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Super committee failure, budget cuts to impact Duke

The recent implosion of congressional deficit reduction negotiations has raised uncertainty about federal dollars that Duke and other universities will receive in the coming years.

After the Joint Select Committee on Deficit Reduction failed to reach a bipartisan agreement last week, automatic cuts to the federal budget are scheduled take effect January 2013. The cuts, per the Budget Control Act of 2011, must total $1.2 trillion divided equally between security and non-security spending in the next 10 years. The cuts will be initiated through a process called sequestration, which could lead to cuts to different federal agencies that provide grants for higher education, research and student aid.

“There will definitely be some implications for Duke but we don’t know what that will be,” said Christopher Simmons, associate vice president of federal relations for the University. “But there are a lot of things that are going to happen before we get to sequestration, including the presidential election.”

As of now, sequestration will occur in 2013, unless lawmakers introduce legislation to undo the cuts to specific areas.

If Congress does not take steps to repeal the cuts, the budgets of most education programs will be slashed by 8 percent across the board, Tony Pals, director of communications for the National Association of Independent Colleges and Universities—of which Duke is a member—wrote in an email Tuesday. Although Pell Grants will be excluded from the cuts, student financial aid programs overall will be cut by $134 million, Pals added.

Duke researchers will continue to be strong contenders in the competition for federal grants from institutions such as the National Science Foundation and the National Institutes of Health, but they will be competing for a smaller amount of money if the cuts go forward, Simmons added.

Sequestration will also trigger a 2 percent reduction in federal reimbursement for hospitals that subsidize the costs of treating patients using Medicare, said Paul Vick, associatevice president for government relations for Duke Medicine. This loss is in addition to the collective $155 billion in Medicare reimbursements hospitals, including the Duke University Health System, will lose over 10 years as part of the health care reform enacted in 2010 but set to take effect 2014.

Vick noted that the super committee was considering proposals that would have led to deeper cuts for DUHS. Although federal money given to hospitals was not a major target in the deficit reduction efforts, every recipient of federal funding was vulnerable, assuming that the committee aimed to make small cuts across a broad range of programs, he added.

“I don’t think any cuts to health care are appropriate, but it is a such a large portion of federal spending—they would have to look at it as part of a deficit reduction package,” he said.

Although universities are beneficial to society in the long term, they are financial drains for the federal government in the short term by using funds without directly contributing to the tax base, said Jacob Vigdor, professor of public policy and economics.

“With the failure of the super committee, everything by default will occur through spending cuts, which is bad from the university perspective,” Vigdor said. “In exchange for all that government money, [universities] do a lot of great things for a society.... You can adopt a policy to cut money for the things we do, but there will be consequences.”

Some members of Congress are deeply concerned about automatic cuts to the defense budget due to sequestration, but less federal funding for research and education could be equally harmful to the United States’ future economic growth, said Rep. David Price, D-N.C.

“All budget cuts are not created equal,” Price said. “You are never going to balance the budget without a healthy growing economy, which is much more about better-targeted investments in research and education than it is simply cutting those things.”

It remains unclear whether sequestration will be reversed before 2013, Simmons said. The legislation aiming to do that could come as a broad measure or gradual changes, but the University remains fully committed to supporting congressional proposals that maintain research and financial aid funding.

“Most Republicans and Democrats want to avoid sequestration and have some control over where cuts are made,” he noted. “Members of Congress may raise questions about the quality of research or education but at the end of the day, colleges and universities receive pretty good bipartisan support... but there’s going to be cuts everywhere to fix the budget.”

Sequestration was most recently introduced in 1985 as part of a balanced budget law but was eventually reversed, Vick noted.

President Barack Obama has noted that he will veto any attempt to reverse the 2013 sequester.

“The whole idea of sequestration is to put pressure on policymakers to come up with something that is less painful,” Price said. “If [sequestration] comes into effect, that is a sign of failure.”

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