The following is a summary, prepared by the Office of Policy Planning & Federal Relations, of policy and funding issues recently addressed by Congress that affect Penn's faculty, students, and staff. For additional information, call the office at 898-1532.

Higher Education and the Recent Congress

The 104th Congress that began its work two years ago with much fanfare and promises of bold change adjourned last month after completing a spending plan for 1997.

That appropriations legislation held some pleasant surprises for college students and faculty, including substantial increases in funding for student financial aid and biomedical research. For some fields of importance to Penn and peer institutions, the spending plan was a mixed blessing, as those increases came with a price tag that will include reductions in basic research programs that fund university-based projects in materials and computer science and engineering.

Such painful tradeoffs among programs of importance to universities like Penn are likely to become more frequent as Congress and the Administration, regardless of the political parties in power, attempt to meet their commitment to a balanced federal budget.

Overall, the 104th Congress addressed a broad spectrum of funding and policy issues that will affect Penn. Among the policy changes were: a major overhaul of telecommunications legislation that could lead to lower rates and more flexibility for the University's computer and internet communications; immigration reform that will impose new tracking and fee requirements on nonimmigrant foreign students; and modest expansion of health insurance coverage.

Conversely, the significance of the past session of Congress, for Penn and other research universities, may be measured as much by what did not occur as by what did. The FY 1996 budget resolution had called for substantial reductions in federal subsidies for graduate and professional education and foreign language and area studies programs; fundamental changes in Medicare that would have cut reimbursements to teaching hospitals for the costs associated with training physicians and treating severely ill patients; and further reductions in funding for the National Endowments for the Arts and the Humanities. That budget plan also suggested considerable reductions in federal reimbursements for the indirect costs of federally sponsored university research -- the costs of facilities, major equipment, and administrative infrastructure necessary to conducting first-rate research.

Due in large part to the advocacy and leadership of senior university officials, faculty, students and their parents, these chilling proposals did not reach fruition. Instead, the political and budgetary deadlock between Congress and the Administration that caused the federal government to shut down for extended periods in 1995 and earlier this year gave way to compromise on spending and policy issues in order to prevent protracted battles that would have kept members in Washington as the electoral season approached.

Our relative success in the recent budget deliberations is also due to the leadership and long-term vision of key members of Congress who have been vocal advocates for federal investments in fundamental research and in human capital--among them Senators Mark Hatfield (OR), Arlen Specter (PA), Edward Kennedy (MA), Pete Domenici (NM), Tom Harkin (IA), Bennett Johnston (CA), Claiborne Pell (RI), and Bill Frist (TN), and Representatives John Porter (IL), Bob Walker (PA), George Brown (CA), and Curt Weldon (PA). As several of these leading advocates who have a long institutional memory about the policy rationale for these investments will be retiring next month, it will be imperative to create a new cadre of leading congressional advocates for higher education and for Penn.

Research Funding--Recent Success, Future Uncertainty

In general, funding for research in basic science and engineering fared well in the FY 97 federal budget, relative to other areas of federal domestic spending. Overall, in 1997 Federal research and development expenditures overall will grow by nearly 4 percent--to $73.9 billion. R & D spending targeted specifically for university-based research will rise by an estimated 2.7 percent--to about $12.9 billion. This modest growth, however, is driven mainly by an increase of more than 6% for extramural research funded by the National Institutes of Health, while funding for other fields of study remains flat and in some cases, may decline.

Nevertheless, the relative priority accorded university-based research has been achieved in large part by the concerted efforts of university leaders, faculty, and chief executives of research-based corporations to advocate on behalf of sustained federal investments in research and education. Last year, Penn was among a small group of founders of the Science Coalition, which has since grown to almost 400 universities, corporations, scientific societies, voluntary groups, and prominent individuals promoting the importance of research investments to policymakers and the media. President Rodin, Trustee Chairman Roy Vagelos, and other Penn leaders, like Trustee and Nobel Laureate Michael Brown, continue to lead these efforts to make a strong case that sustained funding for basic research is crucial to our economic as well as to our intellectual health and to the education and training of future generations.

The following is a summary of several main funding and policy issues addressed in the last session of Congress that affect Penn:

NIH and Health Care Research: Biomedical research sponsored by the National Institutes of Health will benefit from an increase of more than $700 million, or more than 6% relative to last year. Penn faculty have been increasingly successful in obtaining NIH support for their research programs, and Penn ranked fourth among all universities last year in NIH extramural support.

The Agency for Health Care Policy and Research will receive $143.6 million, an increase of 14%.

NSF: Appropriations for the National Science Foundation, the University's second largest research sponsor, will increase by 1.5% overall, to $3.3 billion. The agency's core research and related activities will rise 5.1% to $2.4 billion.

Defense: Although the Defense Department's spending for research, development, and testing will grow by 7% in 97, most of this increase will derive to development and testing of weapons systems rather than to the types of basic and applied research done by faculty at Penn and other universities. Basic research funding will decline by about 2%, with the possibility of further reductions as the Defense Department distributes more than $600 million in cuts needed to pay for increased domestic spending that emerged during the final budget deliberations. These reductions are likely to affect adversely university programs in new materials, mathematics, physics, astronomy, computer and cognitive science that have been supported substantially by DoD.

Energy: The Department of Energy division that funds high energy and nuclear physics received modest increases of .5% and 3.7% respectively. These increases will permit support for the Large Hadron Collider, an international high-energy physics project in which Penn faculty are playing an important role. Fusion, biological, and environmental research sustained decreases ranging from 5% to 7%.

NEH/NEA: The National Endowment for the Humanities and the National Endowment for the Arts will be funded at $110 million and $99.5 million respectively, the same amounts as provided for the two agencies in 1996, but substantially below their 1995 level.

Student Aid and Graduate Training

The FY 97 budget provides for a substantial increase in the maximum Pell Grant--the principal vehicle of federal support for economically disadvantaged students. Spending will increase by $1 billion, raising the maximum grant to $2,700 for the 1997-98 academic year ($230 higher than the current maximum award). In addition, the College Work-Study program, which supports more than 4500 Penn students, will receive $830 million --35% more than in 1996. New federal contributions to the Perkins loan program--which provides low-cost credit to more than 8800 Penn undergraduate and graduate students--will be restored to the FY 95 level of $158 million.

Funding was also sustained for continuing fellowships under the merit-based Jacob K. Javits and Patricia R. Harris programs and to finance new Javits awards for next year. The highly competitive Javits award is the only federal support available for graduate study in the humanities.

Other Department of Education Programs

Trio Programs: The federally funded TRIO programs provide support for disadvantaged students to ensure their success in preparing for and attending college. At Penn, approximately 385 students participate in TRIO's Upward Bound, Special Services, and Veterans' Upward Bound programs. The FY 97 appropriations bill increase TRIO funding by 8%.

Title VI and Fulbright Hays: The Title VI program provides support for programs in foreign languages, and area and international studies, including international business education. Its complementary overseas program, Fulbright-Hays, supports overseas study for U.S. students and faculty. As Penn is a leader in international studies, our students and faculty benefit from substantial support under these programs. Under the omnibus appropriations bill, Title VI received $53.5 million, which more than restores its FY 1995 funding level. Fulbright-Hays was funded at $5.3 million, about 8% more than last year.

Education Research and Improvement: Funding for education research sponsored by the Department of Education increased by 28% relative to last year. Penn faculty and graduate students in several disciplines, investigating and disseminating "what works" in colleges and schools, are particularly well-supported by these research programs, through Penn's Center for Policy Research in Education and the National Center for Postsecondary Improvement, a joint Stanford-Penn-Michigan initiative.

Immigration Reform

Congress also passed a reform bill to address problems of illegal immigration as part of the FY 97 spending plan. Earlier versions of the immigration reform bill posed several concerns for Penn and for other research universities, including: a requirement that foreign workers obtain two years of experience outside the U.S. before being allowed to emigrate; elimination of the "Outstanding Professor and Researcher" category of visa; a requirement that employers who hire foreign workers pay them more than American workers; restrictions on the ability of legal resident aliens to receive student aid for higher education; and limits on the length of temporary visas. While the final law significantly improves upon initial versions, it still contains provisions of concern to Penn. Among these provisions is a requirement that, beginning April 1, 1997, universities collect and report information on nonimmigrant foreign students, scholars, professors and researchers, and impose a per-individual fee to cover program costs borne by the Immigration and Naturalization Service.

Health Care

Although unable to reach agreement on the politically charged issues of Medicare and Medicaid reform, the 104th Congress did pass the Kassebaum -Kennedy health insurance reform bill, which subsequently was signed into law by President Clinton. Key provisions of the new law, such as restrictions on the use of preexisting conditions to deny health coverage and guarantee renewability of health insurance policies, are expected to improve access and portability of health insurance coverage for individuals and families in Pennsylvania and throughout the nation. Among its other provisions, the reform bill also establishes a pilot program to test Medical Savings Accounts; increases the health insurance tax deduction for the self-employed; and strengthens laws related to health care fraud and abuse.

Several politically-popular health amendments were also approved or considered in the context of appropriations legislation as Congress rushed to adjourn for the year. Amendments requiring health insurers to provide minimum 48 hour hospital maternity stays and to set similar annual and lifetime caps for mental health and physical health benefit coverage were passed as part of FY 97 appropriations legislation. However, an amendment outlawing so-called "gag" clauses in managed care contracts that limit physician discussions concerning treatment options failed to gain approval. These piecemeal efforts to place controls on managed care may be a harbinger of things to come in the next Congress.

Telecommunications Act

Earlier this year, Congress passed and the President signed into law a major reform of federal telecommunications law. The new law expands competition in the delivery of all forms of telecommunications and information services, and creates special rates for certain providers of educational services. The act is intended to stimulate new technologies and allow new providers to offer telecommunications and information services previously only offered by telephone companies. The new competition fostered by the act could lead to lower prices, greater flexibility, and more options for colleges and universities in the delivery of telecommunications and information services and technologies.

Among the most controversial provisions of the legislation is the "Communications Decency Act" (CDA), which imposes criminal liability to any individuals or organizations who "make available" to minors (18 and under) "indecent" material via the internet. The wide use of computer networks at colleges and universities, in conjunction with our commitment to protect academic freedom, would make compliance with this law particularly problematic for Penn and peer institutions. A constitutional challenge to the CDA was filed in Federal Court Philadelphia by the American Civil Liberties Union and others. A three-judge panel held on June 12, "without hesitation . . . that the CDA is unconstitutional on its face," and enjoined the Justice Department from enforcing the most problematic provisions of the act. An appeal to the Supreme Court is possible.

Issues for 1997 and Beyond

The new Congress that convenes in January will take up several new measures of direct interest to the University, as well as the regular funding measures and much of the unfinished business described above. Among Penn's most salient concerns:

  • Copyright and Intellectual Property Legislation --Proposals to overhaul patent and intellectual property law in order to align U.S. policy with the General Agreement on Tariffs and Trade (GATT) and prevent piracy of commercial data bases are likely to be taken up by the next Congress. Such legislation could create conflicts between commercial information services and educators and researchers who depend upon "fair use" or free access to certain data bases and other published materials. If enacted, these provisions could add prohibitive costs to the preparation and use of teaching materials, including on-line texts;

  • Student Aid--Congress will begin reauthorization of the Higher Education Act, including the student financial aid programs that provide $8 million in federal grant and work-study assistance and more than $80 million in federally guaranteed and subsidized loans to more than 9000 undergraduate, graduate, and professional students at Penn. It will also consider extension of the 1994 law that permits agreements among colleges to award need-only financial aid and to commonly adopt certain aid principles;

  • Entitlement Reform--The Administration and Congress may begin efforts to address the growing cost of federal entitlement programs, including Medicare reforms that may affect support for medical training and patient care provided by academic medical centers;

  • Tax Policy--Congress will consider tax initiatives that may: (a) help families meet current costs of college tuition and provide tax-favored incentives for pre-college savings; (b) restore access to tax-exempt financing for universities to permit them to lower costs of constructing and renovating facilities; and (c) extend the non-taxability of employer-provided tuition benefits at the undergraduate and graduate levels;

  • NIH--Congress will take up reauthorization of the National Institutes of Health, Penn's leading research sponsor. This legislation will set funding levels and policies for the conduct of biomedical research for the next several years;

  • Faculty Retirement--Congress will again consider legislation to clarify the permissibility of voluntary early retirement incentive plans offered to tenured faculty.


    Volume 43 Number 11
    November 5, 1996

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