NEWS

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December 4, 2012

UChicago and the fiscal cliff

The University could be hit with as much as an eight percent average reduction in its annual $1.5 billion of federal funding for national labs Argonne and Fermi and research grants for graduate students and faculty, should the Budget Control Act of 2011 (BCA) go into effect on January 2.

This depends on how quickly and effectively the newly elected 113th Congress will come to an agreement about the impending “fiscal cliff,” if at all, when over 1,000 government programs will experience automatic cuts under the BCA.

“If the sequester occurs, defense and non-defense discretionary spending will be hit the hardest. And what falls under that non-defense discretionary spending is higher education, student loans, research,” said Mark Hansen, a professor of political science and the department’s former chair.

Neither Hansen nor Matthew Greenwald, the University’s deputy director for federal relations, believe that the sequester will actually take effect. Hansen predicts an agreement in the “11th hour” and a postponement period of three months. Nonetheless, negotiations for other deficit reductions do not prioritize higher education and could have lasting impacts, according to Hansen.

Argonne and Fermi receive a total of around $1 billion of federal funding annually, while other research on campus receives about half a billion from the National Institutes of Health, National Science Foundation, NASA, the Defense Department, and others. Hansen emphasized that the eight percent “worst case scenario” in cuts is an average across research projects. Smaller projects are especially likely to experience difficulty in securing funding.

“Some super researchers may still be really successful getting funding, but the success rate will go down overall,” Greenwald said.

In addition, a sequester would result in $11 billion in cuts to Medicare. About $3 billion of current Medicare spending funds medical student residencies, including those at the University’s Medical Center (UCMC). In addition to the academic implications, one in three UCMC patients rely on Medicare and/or Medicaid.

“So these programs are crucial, especially for an underserved population on the South Side, and can be really impacted,” Greenwald said.

Regardless of what lawmakers decide in January, the appropriations capping under the BCA will not impact student loans, though Greenwald said a sequester may “put pressure” on other aid programs, such as work-study.

The BCA has already eliminated subsidized Stafford loans for graduate students as well as loan repayment incentives for debtors, effective for all loans signed after July 1, 2012. Subsidized loan interest rates are also set to double to 6.8 percent in the 2013-2014 academic year, in a planned return to 2006-2007 rates unrelated to and not dependent on what happens with the BCA. This will affect one-third of the University’s undergraduates.

For the new Congress, the issue of the rising costs of higher education, which have increased faster than inflation rates in recent years, “is less about how [the government] can help the colleges be more affordable and instead telling colleges, ‘you will need to be more affordable,’” Hansen said.

“These [issues] aren’t particularly partisan in origin. There’s not a lot of difference between parties when tuition has been rising higher than inflation,” he said, speaking about the expectation among lawmakers that colleges begin slashing their fees.

Sequester or not, the University recognizes that the current political climate is averse to increased government spending,ß and that developing relationships with Illinois legislators and collaborating with other institutions is necessary to further its federal agenda.

“We need to have good champions. If not ensuring significant increase, not getting cut in this environment is a win. Keeping the status quo is a win,” Greenwald said.

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