Recovery Act: IT Opportunities

1. Recovery Act: IT Opportunities Recovery Act: IT Opportunities Presented by Lamar Whitman, Public Policy Manager Computing Technology Industry Association (CompTIA) Public Policy – May 15/16, 2009

2. Lamar Whitman, CompTIA Public Policy Manager • Issues: Tax, Small Business • Agencies: IRS, SBA • Background: IRS Chief Counsel/Legislative Affairs, Realtors State and Local Tax Policy Manager • Staff liaison for CompTIA Small Business Policy Council • lwhitman@comptia.org; 202-543-3003 x201

3. Summary • “American Recovery and Reinvestment Act of 2009” • Signed into law, February 17, 2009 • $787 billion ($288B in tax, $499B in spending)

4. Stimulus Allocation in $ Billions (Total $787B)

5. Yearly Expected Spending ($ Billions)

6. Agency Report – April 24, 2009 • OMB guidance requires all federal agencies receiving recovery act funds to submit weekly reports; spending thru April 24, 2009: • HHS - $14 BILLION • Agriculture - $717 million • Education - $350 million • HUD - $232 million • Commerce - $39 million • Transportation - $31 million • SBA - $12 million • Social Security - $5 million • Labor - $2 million

7. Spending Report – April 24, 2009 (cont.) Agencies spending less than $1 million • EPA • Defense  • Energy  • Railroad Retirement Board  • Treasury • Homeland Security  • Justice

8. Spending Report – April 24, 2009 (cont.) • Agencies with NO expenditures: • GSA • State • FCC • Smithsonian • USAID • VA • Corps of Engineers  • Interior  • National Science Foundation  • NASA

9. http://www.recovery.gov/

10. How Will The Money Be Disbursed? • Contracts(subject to the FAR and other new requirements) • Competition(e.g., broadband program) • Grants and cooperative agreements • Loans and loan guarantees(e.g., Small Biz programs) • Agency plan (e.g., certain infrastructure programs) • Formulaic spending (e.g., no agency discretion; a agency will allocate money to the nation’s states or school districts in a pre-programmed manner)

11. Recovery.gov – Spending Detailed • GOALS for government website: • Education: Explain the American Recovery and Reinvestment Act; • Transparency: Show how, when, and where the money is spent; • Accountability: Provide data that will allow citizens to evaluate the Act’s progress and provide feedback.

12. Recovery.gov – Other sources FedBizOpps.gov - Contracting opportunities over $25K Grants.gov - 26 different federal agencies GovLoans.gov - All about federal loans

13. State Recovery Websites • 50 states and DC have recovery websites • Wealth of information, including: • Total funds for each state • Allocation of projected spending • Projected job/etc. impacts of recovery spending • Contracting opportunities • Grant application assistance

14. Where is the money? • Broadband – Commerce and Agriculture • Health Information Technology – HHS • State Fiscal Stabilization Fund – Education • Agency spending authorization - Various

15. DEPARTMENT OF COMMERCE: Broadband Technology Opportunities Program • Broadband Technology Opportunities Program - $4.7 • billion , including: • $200 million for competitive grants for expanding public computer center capacity (including community colleges and public libraries) • $250 million for competitive grants for programs to encourage sustainable adoption of broadband service • $350 million for developing and maintaining a broadband inventory map

16. DEPARTMENT OF COMMERCE: Broadband Technology Opportunities Program (cont.) • Purpose is to provide: • Broadband access to unserved and underserved areas of the U.S. • Education, awareness, training, access, equipment, and support to • schools, libraries, medical and healthcare providers, colleges, etc. • organizations and agencies catering to low-income, unemployed, aged, etc. • job-creating strategic facilities located within “designated” zones (e.g., State-designated economic zone) • Improved access to, and use of, broadband service by public safety agencies • Greater demand for broadband, economic growth, and job creation

17. DEPARTMENT OF COMMERCE: Broadband Technology Opportunities Program (cont.) • Other Requirements: • Awards must be made before September 30, 2010 • Projects must be completed no later than 2 years following an award

18. DEPARTMENT OF COMMERCE: Broadband Technology Opportunities Program (cont.) • Eligibility: • State or political subdivision • A nonprofit (e.g., foundation, corporation, institution, or association) • Any other entity, including a broadband service or infrastructure provider, that the Assistant Secretary finds to be in the public interest.

19. DEPARTMENT OF COMMERCE: Broadband Technology Opportunities Program (cont.) • Eligible project must be in “public interest” • Must show how grant will be used to carry out the purposes of the program, including a showing that the project would not have been implemented during the grant period without Federal grant assistance • Must show project can be accomplished in compliance with all applicable Federal, State and local laws • Must raise 20% of funds from non-Federal sources, unless: • applicant petitions for waiver, and • determination is made that petition demonstrates financial need

20. DEPARTMENT OF COMMERCE: Broadband Technology Opportunities Program (cont.) • What qualifies for a grant: • Equipment, instrumentation, networking capability, hardware and software, digital network technology, and infrastructure for broadband services • Construction and deployment of broadband infrastructure • Access to broadband service by community institutions • Access to broadband service by low-income, unemployed, aged, and otherwise vulnerable populations to provide educational/employment opportunities • Broadband facilities that improve public safety broadband communications services

21. DEPARTMENT OF COMMERCE: Broadband Technology Opportunities Program (cont.) • Where grants will be made: • Not less than 1 grant in each State

22. DEPARTMENT OF COMMERCE: Broadband Technology Opportunities Program (cont.) • Is This Money Currently Being Awarded? NO! • Gov. Gary Locke of Washington was just confirmed as Secretary of Commerce on March 24, 2009. • As of May 1, 2009, there is no Assistant Secretary of Commerce /National Telecommunications and Information Administration Director • This legislation has complex guidance and will be difficult to administer

23. DEPARTMENT OF COMMERCE: Broadband Technology Opportunities Program (cont.) • Commerce held public meetings in March asking for comments: • Purposes of the program • Role of the States • Eligible grant recipients • Selection criteria for grant awards • Grant mechanics • Grants for expanding public computer center capacity • Grants for innovative programs sustainable broadband service • Broadband mapping • Financial contributions by grant applicants

24. DEPARTMENT OF COMMERCE: Broadband Technology Opportunities Program (cont.) • Strategies: • Identify needs, e.g. • Rural areas • State offices (e.g., provide broadband to unemployment offices) • Emergency service providers • Identify partner, e.g.  • State/local government • Non-profit hospital • School district • Develop Plan • Identify 20% non-Federal funding

25. DEPARTMENT OF AGRICULTURE: Broadband • $50 million to the Farm Service Agency for maintaining and modernizing the information technology system • $2.5 billion to the Rural Utilities Service, Distance Learning, Telemedicine, and Broadband Program for broadband loans and loan guarantees, including grants for technical assistance

26. DEPARTMENT OF AGRICULTURE: Broadband (cont.) • Requirement for broadband loans/guarantees/grants: • At least 75% of $2.5 billion must go to rural areas without sufficient access to high speed broadband service • Priority to systems that deliver end-users a choice of two or more providers • Priority to projects providing service to the highest proportion of rural residents • Priority to programs that can be implemented quickly • None of these funds may be co-mingled with other federal programs

27. Where is the money? • Broadband Technology Opportunities Program – Commerce and Agriculture • Health Information Technology – HHS • State Fiscal Stabilization Fund – Education • Agency spending authorization - Various

28. DEPARTMENT OF HEALTH AND HUMAN SERVICES (HHS) • $1.5 billion for grants for construction, renovation and equipment, and for the acquisition of health information technology systems, for health centers including health center controlled networks • $2 billion for the Office of The National Coordinator for Health Information Technology. Including $300 million for regional or sub-national efforts toward health information exchange • $50 million to improve information technology security at HHS

29. HHS: HIT Funding • Physicians that utilize electronic health records can qualify for up to $44,000 in Medicare reimbursement bonuses over five years. • Hospitals that utilize electronic health records can qualify for up to $16 million in Medicare reimbursement bonuses over four years. • Timeline: The bonus will become available starting in 2011; prior to that HHS will define “meaningful electronic health record” and develop a certification process for products that will qualify physicians and hospitals for the bonus. • While the funds are not available until 2011, VARs should cultivate relationships with healthcare providers now. Many will be interested in beginning the process toward utilizing electronic health records by implementing electronic billing, scheduling, or prescribing now.

30. HHS: HIT Funding (cont.) • When will payment be made – $44,000 over a period of years: • 2011 - $18k • 2012 - $12k • 2013 - $8k • 2014 - $4k • 2015 - $2k • How will payment be made – New section will be added to existing form used by Doctor/hospitals who file for Medicare for reimbursement

31. HHS: HIT Funding (cont.) What is required: • MEANINGFUL USE OF CERTIFIED EHR TECHNOLOGY - Including electronic prescribing • INFORMATION EXCHANGE — Connected in a manner that provides electronic exchange of health information to improve the quality of health care, such as promoting care coordination • QUALITY MEASURES USING EHR— To be determined by HHS

32. HHS: HIT Funding (cont.) RECAP …. Where is the money? Physicians will receive money in the form of a bonus to their Medicare reimbursement, regardless of how much they spend on HIT or how they spend it. The HIT money itself is not a reimbursement, but rather a bonus for using electronic health records and reporting on such usage. Each doctor can receive up to $44,000 in bonuses over five years. How do IT Providers benefit? The bonus to physicians is a key selling point. IT Providers will not see this money directly, but it will be a great motivator for physicians to implement HIT. Providers should begin now to educate physicians on the benefits of HIT broadly and the bonus available under the recovery bill.

33. HHS: HIT Funding (cont.) • State Grants: HHS has the authority to create a grant program to award States with funding for planning or implementing electronic use or exchange of health information. • Loan Program: HHS has the authority to create a competitive grant program to the States for the development of an HIT loan program to fund the purchase of EHR technology, improve existing EHR technology, and train personnel in the use of EHR. • Clinical Education: HHS has the authority to award grants for the creation of demonstration projects to develop curriculum that integrates EHR technology into the clinical education of doctors, nurses, and other healthcare professionals.

34. HHS: Public Health Services – Health Centers •  $1.5 billion is available for grants to qualified community health centers for, among other things, the acquisition of health information technology systems. • Qualified “health centers” are those that serve medically underserved populations, or special populations such as migratory and seasonal agricultural workers, the homeless, and residents of public housing. • Timeline: The Secretary of HHS must provide a plan to Congress by May 2009 detailing the activities and timeline for programs and grants to be funded. • VARs should cultivate relationships with health centers and, as grant details become available, assist in developing HIT plans for health centers.

35. Where is the money? • Broadband Technology Opportunities Program – Commerce • Health Information Technology – HHS • State Fiscal Stabilization Fund – Education • Agency spending authorization - Various

36. DEPT OF EDUCATION: State Fiscal Stabilization Fund • $53.6 billion for State Fiscal Stabilization Fund to be administered by the Department of Education, approximately $48 billion to be the States as follows: • 61 percent on basis of relative population of individuals aged 5 through 24 • 39 percent on the basis of their relative total population

37. DEPT OF EDUCATION: State Fiscal Stabilization Fund (cont.) • USES OF FUNDS BY STATES •  81.8% for support of elementary, secondary, and postsecondary education and, as applicable, early childhood education programs and services • 18.2% for public safety and other government services

38. DEPT OF EDUCATION: State Fiscal Stabilization Fund (cont.) • USES OF FUNDS BY LOCAL EDUCATIONAL AGENCIES • Any permitted educational activity • Modernization, renovation, or repair of public school facilities • USES OF FUNDS BY INSTITUTIONS OF HIGHER EDUCATION • Education and general expenditures to mitigate the need to raise tuition and fees for in-State students, • Modernization, renovation, or repair of institution of higher education facilities

39. DEPT OF EDUCATION: State Fiscal Stabilization Fund (cont.) • Strategies: Develop Action Plan Now • Identify needs • Most government/education modernization, including technology • Technology for educational purposes • Identify and educate institutions concerning recovery funds • State/local government and agencies • School districts • Application – To be determined; become familiar with local contracting procedures

40. Where is the money? • Broadband Technology Opportunities Program – Commerce and Agriculture • Health Information Technology – HHS • State Fiscal Stabilization Fund – Education • Agency spending authorizations - Various

41. DEPARTMENT OF LABOR • $3.95 billion for Training and Employment Services including: • $500 million for grants to the States for adult employment and training activities • $1.2 billion for grants to the States for youth activities, including summer employment • $1.25 billion for grants to the States for dislocated worker employment and training activities; • $750 million for competitive grants for worker training and placement in high growth and emerging industry sectors 

42. DEPARTMENT OF HOMELAND SECURITY • $200 million for planning, design, construction costs, site security, information technology infrastructure, fixtures, and related costs to consolidate the Department of Homeland Security headquarters • $100 million for development/deployment of border security technology on the Southwest border

43. INDIAN HEALTH SERVICES • $85 million for HIT • Awarded at discretion of the Director of the Indian Health Service.

44. SOCIAL SECURITY ADMINISTRATION • $500 million for the replacement of the National Computer Center and associated information technology costs • $500 million for processing disability and retirement workloads, including information technology acquisitions • $40 million for health information technology research and activities for adoption of electronic medical records in disability claims

45. SMALL BUSINESS ADMINISTRATION • $20 million for improving, streamlining, and automating information technology systems related to lender processes and lender oversight

46. Recovery Assistance for Small Businesses • The Administration has announced a number of provisions aimed at assisting small businesses. • SBA loans • Tax provisions

47. Recovery Assistance for Small Business (cont.) • Treasury to purchase up to $15 billion in securities backed by SBA’s 7(a) Program (General Loan Program) • Secondary market – which historically buys 40% of loans – has dried up; banks cannot offer additional loans until current ones are sold • Temporarily raises guarantees to up to 90 percent in SBA’s 7(a) Loan Program. Current levels are 85 percent for loans at or below $150,000 and up to 75 percent for larger loans • Temporarily eliminates the up-front fees (up to 3.75 percent for larger loans) for 7(a) loans that lenders pass along to borrowers

48. Recovery Assistance for Small Business (cont.) • Additional Treasury Actions: • Treasury is authorized to purchase securities in SBA’s 504 loan program (used for purchase of building/facility). • Temporarily eliminate SBA loan fees for 504 application • SBA will rebate fees paid since February 17, 2009

49. Recovery Assistance for Small Business (cont.) • Extension of section 179 small business expensing. • $250,000 write-off for 2008 and 2009 • Extension of 50% Bonus Depreciation. • 50% additional depreciation allowed for 2008 and 2009 • Expansion of Net Operating Loss Carryback. • 5-year carryback allowed for 2008 NOLs.

50. Government/Educational Sellers Should be Aware…. • 3% Withholding Tax on Government Contractors. • Under current law, beginning in 2011, a 3% federal income tax withholding will be applied to most all payments made to government contractors by Federal, state and local authorities.  The House provision had contained a full repeal of this provision, but the Conference Report adopted the Senate provision, which provided for a one-year delay.  Therefore, without further legislation, the 3% withholding will become effective for payments made beginning in 2012, and following. • Required withholding does not become effective until January 1, 2012. • The estimated cost for the deferral is $290 million over 10 years.