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Washington Update 
december 20, 2007

With time running out in the session and Congress and the White House unable to agree on key spending issues, Congress passed an omnibus funding bill for fiscal year 2008 (FY08) that would continue to fund federal programs without interruption.

The following report is a wrap-up of the last few months’ activities in Washington, D.C. In particular, this report focuses on funding levels that directly impact higher education and university-based research.

The Office of Federal Relations will continue to monitor developments when Congress convenes in January 2008 and will provide you with periodic updates on policy and funding measures that impact UCLA and the higher education community.

I. FY2008 OMNIBUS APPROPRIATIONS PACKAGE

Although the 2007 fiscal year expired on September 30, only one of the 12 federal appropriations measures for FY08 – Defense – has been enacted into law. All other federal programs have been operating at their existing FY07 levels under a Continuing Resolution (CR) that expires on December 21. Congress’ delay in passing the remaining spending bills was compounded by the President’s threat to veto any measures that exceeded the Administration’s FY08 budget.

House and Senate Leaders set new discretionary funding amounts (302(b) allocations) to “split the difference” between Congress’ proposed overall discretionary spending level and that of the White House. After nearly a month of closed-door negotiations, attempts to compromise failed and Congressional Democrats were forced to cut nearly all of the $23 billion in domestic discretionary spending they had proposed, primarily because they refused to eliminate Members’ earmarks. On December 17, Congress released an FY08 omnibus appropriations package that incorporated the remaining 11 domestic spending bills. In total, the omnibus bill provides approximately $474 billion in domestic funding, which when combined with the $459 billion enacted for Defense, roughly equals the President’s FY08 discretionary spending request.

The House passed the omnibus package on December 18 by a vote of 206-201. The Senate added an amendment to include an additional $70 billion for the wars in Iraq and Afghanistan, bringing the total funding in the bill to roughly $560 billion. The Senate passed the full omnibus package on December 18 by a vote of 76-17, and it has been sent to the President for his signature.

On the whole, the omnibus appropriations package is a disappointment for the higher education community. Despite the competitiveness initiatives endorsed by the President and Congress, the final spending package includes very limited funding increases for the National Science Foundation (NSF), Department of Energy (DOE) Office of Science, and NASA research, and it essentially level funds the National Institutes of Health (NIH).

The following is a breakdown of the FY08 spending levels by agency:

• National Institutes of Health (NIH) is funded at $29.2 billion for NIH, an increase of 1.3 percent over FY07 funding. However, since nearly $200 million of that increase would be devoted to the Global Aids program, NIH is left with just $129 million in new funding, which is a less than 1 percent increase.

• Department of Energy (DOE) Office of Science will receive $4 billion, which is 5.8 percent, above FY07 spending, but $380 million below the Administration’s FY08 request. This increase includes $125 million in earmarks, however, leaving only a $97 million increase for competitive research programs, rather than the increases of nearly $700 million initially included in the House and Senate passed appropriations bills. The measure does not fund the President’s $121 million request for the U.S. contribution to the International Thermonuclear Experimental Reactor (ITER).

• National Science Foundation (NSF) will receive $6.065 billion in FY08, an increase of 2.5 percent over FY07, but $364 million less than the President’s FY08 request. Research and Related Accounts will receive $4.821 billion, which is $56.8 million over FY07 but $310 million below the FY08 request. Education and Human Resources will receive $725.6 million, which is $27.6 million above FY07 funding but $52.6 million less than the request.

• NASA is funded at $16.82 billion, which is $573 million above the FY07 level and $489 million below the FY08 request. Within that total, Science will receive $5.6 billion, which is $200 million above FY07. Aeronautics will receive $625 million, which is $336 below FY07 funding. Exploration systems will receive $3.8 billion, which is about $400 million above FY07 funding and $124 million less than the President’s FY08 request.

• National Endowment for the Humanities (NEH) will be funded at $145 million in FY08, an increase of $4 million over FY07 and the Administration’s FY08 request. The research division within NEH is funded at $13 million, an increase of 2.5 percent above FY07. The education division is funded at $12.6 million, an increase of 2.7 percent.

• Department of Education - Student Aid Programs . Due to an across-the-board funding cut of 1.747 percent in the Labor-HHS-Education bill, several higher education programs will be reduced from their FY07 levels:
• Pell Grants were addressed in the College Cost Reduction Act which provided a mandatory increase of $490, bringing the maximum Pell Grant to $4,731 in FY08.
• SEOG, Perkins Loan cancellations, and LEAP funding will drop below their FY07 levels because of the across-the-board cut. SEOG is funded at $757.47 million, a reduction of $13.5 million. Perkins Loan cancellations are funded at $64.3 million, a cut of $1.1 million. LEAP is funded at $63.9 million, a cut of $1.1 million.
• Federal Work-Study funding will increase by $138,000 over FY07, for total funding of about $980.5 million.
• TRIO and GEAR UP will be level-funded at $828.18 million and $303.42 million, respectively. 
• Graduate Education Programs. The Javits fellowship and Graduate Assistance in Areas of National Need (GAANN) programs are funded below their FY07 levels because of the across-the-board cut.  Javits will receive $9.53 million and GAANN will receive $29.54 million.
• International Education and Foreign Language programs will receive an increase of about $3 million above FY07, for total funding of $108.98 million. Domestic programs receive a 2.7-percent increase, overseas programs receive a 6.1 percent increase and the Institute for International Public Policy receives a or 4.4 percent increase above FY07.
• Other. The bill includes a number of language “riders” that UC supports, which prohibit the Department of Education from moving forward with accreditation regulations, block the use of funds to develop a unit record data system, and stop a controversial evaluation of the Upward Bound program until the authorizing committees in Congress have had a chance to consider the issue.

FY2008 Defense Appropriations Act

The House and Senate passed the FY08 Defense appropriations conference report, which the President signed into law on November 13. The bill provides a total of $12.77 billion for DOD Science and Technology (S&T) programs, which is a cut of 4.2 percent from the FY07 level, but it is 18.5 percent more than the Administration’s FY08 request. S&T programs include defense-wide and military service funding for 6.1 Basic Research, 6.2 Applied Research, and 6.3 advanced technology development.

Of interest to research universities, Congress provided a total of $1.63 billion for 6.1 Basic Research, which is a 4.5 percent increase over FY07. Congress provided $5.10 billion for 6.2 Applied Research, which is a 4.4-percent cut from the FY07 level.

The breakdown for 6.1 and 6.2 research across military branches is as follows:

• Army 6.1: $381.5 million, a 4.3 percent increase over FY07;
• Army 6.2: $1.18 billion, a 1.7 percent cut from FY07;
• Navy 6.1: $506.2 million, a 2.9 percent increase over FY07;
• Navy 6.2: $810.8 million, a 3.2 percent increase over FY07;
• Air Force 6.1: $407.7 million, a 0.2 percent cut from FY07;
• Air Force 6.2: $1.17 billion, a 1.5 percent increase over FY07;
• Defense-wide 6.1: $338.3 million, 13.7 percent increase over FY07;
• Defense-wide 6.2: $1.93 billion, a 11.7 percent cut from FY07;
• DARPA: $2.98 billion, a 5.2 percent cut from FY07;
• National Defense Education Program/SMART Program: a 128.9 percent increase above FY07.
• Overall, Congress approved $77.27 billion for Research, Development, Test and Evaluation (RDT&E), which is an increase of 1.7 percent above the FY07 level.

Of particular interest to UCLA, the Defense bill restores funding for the Government Industry Co-sponsorship of University Research (GICUR) program, which funds the UCLA Functional Engineered Nano Architectonics (FENA) Focus Center. Though initially eliminated in the Administration’s FY08 request, GICUR will receive $6.2 million from the defense-wide 6.1 account in FY08.

Indirect Cost Cap

The FY2008 Defense conference report included a cap on indirect cost reimbursement for 6.1 Basic Research. As previously reported in the August Washington Update, the House-passed bill included a 20 percent limit on reimbursement rates. Under this provision, DoD would have been prohibited from including anything more than 20 percent of the direct cost of a grant, contract, or other agreement in the total award to cover indirect costs (administrative and facilities-related costs such as equipment, operation and maintenance, hazardous waste management, etc). A coalition of research universities, including UCLA, worked closely with Senate Appropriators to eliminate the House provision entirely. However, the conference report as enacted in November does include an indirect cost cap, though it was raised to 35 percent, and applies not to negotiated rates but to the amount of an overall grant that can comprise indirect costs.

Though less onerous than the House-passed provision, this cap represents an arbitrary limit on the reimbursement of real and necessary costs for universities to conduct research on behalf of the federal government. These costs are negotiated and rigorously audited by federal agencies. Moreover, this cap has been imposed without any congressional hearings or evidence of unjustified reimbursements of these research costs. UCLA and the research university community as a whole will continue seeking every opportunity to remove the cap when Congress begins the FY09 appropriations process.

II. LEGISLATIVE UPDATE

Higher Education Act (HEA) Reauthorization

The House Education and Labor Committee passed the College Opportunity and Affordability Act of 2007, its version of the reauthorization of the Higher Education Act (HEA), by a vote of 45-0. The University of California Washington Office and campus government relations staff continue to press for improvements in the bill prior to the full House vote in February 2008.

The Committee-passed bill would expand access and opportunity to higher education by creating year-round Pell Grants, authorizing new graduate assistance programs, expanding the Perkins loan program, improving the Academic Competitiveness Grant and Science and Mathematics Achievement to Retain Talent Grant programs

In an attempt to increase the transparency of higher education the bill creates more than 125 new reporting requirements that address costs, transfer of credit, textbooks, peer-to-peer file sharing, accreditation, and safety.

A troublesome clause would create a college cost provision and Higher Education Price Increase (HEPI) Watch List that allows an institution’s tuition to rise at an average of the HEPI plus $500 per year over three years. Increases outside of this would place the university on the watch list. It is unclear what the implications are of being placed on the Watch List.

The House bill eliminates a significant portion of the Senate bill’s accreditation language, which affirmed that universities and colleges are responsible for defining student achievement standards and not the Department of Education.

Finally, the bill narrows the reporting requirement for gifts from any foreign government or private sector corporation, foundation, or any other entity or individual in excess of $1 million “intended for use directly or indirectly by” programs or centers receiving funds from Title VI international education programs.

2007 Energy Bill

On December 19, the President signed into law the “Energy Independence and Security Act of 2007,” a comprehensive bill aimed at enhancing energy efficiency and environmental conservation and reducing U.S. dependence on oil. The House and Senate overwhelmingly approved the legislation

Included within the comprehensive energy package are provisions to set mandatory Renewable Fuel Standards (RFS) for fuel producers and national fuel economy standards (CAFE) for automakers. In addition, the bill seeks to modernize domestic energy infrastructure and promote more energy efficient appliances, commercial products, and “green building” technology, while also diversifying America’s energy supply with renewable sources.

Of interest to research universities, the new law authorizes up to $750-million annually in federal assistance for renewable-energy and energy-efficiency projects on college campuses. Although new funding for campus research (which would be the first of its kind from the federal government) is not authorized to begin until FY09, the bill establishes spending priorities that will influence Congressional appropriations.

For energy projects, the law authorizes the Department of Energy to make $250 million in grants and $500 million in loans annually to colleges, public schools, or local governments. It also establishes grants of up to $1 million each for energy-efficiency improvements to facilities and of up to $500,000 each for projects that test new techniques in energy efficiency and sustainable energy production.

At least 50 percent of the total grant money must be awarded to institutions of higher education and the bill’s language specifically favors campuses with “modest financial resources.” The grants awarded to academic institutions must be evenly split between colleges with endowments between $50 million and $100 million and others whose endowments do not exceed $50 million.

For research, the bill specifically authorizes:

• $25 million in grants per year to universities, or consortia including a university, for research and development on biofuel production “in states with low rates of ethanol production;”
• $25 million for grants of up to $2 million each to universities for research on renewable energy;
• $50 million in grants per year for projects involving engineering colleges to study the production of energy from ocean waves and tides; and
• More than $184 million annually for industrial research centers based at colleges.

In addition, the measure provides a significant boost to academic research on advanced biofuels other than corn-based ethanol by mandating annual production by 2022 of 21 billion gallons of advanced biofuels, including 16 billion gallons of “cellulosic” ethanol.

Congress may also include provisions on sustainable energy production when it takes up the reauthorization of the Higher Education Act in 2008 (see HEA update above).

Patent Reform

Congress’ consideration of patent reform will be postponed until early next year. The House approved its patent reform bill in September but Senate Judiciary Committee leaders have delayed moving their bill to the Senate floor while they continue seeking consensus on the measure. Although the University of California agrees with Congress on the need to improve patent quality and reduce patent litigation, concerns remain about certain critical issues, including the apportionment of damages provisions. We will continue working with Senate and House Judiciary staff to address our concerns.

III. FEDERAL ADVOCACY

Chancellor Block

On January 21-23, 2008, Chancellor Block will travel to Washington to meet with federal agency officials and Los Angeles-area Members of Congress. He will be introduced to area alumni at a reception on January 22 at the UC Washington Center.

UCLA Day in Washington, D.C.

UCLA Federal Relations will sponsor our annual UCLA Day in Washington, D.C. next Spring. Alumni, students, and friends of UCLA will travel to D.C. May 5-7, 2008, to advocate on behalf of the university. This yearly event has proven very successful in connecting UCLA to Congressional Members, staff, and policy makers in the nation’s capital. Further details on the 2008 event will be circulated in January.