Congressional Leaders and White House Reach FY11 Deal; Government Shutdown Averted
Congressional leaders and the President announced late Friday night that a deal had been reached to fund the federal government for the remaining six months of Fiscal Year 2011. The 11th hour deal capped months of debate over not whether to cut federal spending, but by how many billions of dollars, as deficit reduction has become an increasingly bipartisan issue since Republicans won the November elections in part on a promise to decrease annual government spending by $100 billion. And it is through this lens that success in winning support for federally sponsored research and student aid has been redefined from securing increases in annual funding to defending the levels federal agencies now enjoy. This six month funding bill is the beginning of a new normal, rather than an end to a budget fight, in which all discretionary accounts – including those prioritized by the Administration such as research and student aid – may be subject to cuts at level funding is seen as a win. To be sure, House Republicans view the FY11 compromise as a down payment on further cuts in FY12 – on which debate begins Thursday.
While the continuing resolution (CR) was agreed to Friday night, details on its contents were hammered out over the weekend and Monday and made public this morning. The bill cuts an additional $27.8 billion from FY10 levels on top of the $10 billion already agreed to in previous short-term funding bills (details below). It will be considered in the House later this week, and in the Senate shortly thereafter. In the meantime, a stopgap measure approved Friday night will keep government running through Thursday.
Adoption of the CR means key research sponsoring agencies will not realize the increased funding that the President had proposed in his FY11 Budget Request. However, the Administration’s insistence on prioritizing investments in research and education throughout this extraordinary pursuit of reductions across all categories of government means the outcome for science could have been worse. The same is true for students: while the CR eliminates summer Pell Grants, it does maintain the current maximum award of $5,550.
At issue in the debate was the level of cuts to adopt – House Republicans wanted to match the $61 billion reduction from FY10 they had already approved in HR 1 – and policy riders unrelated to the deficit itself, such as funding for Planned Parenthood and certain environmental regulations. In the end, the negotiated settlement dropped those riders in exchange for guaranteed Senate votes on the repeal of healthcare reforms and the defunding of Planned Parenthood – neither expected to pass in the Democratically-controlled Senate – while cutting more than Democrats had initially offered, but less than House Republicans had demanded.
Highlights of the FY11 Continuing Resolution
With the bill just released, analysis of the effects on individual federal program continues. In the meantime, below are some highlights in accounts important across the university. In addition to these specifics, the bill included a 0.2 percent across-the-board reduction to all non-defense discretionary programs to reach the $38.8 billion target; this cut is above and beyond the figures listed below.
National Institutes of Health: is cut $210 million proportionately across all institutes and centers, as well as an additional $50 million cut to buildings and facilities
National Science Foundation: is reduced $53 million, of which $43 million is cut from Research and Related Activities, and $10 million from Education and Human Resources
NASA: is cut $175 million, of which Education is reduced by $38 million, Cross Agency Support by $83 million, and Construction/Environ Compliance by $54 million
DOE Office of Science: is reduced $20 million
ARPA-E: receives $180 million, which is $180 million above the FY10 baseline (ARPA-E had previously been funded through the Recovery Act)
Pell Grants: the maximum award of $5,550 is maintained; summer grants are eliminated
SEOG: is reduced by $20 million
Looking Ahead: ‘Another bite at the apple’
House Republicans may not have secured the $61 billion in cuts that they had been pursuing, but know that there are two more opportunities in the short-term to push for more savings. First on the agenda, although sure to be drawn-out through the rest of the calendar year and perhaps beyond, is the debate over the FY12 budget. That contest will begin in earnest Thursday – the day after the FY11 is finalized – when the House is scheduled to consider its proposed budget for the year. The House Budget Chair, Paul Ryan (WI), released his FY12 budget blueprint on April 5 calling for significant long term reductions in spending, including restructuring Medicare and Medicaid, as well as continued reductions in discretionary spending. Ryan estimates his budget would cut spending $6.2 trillion over 10 years compared to the President’s FY12 request. Much of the non-entitlement savings would come from reducing non-security discretionary spending by $923 billion over 10 years to return to and freeze at FY08 levels. Notably absent from cuts is the Pentagon budget, which continues to grow, placing added pressure on domestic discretionary spending. On entitlements, Ryan proposes block granting Medicaid funding to states and restructuring Medicare for those under 55 to be more of a voucher program giving retirees access to various private insurance options. Putting entitlements into play is a risky political venture for the House Republicans but, in so doing, they include a significant field from which to achieve their deficit reduction goals. In addition, the Ryan budget proposes to reduce the top tax rates by ten percent, partially off-set by unspecified changes in tax expenditures and deductions. Obviously concerns center around the impact of the spending cuts and the tax breaks for the wealthy, as well as the substantial changes to Medicare and Medicaid; however, concerns are also being raised about the economic assumptions underpinning the Ryan proposal, including fairly rosy predictions of economic growth and increased revenues. The Senate Budget Chairman Kent Conrad has indicated he may delay his proposal to accommodate ongoing negotiations among the Senate’s “Gang of Six,” who are working toward a framework for deficit reduction that will include discretionary spending cuts, entitlement reforms and revenue enhancements.
More immediately, Congress will soonneed to increase the statutory debt limit in order to maintain government solvency. Treasury Secretary Geithner has notified the Congress that government will hit the current borrowing ceiling by May 16, although says he could employ certain actions to push that date to as late as July. A number of Republicans have already made clear their intention to vote against raising the debt limit unless the measure is coupled with considerable cuts to federal spending – primarily within the 15 percent of the budget that accounts for non-defense discretionary spending.
Given Harvard’s participation in federal programs (both research and education), we remain very engaged in these funding issues—especially through our continued robust partnerships and collaboration with peer institutions and advocacy coalitions across the sciences and in education. We will stay in touch as these issues continue to develop. Please feel free to be in touch with Suzanne Day or Jon Groteboer in Harvard’s Washington office (at 202 863‐1292) should you have questions or concerns.