Summary of COVID Relief and FY2021 Omnibus Appropriations Package
Congress passed a massive legislative package that combined a $900 billion fiscal stimulus package with the $1.4 trillion Omnibus FY2021 Appropriations agreement that will deliver critical pandemic aid to millions of Americans and provide funding for federal agencies through next September. After days of publicly complaining that the agreement, which his administration negotiated with Congressional leaders, did not contain enough in direct checks to Americans, President Trump finally signed the measure into law on Sunday, December 27.
The immense year-end package will provide another round of direct payments, enhanced unemployment benefits and billions of dollars for struggling industries in what still amounts to a smaller package than the $3 trillion CARES Act mounted at the beginning of the pandemic. Unemployment benefits expire in mid-March, likely setting up another deadline for additional congressional action early next year. The bipartisan, bicameral year-end package also includes a dozen annual appropriations bills that will ward off a government funding fight at the onset of the Biden administration. Negotiators were unable to cobble together a compromise on funding for state/municipal governments and COVID liability protections for employers. Key components of the COVID relief deal include:
- $166 billion in direct checks — Individuals making up to $75,000 a year will receive a payment of $600, while couples making up to $150,000 will receive $1,200.
- $120 billion in extra unemployment help — Jobless workers will get an extra $300 per week in federal cash through March 14.
- $325 billion for small businesses — Small businesses would see a total of $325 billion, including $284 billion in loans through the Paycheck Protection Program.
- $82 billion for education — Includes more than $54 billion for public K-12 schools and $20 billion for a higher education fund to be distributed based on an institution’s FTE size and Pell eligibility. Also contains provisions that will allow incarcerated students to receive Pell grants after a 26-year ban and simplify the FAFSA financial aid form.
- $69 billion for vaccines, testing and tracing — Includes $20 billion for the purchase of vaccines, nearly $9 billion for vaccine distribution and about $22 billion to help states with testing, tracing and Covid-19 mitigation programs.
- $45 billion in transportation aid — Includes $15 billion to help airlines maintain their payrolls, $14 billion for mass transit, $10 billion for state highways, $2 billion for airports and $1 billion for Amtrak.
- Key tax breaks — The legislation allows businesses to deduct expenses associated with their forgiven PPP loans, in addition to expanding the employee retention credit intended to prevent layoffs.
- ‘Surprise billing’ deal — Includes an agreement to protect patients from receiving “surprise” medical bills resulting from unexpected out-of-network and emergency care services.
Details on the $20 billion Higher Education Emergency Stabilization Fund
- Eighty-five percent of that funding ($17.2 billion) will be allocated for institutions and students in an overall fund, as was done in CARES, but with a new formula. Of the remainder, an additional 10% ($2 billion) was set aside for HBCUs and minority serving institutions and 5% ($1 billion) for the institutions with the greatest losses because of the pandemic.
- Half of the funds will be for students, half for institutions, as in CARES.
- Under the new formula, half of the institutional funds will be distributed as they were under CARES, based on FTE (75% Pell and 25% non-Pell) and half will be distributed based on headcount (75% Pell and 25% non-Pell).
- These percentages exclude exclusively online students from the allocation, as in CARES.
- Importantly, the deal improves many of the flaws limiting the use of funds under the CARES Act. This bill would allow institutions to use their funds for such additional coronavirus-related items as lost revenue and payroll costs.
- There is also greater flexibility on the use of student funds, including allowances for financial aid. The bill allows institutions to continue to make emergency student grants as under CARES. Additionally, the bill stipulates that the institution is solely responsible for determining which students may receive the grants (as it does NOT include CARES language that limited funds to international and distance education students and those with Title IV eligibility problems).
- Institutions that paid the endowment tax in 2019 or 2020 are barred from receiving the institutional share of the allocation.
Summary of Final Fiscal Year 2021 Funding Agreement
In addition to the COVID Stimulus, the year-end agreement also includes the massive Omnibus FY2021 Appropriations package that provides $1.4 trillion in FY21 appropriations, including $671.5 billion in base defense funding (+$5 billion over FY20) and $656.5 billion in nondefense funding +$20 billion over FY20. Important to research universities, the bill also includes funding increases to priority research and student aid programs. Below is a short summary of key funding provisions.
National Institutes of Health (NIH): The NIH will receive $42.9 billion in FY21, an increase of $1.25 billion (3 percent) over current levels.
National Science Foundation (NSF): The NSF will receive $8.5 billion in FY21, an increase of $200 million (2.5 percent) over current levels.
Department of Energy Office of Science (DOE): The DOE Office of Science will receive $7.026 billion in FY21, an increase of $26 million (0.4 percent) over current levels.
Department of Defense Basic Research (6.1): DOD Basic Research (6.1) will receive $2.67 billion in FY21, an increase of $67 million (2.6 percent) over current levels.
National Endowment for the Humanities (NEH): The NEH will receive $167.5 million in FY21, an increase of $5.5 million (3.2 percent) over current levels.
Institute for Education Science (IES): The IES will receive $643 million in FY21, an increase of $20 million (3.1 percent) over current levels.
Title VI-Fulbright Hays-International Education: Title VI International Education programs will receive $78 million, an increase of $2 million over current levels.
Pell Grants: The maximum Pell Grant award will increase by $150, raising the max award to $6,495 for FY21.
Federal Work Study (FWS): FWS will receive an increase of $10 million in FY21 for a total of $1.19 billion.
Supplemental Educational Opportunity Grants (SEOG): SEOG will receive an increase of $15 million in FY21 for a total of $880 million.
Title VII and Title VIII Health Workforce Programs: Title VII health professions and education training programs will receive $489.5 million in FY21, an increase of $15 million over current levels. Title VIII nursing workforce training programs will receive $264.5 million in FY21, an increase of $4.5 million over current levels.
FAFSA Simplification Act
Also included in the larger agreement is a rewrite of the system for distributing federal student aid, known as the Free Application for Federal Student Aid (FAFSA), to make the application process more efficient for students and families. It is the first time the formula has been rewritten in nearly 30 years. Here is a summary of key provisions:
- Makes significant changes to the needs analysis formula that includes renaming the term “Expected Family Contribution” (EFC) to the “Student Aid Index (SAI).”
- Under the bill, the SAI would be used to calculate need for need-based aid programs — not including the maximum or minimum Pell Grant — such as the Federal Direct Subsidized Loan program, Federal Work-Study (FWS) program, the Federal Supplemental Educational Opportunity Grant (FSEOG) program, and some state and institutional aid.
- Restores Pell Grant eligibility to students who are incarcerated, have a drug conviction, or failed to register with the Selective Service System.
- Restores Pell Grant eligibility to students who were defrauded by their institutions through a successful “borrower defense to repayment” claim.
- Allows students who qualify for a subsidized student loan to utilize the in-school interest subsidy beyond six years of attendance.
Employer and Tax Benefits
This bill expands and extends several important provisions for employers originally enacted in the Families First and CARES Acts. It also includes the continuation of many expiring tax provisions that were not related to the pandemic, but are part of the tax code. Here is a summary of key tax provisions:
- An expansion and extension of the charitable giving provisions for 2021, allowing non- itemizers (married/filing jointly) to deduct up to $600, and extending the increased cap for itemizers.
- All emergency student financial aid grants related to the pandemic, no matter the source (governmental, private, or institutional), are made tax-free.
- An expansion and extension of the employee-retention tax credit for private employers (and some public employers, including public colleges) through June 30, 2021.
- An extension of the private employer credit for providing emergency paid sick and family leave through March 31, 2021.
- An extension of the expanded IRC Sec. 127 allowing employers to provide tax-free assistance for employee student loan repayments for five years.
- Simplification of the student and family benefits. The tuition deduction is eliminated and the lifetime learning credit qualifying income threshold is increased to avoid overlapping and confusing benefits for families and students.