Legislative Update


Federal Relations

The President presented his FY2001 budget proposal to Congress on February 7, 2000 which proposes to increase overall federal outlays by $45 billion to $1.84 trillion. Some of the details of his budget relevant to the University include:

A. Research: The President is proposing to increase total research spending by $2.6 billion to $85.3 billion. His budget would increase basic research spending by $1.3 billion, or 7%, to $20.3 billion, as well as increase funding for applied research by $833 million, or 5%, to $18 billion. The President proposes to spend a total of $17.8 billion for university-based research in FY2001, an increase of $1.3 billion or about 8%, over FY2000. The budget proposal provides slightly more than $28 billion for merit-based research government-wide in FY2001, an increase of 8% over the FY2000 level. The President is also proposing a total of $42.9 billion for his "21st Century Research Fund" in FY2001, a 7% increase for the programs included there. Some specific agency budget requests include:

  1. $18.8 billion for the National Institutes of Health (NIH), an increase of $1 billion, or 6%.
  2. $4.57 billion for the National Science Foundation (NSF), a $675 million, or 17% overall increase.
  3. $7.7 billion for Research and Development (R&D) funding at the Department of Energy, an 8% increase.
  4. $10 billion for R&D funding for NASA, a 3% increase.
  5. $38.8 billion for R&D for the Department of Defense (level funding).

B. Tax: The President is proposing targeted tax cuts that would total $351 billion over the next ten years, while also including proposals to increase revenues by $181 billion over the same period. Specific tax proposals include the following items of interest to research universities:

  1. Expansion of Section 127 employer-provided educational assistance to include graduate education courses.
  2. Elimination of the 60 month limit on the student loan interest deduction while keeping in place the current income caps for single and joint filers.
  3. "College Opportunity Tax Cut" to allow families the option of taking a tax deduction or claiming a 28% tax credit for tuition and fees for undergraduate and graduate college expenses or courses taken to enhance job skills.

C. Student Aid: The President's FY2001 budget proposes a total of $54.2 billion (including continuing loan obligations) for federal student aid programs. This constitutes a 5.5% increase over the FY2000 level. The President's student aid proposal includes:

  1. $41 million in level funding for Graduate Assistance in the Area of National Need (GAANN) scholarships which includes $10 million for new and continuing Javits Fellowships for FY2002.
  2. $716 million more for the Pell Grant program allowing the maximum Pell grant to increase by $200, to $3,500.
  3. $1.011 billion for Work-Study programs, an increase of $77 million.
  4. $691 million for the Supplemental Educational Opportunities Grants, an increase of $60 million.
  5. Perkins loan capital contributions would be level-funded at $100 million.
  6. An increase of $125 million, or 62.5%, for "Gaining Early Awareness and Readiness for Undergraduate Programs" (GEAR UP).


Commonwealth Relations

On February 8, 2000 Governor Ridge released his proposed FY 2000-01 budget for the Commonwealth. Specific funding recommendations for the University of Pennsylvania and for higher education programs in general are outlined below:

A. Non-Preferred Appropriations: The Governor is proposing a total of $38,555,000 for the University, a 2.1% increase over the current fiscal year. The proposed funding is broken down into four line items - $33,083,000 for the Veterinary School, $4,034,000 for the Medical School, $500,000 for Cardiovascular Studies, and $938,000 for the Dental Clinics. The funding for the Vet School represents a 2.5% increase and is the same increase being recommended for the public universities. The Medical School, Cardiovascular Studies, and Dental Clinics are funded at the same level as FY 2000. The other private state-aided institutions received no increase in the current budget, with the exception of Drexel University, which received a 2.5% increase.

B. University Program Appropriations: In addition to the recommended funding for the University in our non-preferred appropriation, the Governor's budget included several smaller appropriations for university programs that have been funded in prior years. The budget recommends $219,000 for the University Museum, $132,000 in separate funding for Cardiovascular Studies at HUP, and $600,000 for the Cancer Center. These three items are funded at the same level as the current fiscal year. Finally, the budget includes $4.5 million in Museum Assistance Grants through the Historical and Museum Commission. The Morris Arboretum received approximately $120,000 from the fund last year through a competitive process.

C. Higher Education Funding: In other higher education funding areas, the Governor proposed a 10 percent increase for PHEAA student grants. The Governor recommended the continuation of the Higher Education Equipment Grant program at last year's level of $6.0 million. Last year, Penn received approximately $290,000 through this program. Also included is $1 million in the Engineering Equipment Grant program (no increase) of which Penn received approximately $60,000 from this matching program last year. The budget recommends $10 million in higher education technology grants to provide for competitive grants focused on "innovative approaches to community-based networking and for curriculum development for information sciences and technology programs."

D. Technology Funding: The Governor has also proposed the expansion of the Pennsylvania Technology Investment Authority (PTIA) within the Department of Community and Economic Development (DCED) budget. Included in this expansion is an increase from $5 to $15 million in funding to enhance university technology-based research, facilitate commercialization of new technologies, and link university capabilities and resources to technology company attraction activities.

E. Community Access Fund: Finally, the Governor is recommending the continuation of Commonwealth funding for the Community Access Fund (CAF), a pool of dollars designed to assist hospitals experiencing losses due to uncompensated care. With a federal match, there will be a total of $53 million available through this fund.


City and Community Relations

On February 3rd, Mayor John F. Street presented his Fiscal Year 2001 $2.7 billion operating budget and a capital program budget of $140.3 million to City Council for its review and approval. The Mayor's proposed budgets focus on his comprehensive "Vision for a Better Philadelphia" program targeted at neighborhood revitalization, improved public schools, enhanced city services, and a proposed sixth round of reductions in both the wage and business privilege taxes. Details include:

A. Surplus Concerns: The City begins the new decade with a $206 million fund balance, the largest ever. Mayor Street's budget anticipates that beginning this year, the City will start spending the $205.7 million surplus that was accumulated over the past seven years. The surplus was built up in anticipation of increased costs, including the renegotiations of the City's current labor contracts. Although these deficits were anticipated in budget projections, the City is still vulnerable to any downturns in the economy, changes to federal or state reimbursement formulas, or increased demands for services due to welfare cuts. For these reasons, the Mayor's budget remains very conservative and continues a course of fiscal vigilance.

B. Tax Reductions: The Tax Reduction Program, initiated under former Mayor Rendell in FY1996, has been extended through fiscal year 2005. The combined business and wage tax reductions over the ten years of the program will save Philadelphia residents and businesses $1.1 billion. On July 1, 2000, the City will cut the residential wage tax rate from the current 4.6135 percent to 4.5635 and the non-residential tax from 4.0112 to 3.9672, saving workers $13.2 million for FY 2001. The gross receipts portion of the business privilege tax (BPT) will be cut, saving businesses $5.67 million in BPT in FY 2001.

C. Neighborhood Revitalization: The Mayor's budget reinforces his commitment to create a $250 million "SAVING NEIGHBORHOODS CAMPAIGN" through one of the City's development authorities. The initiative is described as an all-out assault on neighborhood blight and destabilization. The Mayor's plan includes an aggressive strategy to eliminate abandoned cars from city streets.

D. Public Education: The Mayor's plan includes the appointment of a highly respected and competent local Secretary of Education. He has appointed a panel of education experts, including President Rodin, who will nominate new candidates for membership on the Philadelphia Board of Education. Mayor Street will be meeting with Governor Ridge, State Representatives, and City Council Representatives to address equitable school funding.

E. Kids Initiative: Another major new initiative announced in Mayor Street's budget is the "Kids Initiative" which focuses on providing children with constructive activities after school. The initiative includes more than $4 million for after school programs allowing the recreation department to extend them uninterrupted through the summer months. The strategy includes an expansion of the Free Library's Learn, Enjoy, and Play (LEAP) Program to every library and increasing operations from 40 to 52 weeks a year.

F. Capital Budget: Key proposed capital budget expenditures include:

  1. $40 million for improvements to Veterans Stadium.
  2. $11 million for re-paving and construction of streets, highways and bridges.
  3. $3.9 million for new neighborhood enhancements including site improvements for housing and commercial revitalization programs.
  4. $300,000 for the 40th Street Walnut West Free Library has been reinstated into the capital budget for library design and development.

--Carol R. Schman, Vice President for Government, Community, and Public Affairs


Almanac, Vol. 46, No. 22, February 22, 2000