NAICU Washington Update

Senate Working on Next Stimulus Bill

July 17, 2020

With the August congressional recess three weeks away, rumblings from the Senate about its approach to the next stimulus bill have begun to emerge. While senators work from home until July 20, the Republican majority is working on a follow up to the CARES Act that will provide federal funding to address myriad societal needs due to the coronavirus. The amount of higher education funding and how it will be distributed is still being debated.
With the House passing the HEROES Act in May and Senate Democrats releasing a bill last week to provide increased funding for child care and education, Senate Republicans need to work out a few issues internally before negotiating with their Democratic counterparts. Senate Republicans are also expected to unveil their proposal for a coronavirus liability shield as part of their stimulus proposal. However, the biggest unresolved issues for private, nonprofit colleges and universities in this round of stimulus funding are related to keeping the CARES Act formula for funding distribution and keeping the funding flexible for institutions and students.
Funding Formula
The CARES Act distributes funds based on 75% Pell FTE and 25% non-Pell FTE and leaves the distribution of student funds up to the institution. Both the HEROES Act and the Senate Democratic proposal change the formula to headcount, and Senate Republicans are considering agreeing to this approach.  This move would benefit schools that have a greater number of students who are less than full time.
Regarding the distribution of funds, the CARES Act leaves the distribution of student funds up to the institution.  However, the Department of Education ruled that those funds could only go to Title IV-eligible students.  In the next stimulus, private, nonprofit colleges would be best served by maintaining the CARES Act formula and keeping the discretion for distribution at the institutional level.  This approach would allow more flexibility for institutions to provide emergency relief to students.
Funding Flexibility
Two proposals concerning funding flexibility are under consideration that could have detrimental effects on private, nonprofit colleges.  The first proposal would limit funds only to schools that reopen and the second would limit funds to schools with large endowments.  
The discussion around reopening schools has escalated into a partisan debate, which has some senators considering whether federal funds should be limited only to “schools” that “reopen.” While the debate has focused on the reopening of elementary and secondary schools, there is concern that such a limitation would also be applied to higher education.  It could be very difficult for Congress to define what “reopening” means for colleges and determine how the department would implement such a definition, especially as institutions are providing education and student services through a wide range of in-person, remote, and hybrid methods.  Costs related to “reopening” should be added to the allowable uses of funds, but funds should not be limited to a “reopening status.”

Policy makers are also considering limiting the amount of stimulus funds an institution can receive based on whether it has a “large endowment.”  The size of an institution’s endowment is not a good proxy for determining whether or not that institution has financial need due to the national emergency.  The continued misperceptions about college and university endowments should not result in excluding institutions from federal funding that would provide students vital access to emergency funding.
Continuing conversations with congressional delegations as leadership debates these issues over the next two weeks are critical. House and Senate leaders have a goal of reaching a negotiated deal by the week of August 3, to facilitate passage before the break.

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