Federal Relations

September 14, 2012

OMB Report on Sequestration Implementation

The Office of Management and Budget (OMB) today released a report mandated by the Sequestration Transparency Act (STA, PL 112-155) that detailed the impact of the $109 billion in cuts that will be imposed by the sequester in January if Congress does meet certain spending targets. According to the report the cuts would result in an 8.2 percent across the board spending cut in all non-exempt nondefense discretionary spending. Congress could reach an agreement to delay the cuts or replace them with targeted cuts by specific program areas.

OMB notes the estimates and classifications in the report are preliminary. If the sequestration were to occur, the actual results would differ based on changes in law and ongoing legal, budgetary, and technical analysis.

Under the assumptions required by the STA, the Pentagon would take the largest hit of any single department, with a 9.4 percent reduction in non-exempt discretionary spending that amounts to a $55 billion cut for defense programs.  This could cut into defense-funded research programs.  The non-exempt nondefense discretionary funding is our main concern and the report indicates an 8.2 percent reduction in this funding. The sequestration would also impose cuts of 2.0 percent to Medicare – mostly taken in cuts to to doctors and other medical providers, not beneficiaries – 7.6 percent to other non-exempt nondefense mandatory programs, and 10.0 percent to non-exempt defense mandatory programs. Medicaid is exempt from the sequester.

Health Sciences

For NIH, the report indicates that $30.711 billion in discretionary budget authority would be subject to the 8.2 percent sequester, equal to $2.518 billion, and an additional $150 million in mandatory budget authority (for diabetes research) would be subject to a 7.6 percent cut, equal to $11 million. The total cut to NIH would equal $2.529 billion.

The report does not provide program-specific details for budget items under the Health Resources and Services Administration (HRSA), such as the Title VII health professions programs. According to the report, however, discretionary programs at the agency will be subject to an 8.2 percent cut. Mandatory appropriations, such as funding provided through the Affordable Care Act for the Prevention and Public Health Fund and presumably the National Health Service Corps, will receive a 7.6 percent cut.

Funding for the Agency for Healthcare Research and Quality (AHRQ) is exempt from the sequester since it is provided through the evaluation tap as opposed to direct appropriations. However, the Patient-Centered Outcomes Research Trust Fund (which funds the Patient-Centered Outcomes Research Institute) would be subject to a 7.6 percent cut, amounting to $30 million from the $390 million fund in FY 2013.

The complete report is available here.

The Office of Federal Relations is going through the remainder of the report now but I think it’s safe to assume that most of the non-health related research accounts will face an 8.2 percent cut if the sequester is implemented in January 2013.