The sequester has arrived. On March 1, President Barack Obama issued an order cancelling $85 billion in spending across the federal government for fiscal year 2013, which ends on Sept. 30.
It is an outcome that no one in Washington really wanted. When the across-the-board cuts were devised in the summer of 2011, they were intended to be so severe and arbitrary that the parties would have no choice but to reach a "grand bargain" to reduce our nation's federal deficit. However, a compromise was never reached. Now, it is unclear whether one ever will.
There are some who believe that the sequestration will devastate our economy; others believe that there is plenty of cushion in the system. The fact of the matter is that whether the sequester will hurt depends on where you live and what you do. For research universities and academic teaching hospitals, there is cause for concern.
What does the sequester mean for Emory?
Simply put, the sequester translates into a 5 percent reduction in federal grants and a 2 percent reduction in total Medicare payments.
Overall, Emory received nearly $350 million in federal research dollars in fiscal year 2012. Last year, 24 federal agencies, including the National Institutes of Health, Centers for Disease Control, the National Science Foundation and the National Endowment for the Humanities, partnered with Emory researchers. With a 5 percent cut to last year's federal research funding level, Emory loses $17.5 million.
Sequestration undercuts our national investment in medical research, denying hope to millions of patients and their families. It also jeopardizes our standing as the world's leader in a range of research fields, weakening our ability to compete in the global economy of the 21st century. Finally, it threatens our youngest researchers, creating further uncertainty as they pursue their first research grants and teaching positions.
Sequestration also threatens Medicare hospital and physician payments at a time when providers already face a broad range of reimbursement cuts in the coming year. The impact of sequestration on Emory providers is estimated to be approximately $9 million per year for Emory hospitals and $2.9 million per year for The Emory Clinic and Emory Specialty Associates providers. Sequestration threatens health care jobs, as well as our ability to provide quality health care and train the next generation of doctors.
Some of our students on financial aid will suffer. While the Pell Grant is protected from sequestration in FY2013, other federal financial aid programs would be impacted, including federal work-study and the Supplemental Educational Opportunity Grant (SEOG). For Emory, the estimated reduction of $151K equates to approximately 55 work-study awards and 14 SEOG awards. For a Congress and administration that espouse access and affordability, the stripping of these awards is very unsettling.
What now?
There has been speculation that the sequester would be addressed in a March deal to keep the government funded for the remainder of fiscal year 2013. That is now looking less likely. Congressional insiders say they do not expect Congress to turn off budget sequestration before April and that negotiations to freeze the automatic spending cuts could drag into May or beyond.
House Speaker John Boehner has said that the House plans, during the week of March 4, to pass a continuing resolution to provide appropriations funding for the remainder of fiscal year 2013. President Obama has indicated that he does not object to that approach. The good news is that the threat of a September government shutdown will be removed. The bad news is that the bill will assume the continuation of the sequester cuts.
With House and Senate budgets due in mid April, Congress will have another opportunity to work out a deficit reduction deal that reduces spending in a more manageable way. Shrinking government budgets are a certainty. However, whether it occurs by hatchet (sequestration) or by scalpel (deficit reduction deal) is the question.
Editor's Note
This column from Emory's Office of Governmental and Community Affairs is designed to provide timely information on legislative issues related to higher education and academic and medical research.