Legislative Update

Appropriations Bills Top Legislative Workload: Members of Congress returned to Capital Hill after Labor Day from almost six weeks of August recess to finish work on all the unresolved matters left from the current session. At the top of the list are the fiscal 2007 appropriations bills, all unfinished. That list includes the Interior Appropriations Bill, with funding for the National Endowment for the Arts (NEA) and the National Endowment for the Humanities (NEH), and the Labor-HHS-Education funding measure with appropriations for the Institute of Museum Services and the Department of Education arts education grant program.

The House passed the Interior bill in May, adding $5 million each to the $124.4 million in level funding proposed by the President in the budgets for the NEA and NEH. In June, the Senate Appropriations Committee approved its version of the bill, with no additional money for either of the two endowments. The President’s budget, which allocates level funding for the NEA, would cut $3.462 million from Challenge America in order to increase funds for administrative expenses by $1.843 million, for direct program grants by $1.117 million, and for State and Regional Partnerships by $508,000. The $5 million in new funding added by the House would restore support to Challenge America and the core grant-making programs of the arts endowment and reject the funding freeze proposed by the President.

As for the FY 2007 Labor-HHS-Education Appropriations Bill, the House Appropriations Committee in June followed the President’s budget proposal and zeroed out the arts in education money for the coming year. The measure approved by the Senate Appropriations Committee in mid-July allocates $36.5 million for arts in education, an increase of $1.223 million over 2006. The Senate’s Department of Education appropriations bill also recommends $36.664 million for the Office of Museum Services, rejecting the increase of $4.8 million proposed by the President in his budget and included in the bill drafted in the House. Instead, the Senate bill contains slightly over $10 million in earmarked funds for museums and libraries.

Neither the House nor the Senate has taken the Labor-HHS-Education Appropriations Bill to the floor. The House Republican leadership postponed floor action after the bill passed the committee with a Democratic-backed provision to increase the minimum wage. In the Senate, general dissatisfaction with the funding levels proposed in the legislation has dampened enthusiasm for taking up the legislation. In advance of the vote on the bill drafted by the appropriations subcommittee he chairs, Sen. Arlen Specter (R-PA) was quoted in Congressional Quarterly complaining that the bill constitutes “what I view as really the disintegration of the appropriate federal role in health, education and worker protections,” lamenting, “We don’t have money to appropriate anymore.”

A recent report from the nonpartisan Congressional Budget Office (CBO) demonstrates the limitations on spending decisions available to Congress. CBO’s report, issued in August, estimates the federal deficit will rise to $286 billion in fiscal 2007, up from this year’s $260 billion projected deficit. The long-term outlook remains bleak, with total deficits over the next decade put at $1.7 trillion.

While the House and Senate have moved forward with drafting the money bills for the coming 2007 fiscal year, the word from Capitol Hill is that none of the funding legislation will get wrapped up until after the November elections when Congress plans to return for a lame-duck session.

Charitable Tax Provisions Affect Arts Groups: On August 17, President Bush signed into law the Pension Protection Act of 2006 passed by Congress just prior to adjourning for the recess. The legislation provided a vehicle for several tax-related provisions carrying an impact on arts organizations. In an effort to boost charitable giving, the bill included a provision long advocated by the nonprofit community to allow individuals aged 70-1/2 and over to donate to charities up to $100,000 in funds from their retirement accounts — the so-called “IRA roll-over” — without first claiming the funds as taxable income. Unfortunately, as had been expected, the bill did not contain another charitable giving provision pushed by arts advocates: that which would allow artists to take a full fair-market value deduction for the charitable donation of their own works to museums and libraries.

Included among the legislation’s charitable “reform” provisions, is one that could serve to discourage certain gifts of art to museums. The new law restricts a donor’s ability to stretch out over time the donation of important works of art, often in order to maximize the deductible value of the gift without running up against a cap on annual charitable deductions. Advocates are hopeful for an opportunity to repeal the provision when Congress next takes up tax legislation expected in the fall.