Report on Looming Federal Budget Cuts 'Confirms the Worst' for Higher Education

September 14, 2012

The dire consequences of looming automatic cuts in the federal budget came into sharper focus on Friday with the release of a 394-page report by the White House Office of Management and Budget. The report contains preliminary details of cuts set to fall on agencies across the federal government, including most programs related to higher education.

If Congress fails to head off the $109-billion in overall cuts for 2013 before January 2, part of $1.2-trillion in required cuts over the next decade, most aspects of federal spending relating to higher education would face reductions of either 8.2 percent (for discretionary programs) or 7.6 percent (for mandatory programs), including appropriations to the National Institutes of Health and the National Science Foundation.

The automatic cuts, to be carried out in a process known as sequestration, were enacted into law last year in the Budget Control Act as a means of encouraging Congress to compromise on deficit reduction. But such a compromise never was reached, and the sweeping cuts remain, contributing to what many observers fear will be a "fiscal cliff" that pushes the United States back into recession.

"These cuts are clearly deep enough to inflict damage," said Terry W. Hartle, senior vice president for government and public affairs at the American Council on Education, and will "substantially cut services in many places."

The report "confirms the worst," said Hunter R. Rawlings III, president of the Association of American Universities, which represents leading research institutions. Sequestration, he added, "would have a terrible short- and long-term impact on the nation's investments in scientific research and education, investments that are essential for long-term economic growth and prosperity."

The National Institutes of Health, for example, would lose more than $2.5-billion from its more than $30-billion appropriation, a cut of 8.2 percent. The report does not specify how the NIH and other agencies would carry out the reductions.

In addition to cuts in programs, the law would raise the 1-percent origination fee for unsubsidized Stafford student loans by 7.6 percent, to about 1.1 percent of a total loan. PLUS-loan and unsubsidized-loan fees would rise slightly, from about 4 percent to about 4.3 percent of a total loan. Pell Grants would not be affected.

During a conference call with reporters, senior White House officials stressed that the Obama administration does not support the "deeply destructive" cuts detailed in the report, which they were required by law to publish. Arising out of a conflict between Republicans and Democrats in Congress over deficit reduction, sequestration "was intended to drive both sides to compromise—it was never intended to be implemented," one official said. "Sequestration is a blunt and indiscriminate instrument. It is not the responsible way for our nation to achieve deficit reduction."