An article in today’s Governing.com details how the sequester will affect state budgets. The news is not good, especially when you consider the sad shape of our state’s budget situation in general. If implemented on January 2nd, the across-the-board cuts at the federal level will likely leave the state legislature with little choice but to make additional cuts to higher education to backfill the reduction in federal funds. The sequester would affect federal dollars that typically support basic elementary and secondary education; Department of Defense activities such as equipment maintenance, construction, procurement and research and development at our state’s military installations; and social services and safety net programs. States would also be hit by more than $2.5 billion in cuts destined for the National Institutes of Health – a particularly troubling situation for the University of Washington.
News and updates
Today in Congress
The Senate’s in at 10:00am and will continue work on a veterans jobs bill. A series of votes are possible. The chamber will recess from 12:30 to 2:15pm for weekly caucus lunches. Then, the senate will hold a procedural vote on the House-passed six-month continuing resolution to fund the government.
The House is in at noon with votes expected about 6:30 p.m. on nearly 30 bills, including one honoring the four Americans who died in Libya and condemning the attacks on United States diplomatic facilities in Libya, Egypt, and Yemen. Another would confirm full ownership rights for certain US astronauts to artifacts from the astronauts’ space missions.
Joint Update on Sequester
Today the UW Offices of Research, Federal Relations, and Planning and Budget released a joint update on the impacts of the sequester on the UW. This is the first of such updates that we will produce and disseminate to the UW community.
Sequester Details
Schedule: Both the House and Senate are out until Wednesday in observance of the Jewish holiday of Rosh Hashanah. When they return, the Senate will take action on the 6-month continuing resolution. Both chambers are expected to recess at the end of the week and not return until after the November elections.
OMB Sequester Report: In the report released last Friday, the Office of Management and Budget (OMB) warns the sequester would be “deeply destructive” to national security, domestic investments, and core government functions. The report outlines some $109 billion in automatic reductions – or sequester – triggered by last year’s debt limit agreement. The automatic cuts would reduce spending over the next decade across more than 1,200 federal accounts starting January 2, 2013, trimming defense by $54.67 billion, domestic discretionary spending by $38 billion, Medicare by $11 billion, and other mandatory spending programs by about $5 billion. The 394-page report estimated the reductions would reduce discretionary defense spending by 9.4 percent and domestic discretionary spending by 8.2 percent. The estimates are calculated based on the level of federal spending in FY2012. Spending in FY2013 is almost sure to be higher since the proposed six-month continuing resolution (CR) increases spending slightly for the fiscal year that begins October 1st.
Sequester and Higher Education: If Congress fails to head off the $109 billion in overall cuts for 2013 before January 2nd – part of $1.2 trillion in required cuts over the next decade through the sequester – most aspects of federal spending relating to higher education would face reductions of either 8.2 percent (for discretionary programs) or 7.6 percent (for mandatory programs), including appropriations to the National Institutes of Health (NIH) and the National Science Foundation (NSF). NIH, for example, would lose more than $2.5 billion from its more than $30 billion appropriation, a cut of 8.2 percent. The report does not specify how the NIH and other agencies would carry out the reductions internally. In addition to cuts in programs, the law would raise the 1-percent origination fee for unsubsidized Stafford student loans by 7.6 percent, to about 1.1 percent of a total loan. PLUS-loan and unsubsidized-loan fees would rise slightly, from about 4 percent to about 4.3 percent of a total loan. Pell Grants would not be affected by the sequester in the first year.
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.