In the absence of agreement on a long-term deficit reduction plan, on March 1^st, President Obama signed an order directing federal agencies to reduce spending subject to sequestration under the Budget Control Act of 2011. The Office of Management and Budget (OMB) estimates that to achieve the necessary $85 billion in savings, sequestration would require a reduction of approximately 5.0 percent in non-defense discretionary spending and 7.8 percent in non-exempt defense discretionary spending. Additional reductions will be taken in certain mandatory programs specified in the law.

As federal agencies prepare to implement the sequester, the Congress is turning its attention to the Continuing Resolution (CR), which is currently funding the entire federal government through March 27. There is general agreement between Congress and the White House and between Democrats and Republicans that there should be no government shutdown. It also appears likely that there will be no attempt to try to overturn the sequester in the final appropriations bill.

So what is likely to happen?

• Due to the significant uncertainty, many federal agencies restrained spending to hedge their bets in the uncertain budgetary situation. Many agencies have implemented the traditional CR formula using the lowest of the FY 2012 enacted level, the President’s FY 2013 budget request, the House appropriations level, or the Senate appropriations level. Agencies have also retained some percentage of funding under the CR in anticipation of a possible sequester.

• Because of these actions, the impact of the sequester will vary by agency depending on the types of programs it funds. For federal research agencies, the first priority is likely to be funding existing grants and grantees.

• Until Congress completes action on the FY 2013 appropriations bill, research agencies are likely to delay announcing new funding opportunities.

• Both the House and Senate Appropriations Committees are working on the CR. The House Committee expects to fund defense-related bills and to continue the CR level for other federal agencies. The Senate Committee may offer an omnibus appropriations bill to complete action on all 12 bills as significant progress on such a bill was made late last year.

• Once agencies have a full-year budget to implement their programs, there could be a flurry of funding solicitations released with relatively short times for submitting applications in order to obligate funding this fiscal year, which ends September 30.

In the meantime, each federal agency will be refining its plan to implement the sequester (please see below for a list of agency resources on the sequester). Congress and the White House will work to agree on final FY 2013 appropriations, which will be subject to the sequester. The next opportunity to restart negotiations between the White House and Congress on a long-term deficit reduction plan, which may or may not revisit the sequester, will be during consideration of the budget resolution for FY 2014 and discussions on raising the ceiling on the debt limit, which expires on May 19.

Sequestration Resources

White House

The President’s sequestration order (released March 1) can be viewed at: http://www.whitehouse.gov/sites/default/files/2013sequestration-order-rel.pdf.

White House Office of Management and Budget (OMB)
OMB released a memorandum on federal agency responsibilities for implementation of sequestration (released February 27): http://www.whitehouse.gov/sites/default/files/omb/memoranda/2013/m-13-05.pdf.

OMB also sent a report to Congress which provides calculations on budgetary resources that are required to be reduced under sequestration (released March 1): http://www.whitehouse.gov/sites/default/files/omb/assets/legislative_reports/fy13ombjcsequestrationreport.pdf.

National Institutes of Health (NIH)

NIH released the following operation plan in event of a sequestration (released February 21): http://grants.nih.gov/grants/guide/notice-files/NOT-OD-13-043.html.

National Science Foundation (NSF)

NSF released this notice regarding the impact of sequestration on NSF awards (released February 27): http://www.nsf.gov/pubs/2013/in133/in133.pdf.

Department of Education

The Department of Education released additional information on sequestration’s impact on Title IV student financial assistance programs (released March 1): http://ifap.ed.gov/eannouncements/030113ImpactofSequestrationonTitleIVFSAProg.html.

Senate Appropriations Committee

On February 14, the Senate Appropriations Committee held a hearing on the impacts of sequestration. The website below will link you to a list of department and agency letters to the Committee with information about how sequestration is expected to impact each entity. Information for NSF, NIH, the National Aeronautics and Space Administration (NASA), the Departments of Defense, Commerce, Education, Agriculture, and Energy (as well as numerous others) can be found here: http://www.appropriations.senate.gov/ht-full.cfm?method=hearings.view&id=17d3dc99-c065-4bec-a7c8-cfd374bf41a3.

The Washington Post

The White House released information on the expected impact of sequestration for each state. The Washington Post published this information and arranged it by category (White House released information on February 24): http://www.washingtonpost.com/wp-srv/special/politics/sequestration-state-impact/.

On April 26, the Senate Committee on Agriculture, Nutrition, and Forestry approved legislation that, if enacted into law, would result in a far-reaching reorganization of programs supporting the nation’s farmers and ranchers. The bill, S. 3240, the Agriculture Reform, Food, and Jobs Act of 2012, would dramatically restructure farm income support and crop insurance programs, as well as eliminate, consolidate, and streamline existing programs for conservation, rural development, trade, nutrition, energy, research and extension, forestry, and related programs for the five-year period through fiscal year (FY) 2017. Majority Leader Harry Reid (D-NV) has announced he plans to take up the bill for debate by the full Senate in the near future.  Meanwhile, the House Agriculture Committee has concluded hearings on the Farm Bill and anticipates preparing its own bill later this summer.  

For the USDA research and extension programs, the Senate bill would largely extend current programs. The bill would extend the authorization for intramural research through the Agricultural Research Service (ARS) through FY 2017. The Senate bill would also reauthorize the National Institute of Food and Agriculture (NIFA) through FY 2017 and extend the authorization for NIFA’s extramural competitive grants program, the Agriculture and Food Research Initiative (AFRI), at the current $700 million annual level (AFRI is currently funded at $264.5 million in FY 2012). The bill would also reauthorize funding for the Extension Service.  

The Senate version of the Farm Bill has no provisions affecting the current formula grant programs for land-grant institutions. Formula programs authorized under the Hatch Act and Smith-Lever Act have open-ended authorizations for appropriations at "such sums as may be necessary.” 

Additionally, the Senate bill does not address the indirect cost rate as the 2008 Farm Bill did. Thus, under the proposed Senate bill, the indirect cost rate remains at the current level of 30 percent established in the FY 2012 Agriculture Appropriations bill. The 2008 Farm Bill increased the indirect cost rate from 19 percent to 22 percent.  

The bill would establish a significant new research initiative in the creation of a non-profit Foundation for Food and Agriculture Research (FFAR), which would promote a public-private partnership to leverage additional funding for agriculture research. The Senate bill includes mandatory funding of $100 million toward this effort, which must be matched by non-federal funding through the Foundation.  

The Senate Farm Bill would extend existing energy programs affecting rural areas, including the Biomass Research and Development Initiative (BRDI), which would be extended for five years through FY 2017 and would be authorized at $30 million annually. The most significant amendment adopted during the Committee consideration of the bill would provide $800 million in mandatory spending to continue existing energy programs. Of this amount, $26 million in mandatory funding is provided each year through FY 2017 for BRDI. 

For a full report on the 2012 Farm Bill from our government affairs consultants, Lewis-Burke Associates, please visit: /resource/group/6d461cb9-5b79-4571-a164-924fa40395a5/docs/120601_senate-reported_farm_.pdf

As you may be aware, the House Oversight and Government Reform Committee recently approved the Grant Reform and New Transparency (GRANT) Act, H.R. 3433. The bill, which the full House has not considered, is intended to provide more transparency in the federal grant-making process by requiring all federal agencies to publicize the selection procedures for each grant program. It also mandates the White House Office of Management and Budget (OMB) create a single, comprehensive website for all federal grant opportunities, among other provisions.

Many in the research community have concerns with the bill’s transparency requirements in the peer-review process, which include the posting of full copies of funded proposals online (albeit with an exception for information that is not subject to the Freedom of Information Act (FOIA)). Although many efforts have been made to effect positive changes in the bill, the amount of disclosure required is still potentially damaging to the peer-review process. As such, Representatives Rush Holt (D-NJ) and David Price (D-NC) have drafted a "Dear Colleague” letter to the House leadership urging them to fix these remaining issues; Reps. Holt and Price also are seeking additional signatories to the letter from among their colleagues.

ASPB is closely monitoring this bill and working to remove damaging provisions in the legislation. If you have concerns with the GRANT Act, you can share them with your Representative and/or encourage them to sign on to the Holt-Price Dear Colleague letter. Contact information for your Representative is available at http://house.gov/representatives/. You can either call their Washington, D.C., office or send an e-mail via your Representative’s website. If you do not know who your Representative is, you can enter your zip code into the above website to find out. The deadline for additional signatories to the Dear Colleague letter is Friday, January 13.

If you’d like help reaching out to your Representative, please contact ASPB’s Public Affairs Manager, Kathy Munkvold, at kmunkvold@aspb.org.

Media attention has focused on the failure of the 12-member congressional Supercommittee to reach agreement on a package to reduce the federal deficit by at least $1.2 trillion over the next nine years. However, universities and science organizations are not the victims of the deficit impasse. Generally, federal funding for scientific research is not the target of deficit reduction for several reasons: (1) the amount of domestic discretionary funding for science is not large enough to have significant impact on deficit reduction; (2) science has bipartisan support among politicians since it is part of the innovation economy upon which the country’s financial recovery is partially dependent; and (3) dismantling the scientific infrastructure of the country is counter-productive in the global technology-driven forces of the 21st century. There are aspects of the current federal deficit paralysis that indirectly affect higher education – particularly relating to student aid, academic health centers, and tax policy – but reducing direct federal support of scientific research at academic institutions is not front-and-center.

Now, many are trying to determine what happens next as Congress still has much work to do before adjourning next month. With funding fully enacted for the National Science Foundation (NSF), the National Aeronautics and Space Administration (NASA), the National Oceanic and Atmospheric Administration (NOAA), and the Agriculture and Food Research Initiative (AFRI) the competitive funding arm of the U.S. Department of Agriculture (USDA), with modest increases (NSF and NOAA), flat funding (AFRI) or a slight reduction (NASA), completion of the fiscal year (FY) 2012 appropriations process, especially for NIH funding, is an important challenge. In addition to funding the remaining appropriations bills, which are currently operating under a Continuing Resolution (CR) through December 16th, there are other issues looming before Congress, such as extension of unemployment benefits, doctor payments, and tax extenders. This report describes the impact of the collapse of the Supercommittee at the federal level; however, actions might be taken by state and local governments to respond to possible implications associated with the collapse of the Supercommittee process. 

Near-Term Outlook for Science Funding

Among its many to-dos, Congress must still complete nine remaining FY 2012 appropriations bills, including bills that fund the National Institutes of Health (NIH), the Department of Energy (DOE), the Department of Defense (DOD), and the Department of Education (ED). It is expected that this will be done through one large "omnibus” package before the end of the calendar year. As previously reported, other science agencies for which appropriations bills have been passed—namely NSF, NASA, NOAA, and the Department of Agriculture (USDA)—fared relatively well in FY 2012, receiving budgets that are about flat or slightly increased above the FY 2011 enacted level. A similar outcome is expected for basic research in agencies like NIH and DOE in the final appropriations agreement.

One caveat is that it is not uncommon for a modest across-the-board reduction to be included in an omnibus appropriations bill should it be warranted to keep discretionary appropriations within the overall cap of $1.043 trillion enacted in the Budget Control Act (debt limit agreement). Should the appropriations process stall, there has been some discussion of extending the current CR into early next year, which would result in a freeze for all programs at the current (FY 2011) level until Congress completes an omnibus bill or enacts a CR for the remainder of the fiscal year.

Planning is also underway by agencies for the President’s FY 2013 budget request which is expected to be more conservative than in past years and may even be delayed due to the uncertainty of future budget cuts. The FY 2013 process remains very uncertain at the moment with flat funding for federal research agencies considered "a win” in the coming years.

Budget Scenarios for FY 2014 and Beyond

In August, the Budget Control Act enacted a process that would institute automatic across-the-board budget cuts over nine years, known as sequestration, in the event that the Supercommittee could not reach a deal. However, given that the cuts are not scheduled to go into effect until January 2013 (after the election) and are subject to subsequent revision by Congress, it is possible they will be delayed or never triggered at all. In the event no changes are made to the automatic budget cuts, the White House Office of Management and Budget would be required to reduce the discretionary appropriated budget by $109 billion per year for nine years, allocated equally between defense spending and nondefense spending.

Reductions in discretionary spending from 2014 to 2021 would be achieved by reducing the aggregate overall caps on such spending for each year. While the President could propose specific cuts to agencies such as NIH and NSF, specific appropriations would still be subject to the annual congressional appropriations process and program funding could be increased or further decreased within the overall capped amount for all discretionary spending. As a general rule of thumb, if these cuts were allocated proportionately, it would mean 6 to 8 percent reductions to the domestic spending agencies.

Concerns are already being expressed by the Administration and by both Democratic and Republican Members of Congress over the magnitude of potential spending cuts to defense. The Congressional Budget Office estimates that the DOD budget could be cut by as much as 10 percent in FY 2013 under the mandated sequester with additional reductions in discretionary defense spending over the nine-year period to estimated savings of about 8.5 percent in FY 2021. Such reductions, totaling an estimated $492 billion, could impact big defense programs already at issue in Congress, as well as drive changes in the structure and mobility of the nation’s military services already under consideration. Additional reductions in mandatory defense spending are also likely under current law. While some want to undo the sequester for defense, the President has threatened to veto any bill that focuses only on exempting defense spending.

In short, the budget outlook for the next several years is uncertain at best. The main question on the table is whether and how to skirt the automatic cuts that would be levied against FY 2013 appropriations as required under the Budget Control Act. However, flat funding for science agencies remains a possibility over the next few years and should be viewed as a "win” in the current budget climate.

Sen. Herb Kohl

Another priority worthy of protection is agricultural research. Without continued investment, food production in this country and around the globe will not be able to keep up with challenges posed by growing populations, climate change, invasive pests, and other threats. According to the Economic Research Service, global demand for food will grow 70 to 100 percent by 2050. To meet that demand, our production capacity will have to increase. Those increases will not happen without sustained emphasis on agricultural research. Senator Blunt and I have worked hard to protect these investments, often at the expense of other USDA programs.

Sen. Blunt (R-MO) is the Republican Ranking Member on the Senate Agriculture Appropriations Subcommittee.