled for March 13 from 2:00-6:00 p.m. Participants will be asked to help an early childhood center, a community center or a safe place for the working poor and homeless so wear comfortable clothes.

A University of Southern California (USC) tram will pick you up at 2:00 p.m. and take you to the site. Once your commitment has concluded, USC is hosting a reception as a way of thanking you. A tram will return you to the J.W. Marriott by 6:00 p.m.

Molly Corbett Broad

President of ACE