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OCTOBER 2007 UPDATE

OFFICE OF GOVERNMENT RELATIONS
Legislation and Policy Report
October 2007

WASHINGTON, D. C.

The FY2008 began on October 1 with no funding bills enacted and the federal government functioning on a Continuing Resolution through November 16. Amid the struggle to pass appropriations bills that are likely to be vetoed by President Bush, the Senate spent a significant amount of time on the farm bill and in confirmation hearings of Michael Mukasey to serve as Attorney General. The House continues to work on free trade, tax extenders, and homeowner insurance legislation.

Budget and Appropriations:

FY2008 – House and Senate Democratic leaders reached agreement on how to allocate FY08 discretionary spending among each chamber’s 12 appropriations subcommittees. Senate Majority Leader Harry Reid (D-NV) reported that Congress would focus a major push on FY08 appropriations bills with the goal of conferencing and sending to the President at least four bills before the current Continuing Resolution (CR) expires on November 16.

Senator Reid stated that the Senate is unlikely to consider the remaining five FY08 appropriations bills on the floor. He did not indicate whether the Senate would take up the bills in one omnibus package or in some other combination. Although the Senate has approved seven funding bills the House has approved all 12. The first bill to move is likely to be the Labor/HHS/Education bill.

Defense funding – The Senate approved its version of the FY08 Defense appropriations bill (H.R. 3222, S. Rpt. 110-155). The measure contains no language on indirect costs. The House-passed version of the bill would limit to 20 percent the indirect cost reimbursement rate for defense basic research. The issues likely will be resolved in the House-Senate conference on the bill, expected to occur in October. The Department of Defense (DOD) continues its strong opposition to the House language.

Commerce/Justice/Science funding – The White House has issued a Statement of Administration Policy (SAP) on the Senate funding bill stating that the Administration “strongly opposes” the overall bill because it exceeds the President’s requested $3.2 billion. The SAP commends the bill for implementing the President’s “American Competitiveness Initiative” but rejects its additional $100 million for education programs at the National Science Foundation (NSF). The bill would fund NSF at $6.55 billion, an increase of $124 million over the Administration’s request and $52 million above the House-passed level.

As part of the floor debate Senators approved Senator Barbara Mikulski’s (D-MD) amendment adding $1 billion in emergency spending for the space agency, which would reimburse NASA for costs associated with the return to flight of the space shuttle following the Columbia tragedy, which forced cuts in the science, aeronautics, and exploration accounts. The Senate-passed bill would provide NASA with $17.46 billion, approximately $150 million above the Administration’s budget request, but $140 million below the House level of $17.6 billion.

Labor/HHS/Education – House and Senate negotiators on November 1 agreed on a conference report on the FY08 Labor/HHS/Education appropriations bill (H.R. 3043) which provides an increase for the National Institutes of Health above the House and Senate levels as well as an increase in the Pell Grant maximum award.

The conference report provides:
• National Institutes of Health (NIH) - $30 billion.
• Provision to require scientific articles based on research funded by NIH to be freely available to the public on NIH’s PubMed Central within 12 months of publication.
• Pell Grant maximum increased to $4,925.
• Pell Grant program - $14.5 billion in discretionary funding, which is $838 million above FY07.
• Unobligated funds within the American Competitiveness Grant and SMART grant programs would be made available for Pell Grants in 2008-09 academic year.
• Campus-based financial aid programs (College Work Study, Supplemental Educational Opportunity Grants, Perkins Loans) – flat funded.

President Bush has said he would veto the bill, along with seven other appropriations bills, because total funding approved by Congress is $23 billion above his FY08 request. The Labor/HHS/Education bill represents about half of the $23 billion difference. Senator Harkin, noting that the Senate bill is $11 billion over the President’s request but only $7.5 billion over the FY07 level, stated that adoption of the President’s request would require a cut of $3.5 billion from the FY07 level.

FY2009 appropriations – A bipartisan group of six members of Congress sent a letter to Secretary of Defense Robert Gates requesting that the Department provide significant funding increases for Defense science and technology (S&T) programs, particularly basic research, in the FY09 budget request. The letter focused on the underfunding of Defense S&T in recent years and highlights the importance to national defense and economic development, as well as its critical role in training the next generation of scientists and engineers.

Higher Education:

Reauthorization - The House approved legislation to extend the Higher Education Act (HEA) until the end of April 2008. The current extension expired on October 31. The Senate has not taken action to extend the HEA as several key senators would prefer a shorter extension in order to force action on reauthorization. The Senate has passed a reauthorization bill but there has been no action in the House.

Student loans – The Department of Education has issued final rules for student loan programs that are intended to strengthen and improve their regulation, including providing greater “sunshine” on loan arrangements between lenders and institutions. The regulations, which cover the Perkins Loan Program, the Federal Family Education Loan Program (FFEL), and the William Ford Direct Loan Program, reflect changes in law prompted by the 2006 reconciliation act and the negotiated rulemaking process that occurred earlier this year. The regulations note that there are no significant differences between the Notice of Proposed Rulemaking and the final regulations. The regulations are effective on July 1, 2008 but the Department is encouraging the voluntary implementation of many provisions prior to that date. The regulations can be viewed by clicking here.

Homeland Security:

Dangerous chemicals inventory – The Department of Homeland Security (DHS) has released its final list of chemicals that institutions must inventory and report on because of their potential use in terrorist activities. The list, known as Appendix A, includes fewer chemicals than initially proposed and that all chemicals included on the list have a threshold amount for tracking and reporting. No chemical on the list will have the threshold of “any amount,” which was included in the preliminary version of Appendix A published in April.

DHS officials have stated that the revised Appendix will allow universities more than 60 days to conduct and submit their inventories by requesting an extension. The final version is expected to be published in the Federal Register in mid-November.

NASA:

Moon-to-Mars Initiative – NASA has revised the lunar exploration architecture it rolled out last December to feature more habitation and surface mobility capabilities earlier than previously planned. The agency envisions using three dedicated landers to put as many of three dedicated habitation modules onto the Moon’s surface during the early phases of the program. The original plan called for building living quarters into the space-constrained landing craft that astronauts will take to the surface.

Astronomy research – The agency will restart a $140 million Small Explorer-class astronomy mission that fell victim to the budget ax in early 2006. The Nuclear Spectroscopic Telescope Array (NuSTAR) is slated for launch in 2011. The spacecraft is expected to bridge a gap between the 2009 launch of the Widefield Infrared Survey Explorer and the 2013 launch of the James Webb Space Telescope.

National Institutes of Health:

The National Institutes of Health (NIH) has issued guidance for research grant recipients under current FY08 Continuing Resolution (CR) which expires on November 16. One or more additional CRs are likely, so this guidance will be NIH policy until the agency’s final FY08 appropriation is decided. The agency will fund most non-competing grant awards at 80 percent of previously committed levels while it operates under the CR. When the agency receives its appropriation for FY08 these awards will be adjusted. The full guidance document is available at: http://grants.nih.gov/grants/guide/notice-files/NOT-OD-08-001.html.

The acting chief of the National Institute of Environmental Health Sciences (NIEHS) assured Congress that he will partly reverse $11.1 million in funding cuts made by his controversial predecessor, David Schwartz. Acting director Samuel Wilson said at a House hearing that he will restore cuts, including $966,000 slashed from the $3.1 million budget of the institute’s journal, Environmental Health Perspective. Mr. Schwartz, who has come under fire for ethics issues and for shifting the NIEHS’s focus from disease prevention to clinical research, is on temporary leave as director while a high-level review of the institute’s management is completed.

Research:

A panel of the National Academies’ National Research Council argues that in order to strengthen the role of science and technology in maintaining national and economic security, the US should ensure the open exchange of unclassified research despite the small risk that it could be misused for harm by terrorists or rogue nations.

The report, “Science and Security in a Post 9/11 World,” suggests creating a new science and security commission, co-chaired by the President’s national security advisor and the director of the White House Office of Science and Technology Policy (OSTP) to help balance scientific openness with security concerns. The commission should include representatives of the academic research community and national security officials. The press release and full report are available at: http://www8.nationalacademies.org/onpinews/newsitem.aspx?RecordID=12013.

Taxes:

House Ways and Means Committee Chairman Charles Rangel introduced a major tax reform bill that was approved by the Committee. In addition to its broad elements the measure would extend for one year a number of expiring tax code provisions including the above-the-line tuition tax deduction and the IRA charitable rollover.

Mr. Rangel’s legislation also includes a provision that would permit college and university endowments and other tax-exempt entities to invest directly in domestic hedge funds and other investment funds without incurring unrelated business income tax (UBIT). The provision would create an exception to the debt-finance income rules in order to allow all tax-exempt entities to invest directly in domestic hedge funds without being subject to UBIT. The proposal would “eliminate the current-law incentive for pension plans, universities and other tax exempt entities to invest in hedge funds and other investment funds through offshore ‘blocker’ corporations’ formed in tax haven jurisdictions and would improve the investment returns for pension plans, universities and other tax-exempt entities that invest these funds.”

The Senate Finance Committee has not yet introduced a bill to extend these provisions, but the panel is expected to consider a measure that combines a one-year “patch” of the alternative minimum tax and the same tax extension provisions as the House bill. The ten-year cost of these one year extensions are $1.39 billion for the tuition tax deduction and $452 million for the IRA charitable rollover.

Odds and Ends:

The “Public and Teaching Hospital Preservation Act” is being supported by the American Association of Medical Colleges (AAMC) and other hospital groups. The legislation would postpone cuts to the Medicaid graduate medical education payments necessary for teaching hospitals “to provide essential services including education of the next generation of physicians and physician scientists.

Bayh-Dole – The Senate Judiciary Committee held a hearing on October 24 to examine the successes and shortcomings of the Bayh-Dole Act, the law that permits universities and other non-profit organizations to retain title to inventions developed with federal funds. The focus of the hearing was on provisions that govern patent royalties earned by universities’ government-owned, contractor-operated facilities (GOCOs), such as the Ames Laboratory at Iowa State University. Two witnesses from the higher education community spoke favorably about the benefits of the law to the nation and society but other panelists raised concerns. Robert Weissman, director of Essential Action, a non-profit organization that focuses on pharmaceutical access, stated that Bayh-Dole has distorted and concentrated markets, resulting in excessive drug prices. He recommended that the federal government more actively assert its ownership rights in government-funded inventions and that reporting mechanisms be strengthened and made more transparent. Duke University professor Arti Rai said that major reform of Bayh-Dole is not needed, but suggested that the standard of “exceptional circumstance” under which a federal agency may declare that patenting is the wrong approach to commercialization in a particular instance might be too high.

Commerce Control List – The Association of American Universities and the Council on Government Relations submitted comments to the Department of Commerce in response to the agency’s systematic review of the Commerce Control List (CCL), which lists technologies subject to the export licensing authority of the Department’s Bureau of Industry and Security (BIS). The letter suggests that the list of controlled technologies be simplified, shortened, and focused on cutting-edge technologies where the US is a clear leader and which have a real bearing on national security. Among its eight major recommendations, the letter suggests that the controlled list be updated regularly so that technologies that have become widely available or were developed overseas can be dropped, and that protection of commercial proprietary information not be a factor in whether the technologies are added or excluded from the list. The letter is available at: http://www.aau.edu/research/Ltr_AAU-COGR_CCL_11-1-07.pdf.

Comings and Goings:

Senator Pete Domenici (R-NM) announced that he will not seek a seventh term next year and will retire in 2009 due to a medical condition.

Scott Horowitz, NASA associate administrator for space exploration systems, stepped down October 1.

NASA Associate Administrator Rex Geveden recently left the agency to become president of NASA contractor Teledyne Brown Engineering. Chris Scolese, who had served as the agency’s chief engineer, will replace Mr. Geveden.

Representative Jo Ann Davis (R-VA) passed away following a battle with cancer. A special election will be held to fill the remainder of her term.

Retired Lt. General James Peake, M.D. has been nominated to serve as secretary of Veterans Affairs. He currently is chief medical director and COO of QTC Management, Inc. and is a former surgeon general of the US Army (2000-2004).

THE BUCKEYE STATE

This month the General Assembly has focused its activities on electric utility re-regulation legislation, the State Attorney General is directing his attention on closing down low-performing charter schools, and the Secretary of State is preparing to evaluate the off-year election process in anticipation of a smooth running election in 2008.

Electric Utility Re-regulation:

The Ohio Senate unanimously approved S.B. 221 on October 31. Governor Strickland’s comprehensive energy regulation plan now moves to the Ohio House Public Utilities Committee for a series of hearings that are expected to continue through January 2008. The legislation would set electric rates beginning in 2009 at February 1, 2008 levels and would bar utilities from increasing rates to match regional wholesale prices. Utilities could challenge the rate cap if they are able to prove that a healthy competitive wholesale market existed regionally. Legislators are concerned that a free market environment would cause electric utility rates to skyrocket as has been the experience in other states.

The House will be revisiting the rate cap provision in the Senate bill along with another controversial stipulation requiring that Ohio utilities obtain 25 percent of the power they sell from advanced and renewable energy sources by 2025.

Higher Education:

Ohio Board of Regents Chancellor Eric Fingerhut continues to develop a 20-year master plan for Ohio’s public colleges and universities which will be presented to the Governor and General Assembly by March 31, 2008. The Chancellor has signaled that he will release a preview of a goal every Friday in November. The first one – “The University System of Ohio will lead the development of a highly educated workforce capable of meeting the needs of existing enterprises and creatively leading the development and growth of new enterprises.”

The Chancellor also indicated the ways he will measure success toward this goal.
• Number of students attending colleges or universities.
• Number of degrees awarded.
• Number of undergraduates over age 25.
• Number of degrees awarded to first generation college students.

There is an opportunity for the public to provide comments at:
http://universitysystem.ohio.gov/master-plan/

Commings and Goings:

Congressman Ralph Regula (R-OH16) announced that he will not seek re-election in 2008. Known as the dean of the Ohio Congressional delegation, Mr. Regula is currently serving his 18th term in the House.

Congressman David Hobson (R-OH7) announced that he will retire and not seek re-election in 2008. A former member of the Ohio General Assembly, Mr. Hobson is now in his seventh Congressional term.

Ohio House Speaker Jon Husted announced his candidacy to fill the state Senate seat of Jeff Jacobson in next year’s election. Senator Jacobson is term-limited and cannot seek re-election.

State Senator Steve Stivers (R-Columbus) has announced that he is a candidate for the Congressional seat currently held by Rep. Deborah Pryce (R-15), who is retiring at the end of her current term.

Former state Rep. Troy Lee James, who represented Cleveland’s Central neighborhood, passed away. The longest serving Democrat in the Ohio House Mr. James served 34 years retiring in 2000 due to term limits.

Locally… Case School of Engineering Professor David Matthiesen, Department of Materials Science and Engineering, gave testimony on S.B. 221 (electric utility re-regulation) before the Senate Committee on Energy and Public Utilities.

The Fifth Annual Louis Stokes Leadership Symposium will be held on Monday, November 26 at 5:00 p.m. in Ford Auditorium, Allen Memorial Medical Library. This year’s featured speaker is Congresswoman Maxine Waters (CA-35th District). The program is free and open to the public.

Sources of information for this report include the Association of American Universities, American Institute of Physics, the Chronicle of Higher Education, the Association of Independent Colleges and Universities of Ohio’s updates and reports, newspapers, political and legislative wire services, and others.