Sequester May Hit Health Research

Unless Congress amends The Budget Control Act of 2011 during the lame duck session this winter, the legislation will cut a total of $1.2 trillion from the federal budget over the next decade.

The budget sequester will trim $55 billion in defense and another $55 billion in non-defense spending. Cuts from the bill that Congress passed are set to go into effect January 2013.

One area that will be hit is federal funding that goes toward university research. There will be an estimated 8.7% ($12.5 billion) cut in 2013.

The Information Technology & Innovation Foundation estimates the sequestration will cause a loss of 200,000 jobs and reduce the nation’s gross domestic product between $203 billion and $860 billion.

Justin Hicks, senior economic analyst at the organization, said federal funding accounts for more than 60% of funding for basic research done in universities today.

“This is a broad and deep problem we are facing,” Hicks said. “When you are looking at sequestration of R and D, the impact on universities is not insignificant.”

And a handful of public universities in the Midwest are highly dependent on federal funding to perform their mission. The University of Wisconsin is near the top of the list of federally funded research programs.

In 2009, the total research budget for the university was around $269 million, of which $160 million was federally funded, said Jon Sender, vice president of Venn Strategies, LLC and manager of federal relations for the School of Medicine.

Sender said the university’s health system is a three-legged stool comprised of education, research and healthcare, all of which would be impacted by the cuts.

“The balance is tricky and when you start taking things away, other things fall away as well; it’s all interrelated,” he said.
Another top five research institution in the nation is the University of Minnesota.

The university’s president, Richard Pfutzenreuter III, said it received $605 million in federal funding in 2012, a large portion of which (some $262 million) goes toward personnel compensation. The university’s reductions would fall in the ballpark of $50 million.

“We are going to have to find other funds to support those staff or we will have to shrink the program,” he said. “Our appropriations from the state legislature for fiscal year 2013 are equivalent to what they gave us in 1998. There is obvious pressure on student tuition and debt, so we aren’t going to solve the problem there. Our only solution at some point is to cut.”

Even if UM doesn’t have to cut staff, it may have to cut salaries, Sender said. The university’s cancer center in Madison is the only one in the state that is designated by the National Institutes of Health for its level of research and care expertise. Many of its staff are researchers, educators and provide patient care and their salary package is reliant on funds from all three areas. 

Research would obviously suffer if cuts are made. Hicks said the United States would lose its access to cutting-edge, basic research that most companies don’t perform.

“Universities are performing R&D on fundamental questions with broad impact,” he said. “No single business out there could endeavor to map the human genome and through federal funding, universities are able to do that.”

Hicks said his organization recently looked at the impact of a dollar of funding flowing through a university. It found that $1 million provided to a school can produce up to 10 different studies or publications – “a huge impact with a huge return,” he said.

Reducing funding may also cut new research. It is likely that established studies will be funded through to completion and have a higher priority for refunding, Sender said. What will suffer is new research. This means they might not enter the field, or go to other countries.
“For a public facility, resources are somewhat limited, whereas private schools, with huge endowments, can make plays for leading researchers,” he said. “There is also a strong overseas market for leading research. A lot outside of the US are investing heavily in research while we cut.”

According to an ITIF report, the United States already ranks low in federal research funding – 22nd out of 30 developed nations including China, Korea and the United Kingdom.

Hicks said he understands that cuts may have to be made. However, Congress can come together before the end of the year to “put together a sensible budget solution.” Research is a clear driver of economic growth, he added.

Instead, Hicks believes the federal government should be investing in innovation, the workforce and education.

“They (Congress) are missing the important fact that we are in a global race and other countries are ramping up R&D dramatically,” he said. “China and Korea aren’t cutting; they are expanding at a quick rate … we are losing ground and they are making it up faster.”