Government Affairs Update

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ECONOMIC GROWTH & TAX RELIEF | BUSH'S APPOINTMENTS | COMMONWEALTH APPROPRIATION | TOBACCO STATEMENT

Economic Growth and Tax Relief Reconciliation Act of 2001

On Thursday, June 7, 2001, President George W. Bush signed into law the Economic Growth and Tax Relief Reconciliation Act of 2001 making a number of changes to the Internal Revenue Code. Congress approved this legislation on May 26, 2001. We are pleased to inform you that one of the provisions contained in this legislation expands the income tax exclusion for employer-provided educational assistance, commonly referred to as Section 127, to include graduate education. This provision retains the annual ceiling on benefits at $5,250, and becomes effective with respect to courses beginning after December 31, 2001. Prior to the inclusion of this provision in the recently passed bill, which was a key item on the University's agenda, Section 127 had applied to undergraduate level assistance only. The provision for graduate-level assistance had expired in 1996.

Other provisions benefiting students, families and colleges include:

• Student Loan Interest Deduction: The Act raises the income eligibility to claim student loan interest deduction from $50,000 to $65,000 for single taxpayers and from $100,000 to $130,000 for married taxpayers. After 2002, the income eligibility will be adjusted annually for inflation. In addition, the Act repeals the current 60-month time limit during which student loan interest is deductible and makes voluntary payments of interest deductible. The changes are effective for interest paid on qualified education loans after December 31, 2001.
• Qualified Tuition Plans: The new bill eliminates taxes on interest earned under state prepaid-tuition plans and allows private institutions to set up such plans with the same tax benefits, starting in 2004. The Act also allows one rollover per year among these different plans, so long as the account is maintained for the same beneficiary.
• Education IRAs: The Act increases the annual limit on contributions to education IRAs from $500 to $2,000.
• "Above the Line" Deduction for Qualified Higher Education Expenses: The Act permits taxpayers to take an "above the line" deduction for qualified higher education expenses, defined in the same manner as for purposes of the HOPE tax credit. The provision expires in 2005.

ECONOMIC GROWTH & TAX RELIEF | BUSH'S APPOINTMENTS | COMMONWEALTH APPROPRIATION | TOBACCO STATEMENT

President Bush's Science Adviser and Other Appointments

On Monday, June 25, President Bush nominated physicist John Marburger, III, to be his Science Adviser. Dr. Marburger is currently director of the Brookhaven National Laboratory. He has previously served as president of Stony Brook University, State University of New York from 1980 to 1994, and dean of the College of Letters, Arts, and Sciences at the University of Southern California from 1976 to 1980. Dr. Marburger received his bachelor's degree from Princeton University and his Ph.D. from Stanford University. In his position, he will chair the President's Committee of Advisors on Science and Technology, and will oversee the White House Office of Science and Technology Policy.

Tom Scully was confirmed by the United States Senate and was sworn in as the Administrator of the Centers for Medicare & Medicaid Services (CMS) in May 2001. CMS, formerly named the Health Care Financing Administration (HCFA), is responsible for the management of Medicare, Medicaid, the State Children's Health Insurance Program and other national healthcare initiatives. Mr. Scully was a senior official in the former Bush White House and at the Office of Management and Budget, and worked on health issues in Congress and the private sector.

President Bush nominated Eugene W. Hickok, Jr., the former education secretary for Pennsylvania, to be the Undersecretary of Education. Dr. Hickok's nomination has not yet been voted on by the Senate, but he is expected to be confirmed without controversy.

President Bush nominated Janet Hale to be assistant secretary for management and budget at the Department of Health and Human Services. Ms. Hale is a former Executive Vice President at Penn.

Senate Organization

On Wednesday June 6, Democrats took control of the U.S. Senate after Senator James Jeffords (I-VT) left the Republican Party to become an Independent. This change will make the appropriations process more contentious, and will make it more difficult for President Bush to gain support for his budget priorities.

Until the Senate passes a committee organizing resolution, committee memberships have reverted back to their organization from before January 20, 2001. Committee and subcommittee chairmanships, however, have gone to Democrats.

The move will impact both of Pennsylvania's Republican Senators. Senator Rick Santorum will retain his position as Republican Conference Chair. Senator Arlen Specter will become Ranking Member of the Appropriations Subcommittee on Labor, Health and Human Services, and Education.

ECONOMIC GROWTH & TAX RELIEF | BUSH'S APPOINTMENTS | COMMONWEALTH APPROPRIATION | TOBACCO STATEMENT

FY 2002 Commonwealth Appropriation

On June 12, the Pennsylvania House of Representatives gave final approval to House Bill 1201, Penn's Fiscal Year 2002 Commonwealth appropriation. The bill had been approved previously by the Senate on June 11. HB 1201 was then signed into law by the Governor on June 22 as Act 25A of 2001.

HB 1201 provides a total of $43,478,000 in funding for University programs, an increase of $2,600,000, or 6.4 percent, over the last fiscal year (see chart below). The funding is broken down as follows: $36,626,000 for the Veterinary School, $4,034,000 for the Medical School, $1,632,000 for Cardiovascular Studies, $938,000 for the Dental Clinics, and $248,000 for the University Museum. Penn's increase of 6.4 percent is substantially higher than the less than one percent increases provided to the public universities (Penn State, Pitt, and Temple), which indicates strong support for Penn's programs.

In addition to the University's direct appropriation, Penn will receive other funding through the Commonwealth's General Appropriation (GA) bill (SB1), which was approved on June 22. The University's Cancer Center will receive $600,000 through a Health Department line item. In addition, two equipment programs which will benefit Penn were included in the GA bill at last year's levels--$6 million for higher education equipment (last year Penn received approximately $290,000 under this program) and $1 million for engineering equipment (Penn's share last year--$63,000). Finally, the budget included $8 million for the higher education graduation incentive program, up from $6 million in last year's budget. This program provides grants for those institutions graduating at least 40 percent of their undergraduates within four years.

University of Pennsylvania Commonwealth of Pennsylvania: History of Non-Preferred Appropriation

(In Thousands of Dollars)

-	FY 1999	FY 2000	FY 2001	FY 2002	FY 2002	FY 2002	FY 2002
-	-	-	-	GOV.REC.	GOV.REC.	FINAL	% INC.
-	-	-	-	-	% INC.	HB 1201	-
Instruction	$0	$0	$ -	$ -	-	$ -	$ -
Medical Instruction	4,034	4,034	4,034	4,034	0	4,034	0
Dental Clinics	938	938	938	938	0	938	0
Cardiovascular Studies	1322	6321	882	632	-28.3	1,632	85
Veterinary Activities	31,489	32,276	34,783	35,826	3	36,626	5.3
University Museum	1992	2192	2413	2413	0	2483	2.9
Total University	$36,762	$38,099	$40,878	$41,671	1.9	$43,478	6.4

1 Includes $132,000 appropriated through separate non-preferred appropriation.

2 Appropriated through separate non-preferred appropriation.

3 Appropriated through PA Historic and Museum Commission (not part of submission to PDE).

ECONOMIC GROWTH & TAX RELIEF | BUSH'S APPOINTMENTS | COMMONWEALTH APPROPRIATION | TOBACCO STATEMENT

ECONOMIC GROWTH & TAX RELIEF | BUSH'S APPOINTMENTS | COMMONWEALTH APPROPRIATION | TOBACCO STATEMENT

Almanac, Vol. 48, No. 1, July 17, 2001

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