Federal update: Sequestration trigger date approaches

According to a report by the Association of American Universities, it appears likely that across the board budget cuts known as sequestration are likely to go into effect on March 1 though it is possible that its damaging cuts can be addressed through the measure that Congress will need to consider to extend the continuing resolution (CR) that expires on March 27.  As reported by CQ.Com, “Even as they blame one another for automatic spending cuts set to take effect March 1, key lawmakers on both sides believe the best chance for a bipartisan deal to restructure the sequester will come by the end of March.”  

Republicans and Democrats remain unable to agree on a formula for stopping the sequester, which was intended to be so egregious when it was passed as part of the 2011 Budget Control Act that both sides would do everything possible to prevent its implementation.  The sequester would impose $85 billion in across-the-board spending cuts on defense and nondefense programs over the remaining seven months of FY13, including on congressional operations. The failure of the Joint Select Committee on Deficit Reduction to produce a bill identifying budgetary savings of at least $1.2 trillion over 10 years by November 23, 2011 has triggered an automatic spending reduction process known as sequestration.

Senate Appropriations Committee Chairwoman Barbara Mikulski (D-Maryland) held a hearing on February 14 on the sequester, during which she released letters from several agencies, including the Departments of Education and Health and Human Services, the National Science Foundation (NSF), and NASA, on its damaging impacts. Senator Mikulski said in her opening statement, “A five-percent cut this late into the fiscal year often translates into a double whammy for our agencies because fixed costs like rent and utilities can't be cut. The big cuts will be to salaries, which means furloughs, layoffs, and services not delivered to the American public.”

In the House, Congressman Jim McDermott (D-Washington) has introduced a bill to exempt the National Institutes of Health (NIH) from the sequester, citing the particular danger to the city of Seattle, where the economy “uniquely relies on federal funding for biomedical research.” His press statement says the bill would reduce the total amount of the sequester by the amount that would fall on NIH in order “to avoid deeper cuts to other programs.”

The original estimated across-the-board cuts in FY13 under the sequester were 9.4 percent for defense discretionary spending and 8.2 percent for nondefense discretionary spending. The fiscal cliff agreement signed on January 2 lowered those percentages to an estimated 7.3 and 5.1 percent, respectively. However, a memorandum prepared by Senate Budget Committee Chair Patty Murray (D-Washington) notes that because the cuts would be absorbed over the remainder of FY13, “the impact of the cuts will generally not be less dramatic.” The Congressional Budget Office estimates that the sequester cuts will cost 750,000 jobs by the end of 2013, and cut 0.6 percent off growth in the gross domestic product.

With little chance that Congress will avert the sequester before March 1, the Senate will nevertheless vote on two competing alternative plans when it returns on February 25, reports CQ.Com.

The proposal released last week by Senate Democrats is a $110-billion replacement plan, divided equally between spending cuts and tax loophole closings.  The $55 billion in savings would come from $27.5 billion in cuts from defense after FY14 and $27.5 billion in cuts to agricultural subsidies.  On the revenue side, the package would set a minimum effective tax rate for the wealthy and increase taxes on the oil sands industry. 

In addition to the Democratic plan, the chamber will consider a plan being developed by Senate Republicans that “promises to be all spending cuts,” says CQ.Com.  

House Speaker John Boehner (R-OH) has said that the Senate should act first on the sequester.  He said last week that if senators “are willing to pass a bill, we’ll find some way to work with them to address this problem,” reports Politico.

In November, UO President Michael Gottfredson joined other Oregon University System president in calling on Congress to avoid sequestration.