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Sequestration: A Primer for the Perplexed

5 February 2013 5:40 pm
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How would sequestration affect U.S. science? If you're confused—and who isn't?—by the seemingly endless debate between Congress and the White House over how to reduce the federal deficit, here are a few points to keep in mind.

On 1 March, an $85-billion across-the-board cut in federal spending—the first step in a mandatory $1.2 trillion reduction over 10 years—will go into effect unless all sides agree to delay it or substitute something else. Indeed, when the Budget Control Act that created sequestration was enacted in August 2011, both sides expected to have an alternative in place by now.

That didn't happen. But after more than a year of shrill rhetoric, the first serious alternatives are beginning to emerge. (The cuts were actually supposed to kick in on 2 January, but on New Year's Day Congress gave itself a 2-month reprieve.)

Senate Democrats, who control that body, are busy working on a package that would lower spending and increase revenues. Their goal is to shrink the deficit without decimating domestic programs. President Barack Obama chimed in today with a similar prescription, urging Congress to adopt it as a temporary fix for the next few months.

In contrast, leaders of the Republican majority in the House of Representatives have little appetite for increasing government revenue. Instead, they are hoping to convert sequestration into a new, lower ceiling on overall discretionary spending for the remaining 7 months of the current fiscal year. If they succeed, the spending cap of $1.043 trillion for 2013 could drop by nearly $70 billion, to $974 billion.

In the meantime, what was once considered too onerous to be implemented now seems unavoidable. So what would sequestration mean to scientists who rely on federal research dollars?

The Obama administration is not making it easy to answer that question. It has imposed a gag order on all federal agencies prohibiting discussion of how the cuts would be applied. Last Friday, for example, a senior scientist at the National Weather Service (NWS) was fired after he spoke to The Washington Post about how he was hoping to reduce utility costs by turning off radar units on calm days.

As a result, budget and legislative officials at several research agencies declined to comment on contingency planning. Public affairs officers referred all queries to the White House Office of Management and Budget (OMB). And OMB press officials didn't return our calls.

Despite that brick wall, ScienceInsider has been able to piece together some information on what sequestration would look like if it is implemented. There is a lot more we would like to know, however, so we encourage anyone with a better understanding of these issues to get in touch with us, or post their comments.

Which agencies are affected?

The sequestration, by definition, covers almost every federal agency and every research program.

How big will the cut be?

The original $109 billion for 2013 was reduced to $85 billion last month. It is split evenly between defense and nondefense programs and applies to all discretionary spending (that is, programs for which Congress can decide how much money to appropriate each year). That category excludes so-called entitlement programs like Medicare, as well as interest on the national debt and other mandatory payments.

What that means for individual agencies, however, is not clear. Last September, OMB estimated that domestic research agencies such as the National Institutes of Health and the National Science Foundation would suffer an 8.2% reduction in 2013. After Congress on New Year's Day tweaked the overall amount to be cut, domestic agencies began using a figure of 6.4%. (That number can be obtained by converting the overall reduction of $24 billion into a percentage of the originally planned cut, and then subtracting it from the original figure.)

However, when ScienceInsider queried NIH about Director Francis Collins' use of 6.4% in an interview last month with Politico, a press spokesperson said NIH is no longer using that figure. More recently, several federal agencies have been spreading the word that they expect a 5% reduction under sequestration, although it's not clear where that figure comes from. So, take your pick: Sequestration, if it goes into effect, will mean a cut of 8.2%, 6.4%, or 5% cut this year to an agency's budget.

Is there any flexibility?

Yes. Sequestration is usually described as a blunt instrument or, to use a different metaphor, as imposing fiscal handcuffs on an agency. But the fact is that agencies will have considerable flexibility to decide which activities will be affected, and by how much.

That discretion comes from the fact that OMB has said that the sequestration cuts will be applied to the same spending accounts that Congress uses to dish out an agency's annual appropriations. But a single account can be an umbrella term that covers a very large agency—nearly all of NIH's $31 billion budget is appropriated to one account, for instance—or a definition that covers something smaller, such as a single program, project, or activity.

Most agencies have their budget divided into many accounts and, thus, will have less flexibility. For example, NSF's $7 billion budget is divided into four major accounts—research, education, agency operations, and new facilities—and each would suffer from the same proportional bite. But the Department of Energy's (DOE's) $4.9 billion Office of Science is just one account within DOE's larger $27 billion budget. That means the Office of Science could have more flexibility to apportion cuts within its six disciplinary-based research program subunits. (DOE's nuclear weapons activities are part of defense programs, which are targeted for slightly larger cuts than non-defense programs on a percentage basis.) NASA's $5 billion science directorate, meanwhile, represents less than one-third of the agency's total budget, but it covers half-a-dozen disciplinary areas.

How are agencies planning to cope?

That is probably the most closely guarded secret. But the general answer is clear: By being very parsimonious with the funds they have already received for 2013 under a temporary spending measure called a continuing resolution (CR). That CR runs out on 27 March, a date that many observers regard as the real deadline for a fiscal deal.

A CR, although in theory a stop-gap funding measure, has become the norm in recent years because of the chronic political gridlock in Washington. As a result, agencies have developed a routine for coping with the uncertainty that they are, in all likelihood, now applying to the pending sequestration. In short, they are spending less than what they have been allocated—perhaps only 80%—and using the savings to create a reserve that will be tapped once Congress hammers out a final budget for the year.

But that routine varies by agency. For NIH, for example, it has meant warning grantees that the second, third, and fourth years of a 4-year research grant may be smaller than what the scientist expects. NIH does that so it doesn't have to shrink the overall number of new awards made. In contrast, NSF historically honors its out-year commitments (a significant percentage of its awards are fully funded from the start, in fact) and trims the number of new awards if the money isn't there.

As President Obama reminded Congress today, there's still time to shelve sequestration and behave like adults in setting responsible fiscal policies. But how much would you bet on it?

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