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No Last-Minute Deal Likely, Sequester Set to Take Effect

NEW YORK (GenomeWeb News) – After more than a year of on-and-off again negotiations, members of Congress and the White House have failed to reach a compromise agreement to avert the budget sequester penalty, which will slash $85 billion out of federal discretionary spending this fiscal year.

Sequestration takes effect today.

Now that all last-minute plans in the Senate and meetings between Republicans in the House of Representatives appear to have expired, administrators at the National Institutes of Health, the National Science Foundation, the Food and Drug Administration, and all other federal agencies must begin enacting 5 percent budget cuts.

The US biomedical research community has been strident in opposing the sequester since its outset, and during the past six months advocates have ramped up the pressure on lawmakers, extolling the value of research for health, science, and economic growth, and publishing reports outlining estimated job losses in particular regions and districts.

For now, it appears those efforts have failed. The so-called "meat cleaver" that is the sequester was designed to be all inclusive so that the pain would be spread to all lawmakers and no carve-outs could be made to protect funding for research, although members of parties on Capitol Hill have suggested that they would prefer not to cut NIH funding.

For NIH, the sequester means a cut of $1.6 billion spread over the remaining seven months of the fiscal year, which could lead to a loss of as many as 2,000 grants. The advocacy group United for Medical Research said recently that this could mean the loss of 20,500 jobs in the life sciences sector and as much as $3 billion in lost economic output.

"We expect that some existing research projects could be difficult to pursue at reduced levels and some new research could be postponed as NIH would make hundreds fewer awards," Health and Human Services Secretary Kathleen Sebelius stated in testimony to the Senate Appropriations Committee two weeks ago.

National Science Foundation Director Subra Shuresh told the same committee that NSF would be able to award around 1,000 fewer grants if the sequester is enacted, which would impact nearly 12,000 people who are supported by these awards.

But the impacts will go beyond the grantees who receive smaller grants or are not awarded because the budget is tight. For example, Shuresh said that NSF's funding for major equipment purchases and facility construction would drop by around $35 million, "leading to layoffs of dozens of science and technical staff, with larger impacts at supplier companies."

NIH posted a notice last week explaining that it has already been operating under a continuing resolution and has been funding awards at a lower level — generally 90 percent of the previously committed level — in the event of sequestration that it expects to reduce funding levels even more. It also anticipates making fewer competing awards.

Although each NIH institute and center will assess their allocations with the aim of maximizing their value, awards are not likely to reach the full level at which they were committed, although each IC will announce their respective approaches to managing the reduced budget level.

Although the sequester is likely to kick in today, there may be avenues for making up the cuts in certain areas over the coming months.

Investment analyst firm International Strategy and Investment Group (ISI) said this week that there is increasing support in Congress for finding a way to allow the Obama Administration some flexibility in how the sequester cuts are administered, and where.

This could be done through the passage of appropriations bills — instead of a continuing resolution that funds the government at last year's level — that could change the amount funded for certain agencies, increasing the amount they were slated to receive before the cuts.

That may be unlikely, however, because the deadline for appropriations bills is in late March, and it seems more likely that to avoid a government shutdown Congress will agree to another continuing resolution for six months, ISI analyst Andy Laperriere pointed out.

Congress also could scrap the sequester altogether at any time, without reaching a deal on cutting the budget deficit long-term, if they chose to, but both parties appear to be entrenched in their positions and they may not change without a stimulus, such as a natural budgetary deadline like the end of the fiscal year, or a strong public reaction against the sequester.

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