Today, President Obama released his fiscal year 2013 budget outlining the Administration’s spending priorities while also providing an alternative path to achieving mandated savings to the spending “sequester” required by this August’s debt limit law (PL 115-25). The President’s budget release signifies the beginning of the FY 2013 appropriations process. According to the Administration, the President’s budget goes above the required $1.2 trillion in spending reductions by proposing to reduce the deficit by more than $4 trillion over the next ten years. Half of the remaining $3 trillion would be achieved through tax increases. The bulk of the discretionary savings would be achieved through spending reductions, many of which were proposed by the President to the now-defunct Joint Select Committee on Deficit Reduction which failed to come to a consensus in November.

Former Congressman Philip English, who co-chairs Arent Fox’s Government Relations practice, made the following statement regarding the President’s budget request:

“The President’s budget proposal on higher education funding is tough but realistic, and represents one part of the federal budget on which there is a real potential for bipartisan common ground.

"The strong commitment on work study funding proposed by the Administration is critical to sustain the federal commitment to student aid. The Administration’s endorsement of permanency for higher education tax credits is an important recognition of their importance in making college affordable to the middle class.

Regrettably, the proposed cuts in indirect medical education (IME) and the deep reduction in graduate medical education (GME) for Children’s Hospitals are ill-conceived at a time when health care reform is slated to heighten the demand for highly skilled medical professionals and key specialties. Congress will be reluctant to go along with some of these cuts at a time when they could erode health care quality and specific critical programs.”

Additional information about the President’s FY 2013 budget is provided here.

Among the key elements of President Obama’s FY 2013 budget:

• Sustains a maximum Pell Grant award of $5,635 through the 2014–2015 award year with a budget request of $36.1 billion for Pell Grants in 2013, of which $22.8 billion is discretionary.
• Creates $1 billion “Race to the Top: College Affordability and Completion” program designed to address public college costs by providing incentives to states that contain tuition and improve outcomes through systematic reforms.
• Addresses rising college costs by reforming the campus-based aid program as well as requesting $55 million for the creation of the First in the World competition.
• Provides $8 billion for a “Community College to Career Fund” which would provide money to community colleges and states to form partnerships with businesses to train two million workers to fill high-growth and in-demand jobs. States, industries, and colleges that are successful in placing workers in jobs would then be eligible for additional “pay-for-performance” money.
• Maintains the interest rate on subsidized Stafford loans at 3.4 percent for an additional year (The interest rate is slated to increase to 6.8 percent in July 2012)
• Requests $1.13 billion ($150 million over FY2012 funding) for the Federal Work Study program.
• Permanently extending the American Opportunity Tax Credit (AOTC), which allows a tax credit of $2,500 for qualified education expenses for individuals earning up to $80,000 (single) and $160,000 (married/joint). The credit is 40 percent refundable for individuals in the lowest income ranges. A student can claim up to $10,000 over four years of college. The credit is currently set to expire on December 31, 2012.
• Caps the charitable deduction by limiting the value of the itemized deduction to 28 percent for individuals with incomes of $200,000 or more and couples with incomes of $250,000 or more. Limiting this deduction for wealthy donors is estimated to raise $584 billion over 10 years.
• Recommends a 10 percent decrease in Indirect Medical Education (IME) beginning in 2014 for a savings of $10 billion over 10 years.
• Recommends $88 million for Children’s Graduate Medical Education (GME), a program that the President proposed defunding in FY 2012, but that received $317.5 million in FY 2011.