March 08, 2013

Sequestration and the NIH

The current uncertainty surrounding the impact of the sequester on funding for grants and research through the National Institutes of Health (NIH), while deeply unsettling for the biomedical research enterprise, brings new opportunities for close engagement with the NIH Institutes and Centers as they make difficult decisions  affecting their research portfolios.  The tough choices on programmatic priorities and decisions to sustain or arrest investments in given areas will unfold at the level of the Institutes and Centers. Adding your perspective to this decision making process and assuring that the tested worth of current programs is understood and protected is more critical now than ever.

While the full effect of the across-the-board spending cuts, or the sequester, on the NIH budget has yet to be measured, certain signals are emerging:

A snapshot of the multiple forces at play. By virtue of the sequester that took effect on March 1, 2013[1], federal spending will be reduced by statutorily set percentages over the next 7 months through the end of the government's fiscal year (FY) on September 30, 2013. On top of the sequester, Congress and the Administration must enact by March 27th a bill to fund the government through the remainder of FY 2013, as that is the date the current stop gap funding bill expires. The combined effects of the sequester and the lack of certainty in the federal budget leave the NIH and the vast research community that relies heavily on agency funding grasping for clarity.

IMPACT: The NIH will absorb $1.545 billion in nondefense discretionary cuts to its budget and $8 million in mandatory cuts, reducing the NIH budget from March 1, 2013 through September 30, 2013 by $1.553 billion.

Impact of budget uncertainty on NIH. The NIH Institutes and Centers have been awarding investigators with ongoing multiyear grants only 90 percent of approved grant funding to conserve funds while they await final budget numbers. Many new grant proposals that have been reviewed and that earned high marks will not be funded until Congress finalizes the FY 2013 spending plan.[2] Additionally, signals from NIH indicate that the 90 percent funding for ongoing grants may become the status quo instead of a temporary method of shoring up resources against budget uncertainties as the Institute looks for ways to absorb the sequester cuts.

IMPACT: Only 90 percent funding for existing grants and delayed funding for new grants pending the continuing resolution.

Applying the sequester cuts across the NIH. Director Dr. Francis Collins has been clear that cuts will be taken by the Institute and Centers across the board rather than through a process of selective reprioritization. According to Dr. Collins, each of NIH's 27 institutes and centers will be cut by 5.1 percent, so research in areas such as cancer, heart disease and diabetes will be hit equally hard. "We don't even have the flexibility to make those difficult choices amongst those," he said recently, "But everything will take a hit."[3]

              IMPACT:

  • Estimates are that NIH will fund approximately 2,300 fewer research grants in FY 2013 due to the sequester.[4]
  • Institute directors will have flexibility within their budgets to decide how to distribute the cut among programs such as single-investigator grants, centers and intramural research.
  • Per Secretary Sebelius, "actual funding reductions will depend on the final mix of projects chosen to be supported by each Institute and Center within available resources."[5]
  • Each NIH Institute and Center (IC) will assess allocations within their portfolio to maximize the scientific impact.[6]

Impact of NIH cuts on the economy. The ripple effect of the cutbacks in federal funding for academic institutions will spread and be felt across regional economies.

              IMPACT:

  • A 5.1 percent sequester is estimated to cut the total number of jobs supported by NIH extramural spending by more than 20,500 and reduce new economic activity by $3 billion.[7]
  • Since each research award supports up to seven research positions, several thousand jobs could be lost.
  • The reality of academic research is that many projects would be difficult to pursue at reduced levels and would need to be canceled, putting prior year investments at risk.[8]

Impact over the longer term. Former NIH Director Dr. Elias Zerhouni recently reflected on what the impact of the sequester could be over the coming years. According to Zerhouni, the deep impact and sudden onset of the sequester would be profound given that research is not an activity that can be "turned on and off from year to year." Said Zerhouni: "Because the most impacted are the young, new investigator scientists, there could be a generational gap created. Grants will be worth less." Dr. Zerhouni suggested one option may be for the NIH to eliminate the inflation increase or cut every grant by two to three percent in an effort to award as many grants as possible. [9]

Far from being resolved, the decisions of how the sequester cuts will be realized within each institute have yet to be finalized. Opportunities for clients to participate at the institute level remain, and we continue to encourage active and positive engagement with institute and center leadership to ensure the best results achievable as these difficult decisions unfold.

 

[1]The sequester originated from the Budget Control Act of 2011 and is the result of the 2011 Congressional "Super Committee's" failure to craft a deficit reduction plan that would reduce the federal budget by $1.2 trillion over the next decade. In the absence of specific savings from the Committee, the automatic sequestration cuts would kick in. Despite a two-month delay of the sequester, passed via the American Taxpayer Relief Act on January 1, 2013, Congress and the Administration have been unable to negotiate a budget deal to replace the cuts of the sequester.

Sequestration impacts programs across the government—defense programs, non-defense programs, and Medicare provider reimbursements— reducing spending in each area by 7.7 percent, 5.2 percent and 2 percent respectively for the current fiscal year. Sequestration applies to all federal programs not specifically exempted by Congress in the Budget Control Act of 2011. Exempted programs include:

  • Social Security benefits
  • All Veterans Affairs Department programs
  • Federal pension payments
  • Interest payments on the national debt
  • Food stamps
  • Joint federal-state programs such as Medicaid
  • Various welfare programs
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