Automatic spending cuts, or sequestration, was established through the Budget Control Act passed by Congress last August and is set to go into effect January 2013.  The sequestration process has great implications for all federal discretionary programs, including most – if not all – of federally funded research programs. Below is a link to a detailed explanation of this process and the impacts to federal spending in both the short- and long-term.

Sequestration_Details.pdf

Late yesterday, Congressional leaders agreed to a deal that will avert a government shutdown as the end of the federal fiscal year looms.  The Senate approved a week-long continuing resolution (CR) that will run through October 4^th, which is expected to be approved by the House – through a pro forma session – sometime on Thursday.  A longer term CR will still be necessary and will be the main topic of debate when both chambers reconvene next week after this week’s recess period.  The deal will do little, however, to end partisan fighting over FY12 spending.

The Senate bill is a considered a “clean” CR that will fund the federal government through October 4^th at the $1.043 trillion limit set by the debt limit law (PL 112-25) enacted in August.  The bill would eliminate the $1 billion in fiscal 2011 disaster aid for the FEMA and Army Corps of Engineers included in the House version, as well as offsets for an energy loan program.  The House plans to approve the measure by voice vote in a pro forma session on Thursday, paving the way for the President to sign the measure and avoid a federal shutdown when the new fiscal year begins October 1^st.

The overall deal was agreed to after the Senate passed a revised version of Majority Leader Reid’s six-week stopgap measure that would provide government funding through November 18^th and eliminate disaster aid for FY11 and the energy offsets.  While both chambers favor the longer-term stopgap, it will not be cleared until next week after the House returns from recess and has had a chance to debate it.   Appropriators are expected to use the next six weeks to draft a year-end omnibus spending bill, but with partisan divisions forcing lawmakers to spend nearly two weeks on the short-term deal, it seems far from certain that an agreement can be reached by November 18^th on a broader spending bill.

The good news for now is that we are avoiding a government shutdown but the path forward on FY12 appropriations is far from certain.

Sources:  Congressional  Quarterly, Roll Call

President Obama today announced that it was time to commit to tackling education reform and that he would allow states to apply for waivers that will give them flexibility from mandates under the ‘No Child Left Behind’ law that many officials agree is outdated and no longer effective.

The President stated that many states and school districts have initiated education reforms and innovations to support excellent teaching and encourage all students to learn and achieve success. No Child Left Behind (NCLB) has since become a barrier to implementing these practices and reforms.

The goal is to support states and local school districts transitioning to college and career ready standards and assessments, developing systems of differentiated recognition, accountability, and support, and evaluating teacher and principal effectiveness and supporting improvement. For example, a state will no longer have to set a target requiring all students to be proficient by 2014, but instead be allowed to establish ambitious but achievable goals in reading/language arts and math. States and school districts under a waiver would also have more flexibility related to the use of federal education funds.

In order to receive a waiver a state must develop a rigorous and comprehensive plan addressing the critical areas that are designed to improve educational outcomes for all students, close achievement gaps and increase equity, and improve the quality of instruction.

Link to White House speech/press release

In light of a stalled and bleak economic recovery, President Obama is set to annouce an aggressive “Jobs” proposal in a speech before Congress tomorrow evening.

While officially unconfirmed by the White House, the package apparently contains approximately $300 billion worth of tax credits, school renovation projects, job training for the unemployed, and a program to prevent layoffs of school packages in an effort to jumpstart the economy and put many Americans back to work.

Although Obama has said that the jobs plan will include ideas that Republicans have historically supported, there has already been early skepticism voiced by members of the GOP and even some conservative democrats concerned that this will look too much like another stimulus package.

Timeline

August 16, 2011:  members of the Joint Select Committee on Deficit Reduction to be appointed.

September 16, 2011:  Joint Select Committee on Deficit Reduction must hold its first meeting.  

September 22, 2011:  Congress must consider a resolution of disapproval for first tranche ($900 billion) of debt limit increase.  

October 1-December 31, 2011:  the House and Senate must vote on a Balanced Budget Amendment.

October 14, 2011:  deadline for House and Senate committees to submit recommendations to the Joint Select Committee on Deficit Reduction.

November 23, 2011:  deadline for the Joint Select Committee on Deficit Reduction to vote on a plan with the goal (not a requirement) of $1.5 trillion in deficit reduction.   

December 2, 2011:  Joint Select Committee must submit report and legislative language to the President and Congress.

December 23, 2011:  Deadline for the House and Senate to vote on the Joint Select Committee on Deficit Reduction’s bill.     

January 15, 2012:  “trigger” date leading to $1.2 trillion of future spending cuts goes into effect, if the Joint Select Committee on Deficit Reduction’s legislation has not been enacted. 

February 2012:  Approximately when the first $900 billion of debt ceiling increase runs out. 

February/March 2012:  in this period—15 days after the President uses his authority under the bill to increase the debt ceiling a second time—is the deadline for Congress to consider a resolution of disapproval for the second tranche ($1.2-$1.5 trillion) of debt limit increase.  

Fall/Winter 2012:  additional $2.1-$2.4 trillion of borrowing authority from this law runs out. 

January 2, 2013:  OMB orders sequestrations for defense and non-defense categories of spending necessary to meet spending cuts required by the “trigger.”

The National Science Foundation (NSF) on July 28 launched a new program to help develop basic scientific and engineering discoveries into new technologies, products, and processes.  The NSF Innovation Corps (I-Corps) program is a public-private partnership among the NSF, Kauffman Foundation, and Deshpande Foundation.  The goal of the program, according to the NSF press release, is to “connect NSF-funded scientific research with the technological, entrepreneurial and business communities to help create a stronger national ecosystem for innovation that couples scientific discovery with technology development and societal needs.”

 The I-Corps program will initially support 100 projects per year, at $50,000 per award.  The program places a $5,000 limit on facilities and administrative cost reimbursement for all I-Corps program recipients.

Each grant will support an I-Corps team, composed of a principal investigator, a mentor, and an entrepreneurial lead.  Over a period of six months, each team will determine what resources are needed to move research to the stage of technology development, as well as evaluate competing technologies and determine the value that the I-Corps-supported technology would add to the marketplace.  While I-Corps proposals will be evaluated using the standard merit review criteria approved by the National Science Board — Intellectual Merit and Broader Impacts — they will also be evaluated on two additional criteria: the potential impact on the market and the time horizon to impact.

NSF anticipates investing $1.25 million of its FY 2011 appropriation in the I-Corps program.  The Foundation also expects to secure private investments for the program in FY 2011 and 2012. 

Read NSF’s press release here.

The Senate Appropriations Subcommittee on Labor, Health and Human Services, Education, and Related Agencies held a hearing yesterday on the Department of Education’s FY12 budget. Secretary Duncan was the witness.

In his opening remarks, Duncan expressed concern that America has gone from being a world leader in education to now being “middle of the pack”.  He also emphasized that demand on the Pell program has increased from 6 million to 9 million students in 2 years and that the Department is focused on closing the Pell shortfall – currently $11 billion – through increased efficiencies and more resources. The Pell program accounts for a third of the Department’s total $77 billion FY12 request. The Secretary cites the increasing number of lower income families and more families without jobs as the reason for the increased demand for the grants. Earlier this week, both Reid’s and Boehner’s debt ceiling deals contained an elimination of the in-school interest subsidy for graduate students, with the money saved by doing this going back into the Pell program to help shore up the shortfall for the next two years. Although this will have a negative effect on students, out of the many rumored changes to Pell that have been floating around during the past few weeks and the negotiation process, this is the best possible outcome for the university community. Pell and changes to the program will continue to be an issue as we head towards Fall and finishing up the FY12 process.

The Committee also brought up the concern that 89% of first-generation college students do not complete their degree. The Secretary stated that this was one of the Department’s FY12 priorities, and they are trying to solve this problem in three ways: 1) Fighting to maintain access to Pell. 2) Investing in community colleges and partnerships with the private sector to leverage funding. 3)  Investing in programs such as i3 and the proposed “First in the World Competition”. The First in the World Competition would provide “venture capital” to encourage innovation approaches to improving college completion (particularly low-income and minority students), research support to build the evidence of effectiveness needed to identify successful strategies, and resources to scale up and disseminate strategies we already know are successful.

The Labor-HHS-Ed Appropriations bills have not yet been drafted in the House or the Senate and we don’t expect to see them until after the August recess.

The Senate Majority Leader has released draft legislation last night that would raise the debt ceiling through 2012 while trimming the deficit by $2.7 trillion over 10 years.  The package would boost the debt limit by $2.4 trillion immediately, would not include any new revenues (taxes), and would not affect Medicare, Medicaid, or Social Security benefits.  The Senate has not yet announced when they might vote on this legislation, but the August 2^nd deadline set by the US Treasury is looming.  Meanwhile, the House Republicans have released their draft legislation to raise the federal debt limit.  The House may vote as early as Wednesday on their proposal.

The House plan would authorize $1 trillion in new borrowing right away, and another $1.6 trillion would be allowed in several installments (unless two-third majorities in Congress objected each time).  These additional “installments” would be considered only after a new special congressional committee proposes a package of entitlement cuts.

According to a fact sheet distributed by Democrats, the Senate plan would include $1.2 trillion in discretionary spending cuts, in both defense and non-defense programs, which were already agreed to in bipartisan talks led by Vice President Biden a few months ago.  Another $1 trillion would come from “savings from winding down the wars in Iraq and Afghanistan,” an approach that the fact sheet says matches one used in the House GOP “cut, cap and balance” bill passed last week (HR 2560) and the House-passed budge resolution (H Con Res 34).  The sheet said there would be $400 billion in interest savings as a result of the spending cuts, which it claims is also reflected in the House plans.

Another $100 billion would come from “savings” in mandatory programs negotiated by the Biden group. But according to the fact sheet, the savings “will not impact Medicare, Medicaid or Social Security benefits in any way.”  This is good news for Graduate Medical Education (GME) funding that comes from Medicare and supports medical residency programs throughout the country.

The figure includes $40 billion in “program integrity savings,” which encompasses $15 billion by reducing fraud and abuse in mandatory programs through continuing disability reviews and Supplemental Security Income redeterminations, IRS tax enforcement measures, health care fraud and abuse control, and reviewing unemployment insurance for improper payments; $30 billion in savings at Fannie Mae and Freddie Mac; $15 billion from broadcast spectrum sales and changes to the Universal Service Fund; $10 billion to $15 billion in agriculture program changes; and unspecified savings from higher education programs that will go to “sustain the Pell grant program.”

For student aid/Pell Grants, the House and Senate plans are similar.  They both eliminate the in-school interest subsidy for graduate and professional student loans, effective for any period of instruction beginning on or after July 1, 2012. The House plan includes an exception to the elimination of the in-school interest subsidy for students enrolled in a program leading up to a degree or certificate or students enrolled in a program necessary for a teaching credential or certification where such credential or certification is required by the state.  This exception is not in the Senate bill.

Both the House and Senate plans use savings from the in-school interest elimination to provide additional mandatory funding for Pell, though in slightly different amounts.  The House adds $9 billion in FY12 and $8 billion in FY13, while the Senate provides $10.5 billion in FY12 and $7.5 billion in FY13.  Overall the Senate provides a total of $18 billion, while the House provides $17 billion for Pell.

Comparison of House and Senate Proposals

Debt limit increase

House Republicans:

• Add $1 trillion immediately to the current $14.3 trillion debt limit, which would be expected to allow the government to continue borrowing into the early months of 2012.

• The President would be authorized to request a further increase of $1.6 trillion only if the recommendations of a joint committee created to reduce the deficit are enacted.  The second increase, if requested, would take effect unless Congress passed a resolution of disapproval, presumably by a two-thirds vote in each chamber to override an expected veto.

Senate Democrats:

• Add $2.4 trillion immediately to the current $14.3 trillion debt limit, which would be expected to allow the government to continue borrowing until after the 2012 election.

Savings from discretionary spending

House Republicans:

• Reduce spending immediately and cap future spending to save $1.2 trillion over 10 years.  Adherence to annual spending caps would be enforced through a process of automatic spending cuts similar to the process created by the 1997 deficit reduction law (PL 105-33), which expired in 2002.

• The plan assumes no specific savings from declining war costs in Iraq and Afghanistan.

Senate Democrats:

• Reduce domestic and defense spending by a total of $1.2 trillion over 10 years, based on cuts negotiated in earlier meetings with Vice President Biden.

• The plan counts $1 trillion in additional savings from declining war costs in Iraq and Afghanistan.

Savings from mandatory programs

House Republicans:

• Create a 12-member joint committee of Congress that includes three Republicans and three Democrats from each chamber, and co-chairmen named by the House Speaker and Senate Majority Leader.  The joint committee would be charged with reporting back to both chambers by November 23^rd with recommendations to reduce the deficit by an additional $1.8 trillion over 10 years.  The committee proposal would be subject to up-or-down votes in both chambers by December 23^rd.  No amendments would be permitted and a simple majority in each chamber would be needed for passage.  A Senate filibuster would not be permitted.

• It is unclear whether the total amount of deficit reduction assumes savings from reduced interest payments on the federal debt.

Senate Democrats:

• Cut the deficit by $100 billion over 10 years by reducing waste and fraud in entitlement programs, improving IRS enforcement, curtailing agriculture subsidies, selling broadcast spectrum, and finding savings from Fannie Mae and Freddie Mac.  No changes in Social Security, Medicare or Medicaid benefits are counted.

• The plan assumes $400 billion in savings over 10 years from reduced interest payments on the federal debt.

• The plan would create a 12-member joint committee similar to that in the House plan to recommend ways to reduce the deficit to about 3 percent of gross domestic product, but enactment of its recommendations would not be tied to the debt-limit increase.

Increased revenue

House Republicans:

• No tax increases assumed, although the joint committee would be empowered to consider additional revenue to achieve its deficit-reduction target.

Senate Democrats:

• No increase in revenue is assumed.

Balanced-budget amendment

House Republicans:

• Both chambers would be required to vote after October 1^st but before the end of 2011 on a proposed amendment to the Constitution that would require a balanced budget.  The specific terms of the proposed amendment were unclear.

Senate Democrats:

• No balanced-budget amendment is assumed.

University consortia and individual investigators are encouraged to submit white papers and full funding proposals to the Minerva Initiative, the Department of Defense’s competitive, university-based social science basic research program.  Because of a delay in release of the funding solicitation, program managers have extended the deadline for white paper submissions to Friday, September 16, 2011, and the deadline for full proposals to Tuesday, November 22, 2011. 

The Minerva Initiative was created in 2008 under the leadership of former Defense Secretary Robert Gates as a means to improve our fundamental understanding of the social, cultural, behavioral, and political forces that shape regions of the world of strategic importance to the U.S.  Secretary Gates announced the Initiative at the April 2008 meeting of the AAU presidents and chancellors in Washington, DC. 

The Minerva Initiative is inviting white papers and full proposals for basic research in the following seven areas:

(1)    Strategic Impact of Religious and Cultural Changes
(2)    Terrorism and Terrorist Ideologies
(3)    Science, Technology and Military Transformations in China and Developing States
(4)    National Security Implications of Energy and Environmental Stress
(5)    New Theories of Cross-Domain Deterrence
(6)    Regime and Social Dynamics in Failed, Failing, and Fragile Authoritarian States
(7)    New Approaches to Understanding Dimensions of National Security, Conflict, and Cooperation

As part of the Advanced Manufacturing Partnership launched last month by President Obama, the Department of Energy is offering an investment of up to $120 million over three years to develop transformational manufacturing technologies and innovative materials. The Advanced Manufacturing Partnership is a national effort bringing together industry, universities, and the federal government to invest in emerging technologies that will create high-quality manufacturing jobs and enhance US competitiveness.

The selected projects will emphasize new processes and materials that are revolutionary in their design or impact and that are capable of being commercialized within the next five to seven years. By boosting investment in near-term technology development, the Department is supporting projects that might otherwise take far longer to contribute to U.S. industrial competitiveness. DOE expects to fund 35 to 50 cost-shared projects under the initiative.

Projects associated with innovations in the earlier stages of development, such as applied research projects or those that establish a proof of concept, will be eligible for awards up to $1 million. These projects must be completed within two years. Projects associated with innovations further along in their development, such as laboratory testing or verification of a prototype system, will be eligible for awards up to $9 million.

Applicants must submit a Letter of Intent by September 1, 2011 in order to be eligible to submit a Full Application by October 5, 2011

 For more information, see the funding opportunity announcement and the DOE press release.

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