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Congress' inaction could mean financial pain for Emory

By Cameron Taylor, director of federal affairs | Emory Report | Oct. 9, 2012

After the Nov. 6 elections, Congress will resume its work during a lame-duck session. On the docket is critical work toward a potential solution to the fast approaching and potentially dangerous “fiscal cliff” -- the simultaneous expiration of a slew of tax breaks along with across-the-board cuts to federal spending, known as sequestration.

Passed as part of the Budget Control Act of 2011, sequestration is a deficit reduction mechanism intended to cut $1.2 trillion over nine years by imposing automatic, across-the-board cuts to federal spending beginning on Jan. 2, 2013. Sequestration was never intended for implementation; it was the threat to push the Joint Select Committee on Deficit Reduction to achieve consensus. That group, sometimes referred to as the super committee, failed.

Sequestration would cut several billion dollars from key areas important to Emory, including federally-supported scientific research, health care and student loans. For research, sequestration would mean a direct reduction in the number of grants available, smaller award sizes, or funding for existing awards only. For hospitals and physicians, it would mean lower Medicare reimbursement rates. For students, it would mean higher loan origination fees and lower grant awards.

In 2013, sequestration would require $109.33 billion in across-the-board spending cuts, split evenly between defense and nondefense programs. The Office of Management and Budget assumes an 8.2 percent cut in most domestic discretionary spending programs. This means the National Institutes of Health budget would be cut by $2.5 billion, research at the National Science Foundation by $469 million, and the National Endowment for the Humanities by $12 million. Pell Grants would be exempt from the sequester, but most other financial aid programs would be cut.

The good news

A group of senators, led by our own Sen. Saxby Chambliss (R-Ga.), have been working for months on a path around the cliff. Currently, the framework is a three-step process. First, the senators are working to come to an agreement on a deficit reduction target. The number under consideration is $4 trillion over 10 years. It would be reached through an overhaul of the tax code, savings from changes to entitlements like Medicare and Social Security, and cuts to federal discretionary spending. As part of this agreement, instructions would be provided to relevant congressional committees to draft the details. Should Congress not meet the targets within the specified time, a back-up plan would take effect. Finally, Congress would vote to delay the automatic spending cuts and extend the tax cuts, along with some deficit reduction down payment.

The bad news

The bipartisan effort that Sen. Chambliss is leading has not received buy-in from either the Republican or Democratic Senate leaders, making its future uncertain. Even if the leadership were to coalesce around the above bipartisan effort, Congress is a long way from any agreement, with a tight deadline looming. Partisan disagreements remain.

Regardless of the outcome, the Emory community will experience financial pain. In academic year 2011-2012, Emory’s students received over $140 million in federal financial aid funding. In fiscal year 2012, Emory received over $349 million in federal research funding.  While we cannot speculate on exact figures, both of these numbers may shrink in the coming decade, jeopardizing Emory’s ability to maintain an economically diverse student population and continue its groundbreaking research.

Emory continues to have other specific concerns. For example, a prominent proposal contains language related to Graduate Medical Education (GME) that concerns teaching hospitals. In an effort to raise the $267 billion necessary to freeze physician payments for eight years (and delay the 27.4 percent pay cut for doctors who see Medicare patients), the plan would cut $60 billion from GME. A cut to medical education could not come at a worse time as Georgia already is experiencing a serious physician shortage.

Advocacy efforts

Emory has joined its voice with over 150 major universities in support of a comprehensive deficit reduction plan. President James W. Wagner shared a copy of this letter with Sen. Chambliss and pledged Emory's support for his efforts.

Emory also continues to impress upon decision-makers that investment is in fact a key strategy for digging ourselves out of our financial morass.  As a member of the Association of American Universities, Emory has been promoting a report by the Information Technology & Innovation Foundation—a nonpartisan, nonprofit think tank -- detailing the significant economic harm that the sequester would impose on federal research and development.

Finally, Emory is working with our institutional colleagues to create momentum for policymakers to reach a major agreement. A group of academic teaching hospitals, led by Emory, is making the rounds on Capitol Hill. We are having constructive discussions about our specific policy concerns, as well as our concrete spending reduction ideas.

In summary, there are enormous challenges facing this Congress. Conventional wisdom suggests that Congress may postpone making some tough decisions until 2013. However, time is running out, and the fiscal cliff before us will at least need a bridge.