In Lead-Up to Holidays, Congress Pushes Tax Reform and a New CR

With one day remaining before the current continuing resolution (CR) – the stopgap spending measure that keeps the government funded in the absence of regular appropriations – expires, Congress has been knee-deep in tax reform, health program funding and fiscal year 2018 spending discussions. Congress has now moved tax reform forward, but other issues still loom large.

Congress on Wednesday passed the sweeping Tax Cuts and Jobs Act to overhaul the U.S. tax code. The $1.5 trillion bill narrowly passed the Senate in a 51-48 vote and passed the House (for the second time to fix technical problems with the legislation) in a 224-201 vote. The bill is now with the president, who may sign the bill into law as early as today but will likely push enacting the bill until early January to postpone the automatic cuts it would trigger. (Read more on the statutory Pay-As-You-Go rule from Politico here.)

AADR remains concerned about how the net $1.5 trillion this bill is expected to add to the federal deficit over 10 years could undermine – and even jeopardize – non-defense discretionary programs, which encompass virtually everything outside of national defense and entitlement programs (education, scientific research, public health programs, infrastructure, etc.). Yet, in a positive move for the research community, the House and Senate during conference committee removed the House bill’s initial provision to treat as taxable income the tuition waivers provided to graduate students by universities in exchange for their teaching courses or conducting research while seeking graduate degrees. In the new bill tuition waivers, which benefit graduate students but are never received by the student as income, will not to be taxed and treated as income – as is current practice.

AADR was troubled about how that provision, among others, could impact higher education and our nation’s scientific advancement by burdening students pursuing or wishing to one day pursue advanced degrees. AADR spoke out against the bill’s potential implications for research, and so did our members. We would like to thank those of you who responded to our call to action and reached out to your elected officials, whether through our action alert or other mechanisms. Through AADR’s action alert portal alone, roughly 80 messages were sent to members of Congress. Your voice matters; the public outcry resulting in the removal of the graduate waiver tax provision in the final bill proves that.

With the tax bill now more or less off its agenda, Congress shifts its attention to reaching an agreement that will keep the government funded beyond tomorrow’s deadline.

Last night House Republicans released the text of a new CR, H.R. 1370, to keep the government funded through January 19, 2018. The bill, which replaces the previously proposed H.J. Res 124, would also extend funding for the Children’s Health Insurance Program (CHIP), the National Health Service Corps and Community Health Centers, and it would waive statutory PAYGO requirements to prevent the automatic spending cuts triggered by the tax legislation’s enactment. However, as a way to pay for the public health program extensions, the CR also contains a provision to cut $750 million from the Prevention and Public Health Fund through fiscal year 2022. As a reminder, the Prevention Fund, which is regularly targeted in spending negotiations, accounts for roughly 12 percent of the Centers for Disease Control and Prevention budget.

At this point, House Democrats say they will vote against the CR unless they get assurances that a final spending bill for fiscal year 2018 will provide parity between defense and non-defense spending and include a solution for Dreamers. Senate Democrats’ standing is unclear.

In sum, there is still much to negotiate in advance of tomorrow’s CR deadline. Continue to check AADR’s blog for updates.

UPDATE: On January 18, Congress voted to approve a CR to fund government operations through January 19 and includes a waiver of the PAYGO spending cuts. The bill provides temporary funding for CHIP and $550 million for community health centers that will is intended to last through March 31. The extension was partly paid for by the previously mentioned $750 million cut to the Prevention Fund, which will begin with a $100 million cut in FY 2019. 

Continuing Resolutions Will Likely Take Spending Talks into 2018

Last week, Congress approved and the president signed H.J. Res 123, a continuing resolution (CR) to fund the government through December 22. The CR, which avoids a shutdown and keeps federal programs operating at current levels, modified the expiration date of the previous CR set to expire on December 8. All of the previous CR provisions carry forward through December 22. After this date, another funding measure – either another CR or a spending bill funding the government for the remainder of fiscal year 2018 – will be needed. Despite the two-week buffer, there is already an expectation that a second CR into January will need to be passed to give lawmakers more time to complete their work.

These funding measures have implications for research and come into play as Republicans and Democrats negotiate longer-term deals over government funding, which include raising the defense and non-defense budget caps and passing an omnibus spending package for fiscal year 2018 appropriations.

By way of background, at the beginning of the fiscal year, October 1, 2017, spending limits on military and domestic programs came into effect as a result of 2011’s Budget Control Act. Consequently, if Congress wants to increase funding for defense and non-defense programs, lawmakers first need to pass a budget deal to lift the caps and then pass a spending bill containing the actual appropriations for fiscal year 2018 (e.g., funding for the Department of Health and Human Services, Education and Related Agencies). Importantly for the dental, oral and craniofacial research community, it is important to note that for the Senate’s proposed increases for the National Institutes of Health (NIH) and the National Institute of Dental and Craniofacial Research (NIDCR) to be realized, Congress will need to make a deal to raise the caps.

Congressional negotiators are currently considering a two-year budget deal to do just that – potentially raising the caps by more than $200 billion. However, Republicans and Democrats are working under different priorities. Republicans are looking to increase the defense budget – initially seeking a deal that would raise defense by $54 billion and non-defense by $37 billion in both fiscal 2018 and 2019 – and Democrats are seeking parity, proposing increasing defense and non-defense equally by $54 billion, a move that would raise the two-year cost above $200 billion.

In addition reaching consensus on top-line numbers and finding a solution for Democrats’ demand for parity, a number of challenges remain for the budget deal as negotiators look to it as a vehicle to pass other legislation, such as the reauthorization of the Children’s Health Insurance Program and a third emergency supplemental for communities affected by this year’s natural disasters.

According to CQ Roll Call, a GOP aide speculates that a budget agreement will be announced December 18, just a few days before the December 22 deadline to pass another funding measure.

AADR will be closely monitoring these developments over the coming weeks given their implications for research funding. Under a CR, NIH will be paying out grants at a lower rate than they would under regular appropriations (see a previous NIH CR notice here). Therefore, it is critical that Congress pass regular appropriations through the end of the year to provide stability for medical research.

If you have questions, please contact AADR’s Assistant Director of Government Affairs Lindsey Horan or continue to check the AADR Government Affairs and Science Policy Blog for updates.