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Unresolved fiscal cliff could leave mark at Duke

With the general election in the rearview mirror and a fiscal cliff on the horizon, federal and state governments will likely make some spending cuts that could affect Duke.

If unchanged, major automatic spending cuts and higher tax rates will go into effect Jan. 1, 2013, prompting what many politicians and pundits have called a fiscal cliff that may shock the wallets of many Americans and could send the United States into another recession. Because the 2012 general election did not alter the balance of power on Capitol Hill—Republicans kept their majority in the House of Representatives and Democrats widened their majority in the Senate but still do not have a supermajority—the two parties that have been long at odds on issues concerning taxation and government spending will need to forge an agreement before the end of the year in order to alter these policies.

Not only are Bush-era tax cuts set to expire at the end of the year, effectively raising taxes at all income levels, but federal spending will be cut across the board by 0.25 percent on average for many federal agencies. The National Science Foundation and National Institutes of Health could see their funding cut by up to 7.8 percent.

The cuts are likely to slash federal research funds for universities nationwide, said Chris Simmons, associate vice president for federal relations and one of three registered federal lobbyists employed directly by the University.

“Given the size of the federal deficit, we’re prepared for some cutbacks, especially in research,” he said. “If funding is cut, the University will have to compensate for that in some way.”

Not all universities will see funding cut equally, and those that have more competitive research faculty will likely come out on top, Simmons noted, adding that Duke has a high-powered faculty that is highly competitive for funds.

Duke was ranked the fifth-largest research university in the nation based on expenditures and was the 13th-most federally funded in the 2010 fiscal year. Simmons added that the effects of budget cuts will lag behind the actual implementation of the cuts.

“We won’t know the actually impact of the cut on our budget for several months,” he said. “How we react to those cuts will depend on how our faculty competes and which federal programs are cut.”

Last week, North Carolina voters elected a Republican-controlled state government. Upon inauguration, the GOP will hold the governor’s seat, the lieutenant governor’s seat and a majority in both the state house of representatives and senate, a dominance North Carolina has not seen in 140 years, said Mike Schoenfeld, vice president for public affairs and government relations. Like for the federal government, a top priority on the state government’s agenda will be the budget, he added, noting that possible spending cuts will have direct and indirect effects on the University.

One state program relevant to Duke that may see funding cuts is the North Carolina Legislative Tuition Grant Program, a scholarship program that grants money to North Carolina students who choose to attend in-state private schools, Schoenfeld said. NCLTG used to give $1,800 scholarships to in-state students in order to incentivize young North Carolinians to keep their talent in state. Last year, the program was changed to a need-based system to save costs, but the general concept remains the same.

If state funding for K-12 public schools is slashed and the results of those cuts negatively affect Triangle-area schools, it may hamper Duke’s ability to recruit faculty and staff who would send their children to such institutions, Schoenfeld added.

Throughout his campaign, President Barack Obama touted his ongoing dedication to the expansion of the federal Pell Grant program, which provides need-based aid to low-income university students. Obama argued that if his opponents in the Republican party gained more power in Washington, they would drastically cut funding for this program, making it more difficult for Americans to obtain higher education.

This distinction, however, may not be so clear—funding for higher education is typically an important priority across party lines, Simmons noted.

“We know that the president and Congress have been supportive of universities and of sending students to college,” he said.

Although Pell Grants are protected from automatic cuts, other federal financial aid programs could be cut by $134 million.

Another hot-button issue this election cycle was the staying power of the Affordable Care Act, which Obama’s victory will enshrine as the “law of the land,” said House Speaker John Boehner, R-Ohio, in an interview with ABC News last Thursday.

Duke spends approximately $400 million insuring around 70,000 faculty, staff, dependents and retirees annually, Schoenfeld said. As health care reform becomes fully implemented nationwide—a process that will take a number of years—Duke will see its cost of providing insurance increase. For example, beginning in 2014, the University will have to insure faculty and staff members’ dependents until they are 26 years old, Schoenfeld noted.

“Stability almost always trumps uncertainty, and there are many aspects of the ACA... that will make the health care system more rational, more comprehensive and more fair, but they’re not without their trade offs,” Schoenfeld said.

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