On March 20, the Senate took a step toward avoiding a government shutdown by passing a six-month Continuing Resolution (“CR”) funding the federal government through the end of the Fiscal Year. The bill ended up passing by a 47-vote majority after an agreement was reached to avoid furlough of federal food inspectors. We now anticipate that the House will consider the Senate amended version of the CR on Thursday in time for the President to sign the bill before March 27 when the present CR expires.
Unfortunately, the CR will not effect the current sequester. It will remain in place. We are still evaluating what the impacts are for Washington State University (WSU); however, we do know that any cut to federal investments of education, research and development hinders our students and faculty in their ability to create innovative solutions that assist in greater economic development for our state and nation.
Background
The Budget Control Act of 2011 (“BCA”) implemented sequestration if Congress could not reach an agreement on spending cuts. In addition, the BCA required that the Office of Management and Budget (OMB) release a report to the Congress outlining how the across the board reductions would be implemented for all non-exempt budget accounts.
The sequester requires multiple reductions in FY 2013 :
- 7.8 percent reduction in non-exempt defense discretionary funding
- 5.0 percent reduction in non-exempt nondefense discretionary funding
- 2.0 percent reduction to Medicare
- 5.1 percent reduction to other non-exempt nondefense mandatory programs
- 7.9 percent reduction to non-exempt defense mandatory programs.
With seven months until the end of the fiscal year, these cuts will be implemented in way that effects the federal funding over a seven-month period instead of a twelve. According to OMB, the “real cuts” will feel like a 13 percent cut for non-exempt defense programs and 9 percent for non-exempt nondefense programs.
Federal agencies are working diligently to identify how they will absorb these cuts and what the impact will be on FY 2013 and future program funding. Program funding must be cut across the board – agencies do not have discretion to move federal monies around to make up for these cuts. The pain will be felt. While many agencies have announced furloughs, at this point, they have not released finalized details on program priorities or budgets.
Impact to Washington State University
Research: Assuming that Federal agencies will cut funding for grants and contract funding by 5.0 percent, WSU will lose approximately $4,440,284. However, given the limited time for these reductions in FY 2013, we can anticipate a higher number as the Agency leadership determines how to implement the cut over a shorter period of time.
Financial Aid: The Pell Grant Program is exempt from sequester in FY 2013 but could be effected in FY 2014. If the sequester is still in effect for the 2013-2014 school year, WSU is expecting to lose up to $34,000 in Federal Work Study funding. At this time, both the Direct Loan Program and Teach Grant are not impacted. However, students and families will see a small increase to the fees associated with Stafford and Direct Plus loans.
Build America Bonds: Based on the current percentage reductions, the Office of Business and Finance at WSU estimates that Build America Bonds (BABs) will be cut by $253,409.92 this calendar year.
Impact to the State of Washington
According to the White House report “Impact of March 1, Middle Class Families, Jobs and Economic Security”, the State of Washington could see the following cuts in FY 2013:
Teachers and Schools
- Washington will lose approximately $11,606,000 in funding primary and secondary education. Approximate 11,000 fewer students would be served and 50 fewer schools would receive funding
- Education for Children and Disabilities would lose approximately $11,251,000, including funding for 140 teach aids
Work Study
- 340 Work-Study positions would be impacted
Protections for Clean Air and Water
- Washington would lose about $3,301,000 in funding for clean water and air quality
- $924,000 in grants for fish and wildlife protection is at risk.
Military Readiness
- 29,000 civilian Department of Defense employees could be furloughed.
- Army: Base operation funding would be cut by about $124 million in Washington.
- Air Force: Funding for Air Force operations in Washington would be cut by about $3 million.
- Navy: Cancel aircraft depot maintenance at Whidbey Island, a demolition project in Bremerton.
Examples of National Impact as provided by the White House:
- Cuts to food safety: Outbreaks of foodborne illness are a serious threat to families and public health. If a sequester takes effect, up to 2,100 fewer food inspections could occur, putting families at risk and costing billions in lost food production.
- Cuts to research and innovation: In order to compete for the jobs of the future and to ensure that the next breakthroughs to find cures for critical diseases are developed right here in America, we need to continue to lead the world in research and innovation. Most Americans with chronic diseases don’t have a day to lose, but under a sequester progress towards cures would be delayed and several thousand researchers could lose their jobs. Up to 12,000 scientists and students would also be impacted.
- FBI and other law enforcement – The FBI and other law enforcement entities would see a reduction in capacity equivalent to more than 1,000 Federal agents. This loss of agents would significantly impact our ability to combat violent crime, pursue financial crimes, secure our borders, and protect national security.
- NIH research – The National Institutes of Health (NIH) would be forced to delay or halt vital scientific projects and make hundreds of fewer research awards. Since each research award supports up to seven research positions, several thousand personnel could lose their jobs. Many projects would be difficult to pursue at reduced levels and would need to be cancelled, putting prior year investments at risk. These cuts would delay progress on the prevention of debilitating chronic conditions that are costly to society and delay development of more effective treatments for common and rare diseases affecting millions of Americans.
- NSF research – The National Science Foundation (NSF) would issue nearly 1,000 fewer research grants and awards, impacting an estimated 12,000 scientists and students and curtailing critical scientific research.
- TSA – Layoff of TSA workers, causing longer waits.
We should see more detail as to how the Administration will implement the sequester as the FY 2014 budget is released. We expect it to be released the week of April 8 and we will update this information and share it with you via our blog.