NACUBO Overview of Sequestration Implications

The National Association of College and University Business Officers (NACUBO) has provided a concise overview of the implications for federal student aid and research programs if the pending sequestration (i.e., automatic budget cuts) approved as part of the federal debt ceiling fight goes into effect at the start of 2013 as currently scheduled. Essentially, depending on the type of program, most of what higher education holds dear in the federal budget (except for Pell Grants) will see either a 7.6% or an 8.2% cut (with defense research programs receiving a 9.4% cut). Economists across the spectrum believe that implementation of the sequestration along with other "fiscal cliff"  provisions set to expire at the end of the year (e.g., the Bush tax cuts, the payroll tax reduction first implemented as part of the American Recovery and Reinvestment Act) would most likely drive the U.S. economy back into recession in relatively short order.

At this juncture, Congress has postponed any action to address the "fiscal cliff" issues until after the November elections. This means Congress and the Obama Administration will have to reach an agreement during the "lame duck" session to at least to postpone sequestration and the expiration of major tax provisions until the new Congress and either President Obama or Romney are sworn into office in January. Both sides are still emphasizing their negotiating positions, though, with any compromise agreement to either "kick the can down the road" or adopt a comprehensive tax-and-spending plan to tackle the nation's budget deficit and overall debt not yet in sight. (Most believe the Simpson-Bowles deficit reduction plan and the bones of the "grand bargain" President Obama and House Speaker John Boehner tried to craft during the debt ceiling fight will form the basis of any comprehensive resolution, either during the lame duck session or in 2013.) Until the fall election results establish which side has the most leverage, assuming it does, serious negotiations and an interim or final plan will wait.