Office of Federal Relations
To:
Campus
From:
Office of Federal Relations
Re:
FY 15 President Budget Request – First Look
Date:
March 4, 2014
Earlier today, the Administration released its FY 15 budget request. While we are still reviewing its
contents and will provide more detailed summaries over the next week or so, what follows is an initial
overview of this year’s request.
As you know, by law, the Administration each year submits a detailed budget request to Congress.
Normally this process happens in early February and in turn kick-starts congressional action on budget
resolutions followed by appropriations bills in each chamber. This year, release of the Administration’s
budget was delayed due to the late passage of the FY 14 Omnibus Appropriations bill. Further, there is
not likely to be a budget resolution because the budget agreement reached in December set an overall
topline spending level of $1.014 trillion for FY 15.
It is important to keep in mind that the documents making up the Administration’s budget present
merely one vision—admittedly an important and influential one—of what the budget might look like for
the coming fiscal year and beyond. While the Administration’s budget claims to hew to the $1.014
trillion spending cap, it does so through a number of “budget gimmicks,” not least of which is the
creation of a $56 billion “Opportunity, Growth and Security Initiative” that are new resources above the
budget cap, divided evenly between defense and non-defense discretionary programs. More details on
this are below and will follow as we delve into the details. Important to note, however, is that this new
initiative more of a “wish list” than anything else.
In general, the budget places a strong priority on education and research. “The 2015 budget reflects this
Administration’s clear-eyed recognition that our Nation’s standing as a global leader today is built
largely on a foundation of science and technology,” said Dr. John P. Holdren, President Obama’s science
and technology advisor and Director of the White House Office of Science and Technology Policy. “By
continuing the Administration’s record of steady support for research and development across the full
spectrum of scientific and technological domains—including such diverse priorities as biomedicine,
advanced manufacturing, climate science, cybersecurity, natural resource management, space
exploration, and national security—the Budget ensures that the United States will be an incubator of
innovation and economic growth for many years to come.”
Most of the research accounts would see very small increases under the Administration’s budget
request when compared to the recently approved FY 14 funding levels.
As always, feel free to contact us if you have any questions and stay tuned for additional information.
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Research Accounts
 NIH – $30.2 billion, a $300 million increase from the FY 14 level of $29.9 billion but still below the
pre-sequester FY 12 level of 30.86 billion.
 NSF – $7.3 billion for NSF, an increase of $100 million over the FY 14 level of $7.2 billion.
 DOD research – Science and Technology (6.1-6.3 programs): $11.5 billion in basic and applied research and advanced technology development, which is a significant cut below the FY 14 enacted
level of $12.2 billion. Details are still pending as to the breakdown between 6.1, 6.2 and 6.3 as well
as the service branches. Included in the S&T total is $2.9 billion for the Defense Advanced Research
Projects Agency, which is roughly the same as the FY 14 enacted level.
 Institute of Education Sciences – $637.2 million, an increase of $60.27 million above the FY 14 level
of $576.93 million.
o Research, Development and Dissemination would receive an increase of $10.4 million over the
FY 14 level of $179.9 million.
o Special education research would be flat funded compared to the FY 14 level at $54 million.
 DOE Office of Science – $5.11 billion, an increase of $44 million above the FY 14 level.
o Within the Office of Science, Basic Energy Sciences would see the largest increase ($94.5 million)
and Fusion would see the largest cut ($88.6 million).
 DOE ARPA-E – $325 million, an increase of $45 million over the FY 14 level of $280 million
 NASA - $17.5 billion, a decrease of $100 million from the FY 14 level of $1.6 billion
o Science – $4.972 billion, a reduction of $179 million from the FY 14 level.
o Aeronautics – $551 million, a decrease of $15 million from the FY 14 level.
o Education – $89 million, a decrease of $27.6 million from the FY 14 level. Within this account,
the Administration is requesting $24 million for the Space Grant Consortiums and $9 million for
EPSCoR, decreases of $16 million and $9 million, respectively.
o Space Technology – $706 million, an increase of $130 million from the FY 14 level.
 NEH – $146 million which is equal to the FY 14 level.
 Agriculture and Food Research Initiative – $325 million, an increase of $9 million above FY 14.
Cross-cutting Initiatives
 Advanced manufacturing – Plans to launch five new advanced manufacturing institutes in calendar
2014 – in addition to the four already established – for a national network of 45 manufacturing
institutes over 10 years.
 Clean Energy – A commitment to an “all-of-the-above” strategy on energy, including by investing
$5.2 billion from DOE in energy technology programs; $345 million for the Department of
Agriculture (USDA) research and energy efficiency programs; and several other initiatives across the
federal government to address energy security and carbon reduction.
 BRAIN Initiative – Continues the cross-agency neuroscience initiative which hopes to revolutionize
understanding of how the human brain processes, stores and retrieves information. $100 million
from NIH; $20 million from NSF; $80 million from DARPA.
 National Nanotechnology Initiative (NNI) – $1.5 billion for the multi-agency NNI. Member agencies
support R&D focused on materials, devices, and systems that exploit the unique physical, chemical,
and biological properties that emerge in materials at the nanoscale
 Networking and Information Technology R&D (NITRD) – $3.8 billion for the NITRD Program, which
provides strategic planning and agency research coordination for cybersecurity, high-end computing
systems, advanced networking, software development, health IT, wireless spectrum sharing, cloud
computing, and other information technologies.
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New Health “DARPA-like” Research Initiative – $30 million for a new health research program
modeled after the DARPA program, designed to fund innovative projects that accelerate discoveries
and cures.
STEM consolidation – Creates a “new” framework government-wide reorganization of federal STEM
education programs, designed to reduce fragmentation, and focus these programs around five areas
identified by the Federal STEM Education 5-Year Strategic Plan. Universities expressed concerns
about the earlier consolidation proposal which was soundly rejected by appropriators.
Open Access/Open Data – Continues initiatives “to open Government data and research for public
and private sector use to spur innovation and job creation, while ensuring strong privacy
protections.”
Research highlights of the President’s Opportunity, Growth, and Security Initiative – While further
analysis of the President’s OGS Initiative is required, the summary cites investing additional Federal
resources of $56 billion into education, research, infrastructure and process reform to “restore our
global edge” as a priority. Climate change research and resiliency, continuing development of a
national network of manufacturing institutes to spur economic development, and national security
research and development are identified as priorities as well. This would be new funding above the
budget caps agreed to in December and thus is likely to be greeted with skepticism at best on
Capitol Hill. Research highlights include:
 Department of Energy
o $484 million for research into innovative materials and sustainable vehicles and fuels system
designs; advanced manufacturing; solar and wind energy; efficient buildings; new
technology validation; and Federal energy cost savings
o Energy efficiency and electrical grid modernization initiatives to incentivize states to double
American energy productivity over 20 years and modernize electricity grids for improved
reliability and resilience
o Strengthening a response to the effects of climate change, including identifying and
analyzing critical infrastructure vulnerabilities, and State and local grants for resilience
planning
o Accelerated National Nuclear Security Administration investments, including facilities
construction, deferred maintenance, and research and development
 National Institutes of Health
o $970 million in additional funding for NIH
o Funding for 650 additional NIH grants
o Funding to double the size of the proposed new NIH DARPA-like initiative that will invest in
breakthrough medical research
o Increasing NIH’s contribution to the multiagency BRAIN Initiative
 National Science Foundation
o $552 million in additional funding for NSF
o Funding for 1000 additional NSF grants to expand knowledge across disciplines in areas such
as neuroscience and materials science
o Additional research traineeships in high priority areas for graduate students
 National Aeronautics and Space Administration
o $886 million in additional funding for NASA
o $100 million to fully utilize the International Space Station’s research facilities
o $100 million for development space technologies that will lower the cost and increase the
capabilities of future space activities
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Additional science missions and research, including extending current missions that
continue to generate valuable science and accelerating early work on a potential successor
to the James Webb Space Telescope
Department of Defense
o $2.1 billion in additional funding for DOD R&D
Department of Agriculture
o Funding for high priority research and construction of a new biosafety research laboratory.
Other
o Expanding Advanced Manufacturing and Investing in Regional Economic Growth – A national
competition to establish 45 advanced manufacturing institutes; launching a new publicprivate “Scale-Up” fund to help take innovative advanced manufacturing technologies to
scale; and investing in regional economic growth and competitiveness through community
grants.
o Developing Climate Resilience – Investing in research and unlocking data and information to
better understand the projected impacts of climate change and how to better prepare
communities and infrastructure; encouraging local measures to reduce future risk; and
funding technologies and infrastructure to increase resiliency.
Healthcare
The Administration’s FY 15 budget request includes $402 billion in new Medicare and Medicaid savings
over 10 years. Approximately $354 billion of those savings would come from cuts to Medicare providers.
Medicare
Among other Medicare-related changes, the President’s budget would:
 Replace the Budget Control Act’s remaining sequestration cut to mandatory spending (i.e. the 2%
Medicare provider cut) through other savings.
 Reduce Medicare graduate medical education (GME) payments by $14.6 billion. This is a greater cut
than the $11 billion proposed last year. The budget also proposes $5.23 billion to support 13,000
new residents through a new competitive GME program implemented by the Health Resources and
Services Administration.
 Reduce bad debt payments to providers, including hospitals, by $30.8 billion.
 Adjust the payment updates for post-acute care providers for savings of $97.86 billion.
 Implement site-neutral payments for certain procedures commonly treated in skilled nursing
facilities (SNFs) and inpatient rehabilitation facilities (IRFs) for savings of $1.6 billion.
 Implement value-based purchasing for SNFs, home health agencies (HHAs), ambulatory surgical
centers (ASCs), and hospital outpatient departments.
 Raise the “60% Rule” threshold for IRFs back to 75 percent for savings of $2.4 billion.
 Adopt SNF payments to reduce hospital readmissions for savings of $1.9 billion.
 Implement bundled post-acute care payments for savings of $8.7 billion.
 Reduce clinical laboratory payments for savings of $7.9 billion.)
 Exclude certain services from the in-office ancillary services exception for savings of $6 billion.
 Strengthen the Medicare Independent Payment Advisory Board for savings of $12.9 billion.
 Make changes to beneficiary premiums, deductibles and co-pays for savings of $59.72 billion. For
example, home health copays would be introduced for new Medicare beneficiaries.
 Strengthen efforts to eliminate waste, fraud and abuse for savings of $400 million.
Medicaid
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The Administration’s budget would reduce funding for Medicaid and the Children’s Health Insurance
Program by $7.3 billion over 10 years, including through rebasing (meaning future cuts) to Medicaid
disproportionate share hospitals in FY 24 for savings of $3.26 billion. The budget request would also
extend Obamacare’s Medicaid primary care payment increase through CY 15, with some modifications.
HHS Miscellaneous
 340B Drug Discount Program – $17 million for the 340B program, an increase of $7 million above FY
14, for program operations, oversight and integrity.
 Organ Transplantation – $24 million, a modest increase over FY 14, to coordinate organ donation
activities and provide grants to states to develop and improve donor registries. In addition, the
budget requests $33 million to support patients who need a potentially life-saving marrow or cord
blood transplant and to maintain the National Cord Blood Inventory.
 Title VIII Nursing Workforce Development – $224 million, equal to the FY 14 level.
 University Centers for Excellence in Developmental Disabilities – $37 million for University Centers
for Excellence in Developmental Disabilities, equal to FY 14.
Student Aid & College Access, Affordability and Completion
 Pell Grants – The FY 15 budget would provide $22.8 billion in discretionary funding for Pell Grants,
which, when combined with $6.4 billion in mandatory funding, will support a projected maximum
award of $5,830 in award year 2015-2016. The budget would also restore Ability to Benefit eligibility
to students in an “eligible career pathway program.”
 Pay As You Earn – As in previous years, the budget would extend the availability of the Pay As You
Earn repayment plan to all student borrowers. As a result, student loan payments for all borrowers,
regardless of when they borrowed, would not exceed 10 percent of their discretionary income and,
after 20 years of repayment, that any remaining balances would be forgiven.
 Campus-Based Aid – The FY 15 budget requests flat funding for the campus-based aid programs and
would revise the current allocation formulas to “reward institutions that enroll and graduate higher
numbers of Pell-eligible students while offering an affordable and quality education such that
graduates obtain employment and repay their educational debt. “
o Federal Work-Study - $974.7 million, equal to the FY 14 level.
o Supplemental Educational Opportunity Grants (SEOG) – $733.1 million, the same as FY 14.
o Perkins Student Loan Program – As in previous years, the budget would re-structure the Perkins
Loan program to allow for significantly increased lending authority. New this year, the budget
would reinvest savings from the new program (largely from a higher interest rate) in the Pell
Grant program.
 College Opportunity and Graduation Bonus – The budget request includes a new mandatory
proposal that would reward colleges that successfully enroll and graduate a “significant” number of
low- and moderate-income students on time and encourage institutions to improve their
performance. Eligible institutions would receive an annual “bonus” grant equal to their number of
on-time Pell graduates multiplied by a tiered bonus amount per student ($1,000 for 4-year
institutions). Eligibility would be based on Pell students comprising “significant” share of an
institution’s graduating class, graduation rates and student loan default rates. The estimated 10year cost of the proposal is $7 billion. Further details are not available.
 Graduate Assistance in Areas of National Need (GAANN) – $29.3 million, the same as FY 14, to
support 579 fellowships to graduate students of superior ability who have financial need for study in
areas of national need. It is not clear if current Javits Fellowships will continue to be supported.
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First in the World Competition – $100 million, an increase of $25 million over FY 14, to support a
competitive program to develop and test innovative strategies that improve college completion
rates and make college more affordable.
GPRA Data/HEA Program Evaluation – $52 million, an increase of $51.4 million over FY 14, to
support pilot and demonstration program studies, the development and refinement of a new
college ratings system, and activities to improve program performance measurement.
State Higher Education Performance Fund – A new $4 billion competitive grant program for states
to support, reform and improve the performance of their public higher education ssytems. This
appears to be largely a rework of the Higher Education Race to the Top program.
International Education and Foreign Languages Studies (IEFLS) – $76.2 million, an increase of $4
million above FY 14. The proposed increase would “support new awards to help American students
develop proficiency in critical foreign languages, specifically those spoken in the Asia-Pacific and
Sub-Saharan Africa regions, and new institutional mobility grants” in those regions.
Advanced Research Projects Agency-Education (ARPA-ED) – The request would provide up to $49.5
million for ARPA-ED, an initiative modeled on similar entities at the Departments of Defense and
Energy that would aggressively pursue technological breakthroughs with the potential to
dramatically improve the effectiveness and productivity of teaching and learning. Funding would be
provided within the Investing in Innovation Fund.
STEM Education Programs – The budget again proposes a comprehensive reorganization of STEM
education programs with $319.7 million being dedicated within the Dept. of Education to STEM
Innovation Networks, STEM Teacher Pathways, National STEM Master Teacher Corps and the
Effective Teaching and Learning: STEM program.
Tax
The Administration’s FY 15 budget request includes a number of tax provisions of interest to students
and families including:
 Permanently Extend the American Opportunity Tax Credit (AOTC)
 Simplify taxes for Pell Grant Recipients by clarifying AOTC rules and simplifying calculations and
providing some with a reduction in taxes or a boost to their AOTC
 Provide tax relief to student loan borrowers by excluding student loan forgiveness from taxation for
borrowers who have made student loan payments for many years under an income-related
repayment plan.
 The proposal would make Pell Grants excludable from income
Similar to recent years, the budget request also includes other tax provisions of interest to universities,
including:
 A proposal to comply with the so-called “Buffet Rule” that would require high income taxpayers to
pay no less than 30 percent of their income in taxes – after charitable contributions.
 The Administration’s FY 15 budget once again proposes to limit the value of certain tax expenditures
and itemized deductions to 28 percent for income taxpayers, including:
o the deduction for charitable contributions to organizations such as colleges and universities;
o tax-exempt interest on municipal and private activity bonds;
o employer sponsored health insurance; and
o retirement contributions.
 The FY14 budget would make permanent the research and development tax credit,
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