Office of the Vice President for Global Communications

Friday, March 1, 2013

What does sequestration mean for U-M?

Unless a last-minute deal is struck in Washington, D.C., a set of automatic federal budget cuts known as “sequestration” will begin to go into effect today.

How might sequestration affect U-M? It may take more than a month to fully understand the impact.

Even though cuts begin to take effect today, federal agencies whose budgets have been cut now need to implement those cuts, and the impact will trickle down to U-M over the coming weeks.

Here is a summary of what is known now:

Research

About 62 percent of U-M’s research budget, or $795 million in fiscal year 2012, is sponsored by the federal government. Depending on how federal agencies implement sequestration cuts, U-M could receive tens of millions of dollars less in federal grant funding than current levels — perhaps as much as $40 million. Current grants could be trimmed, and competition for new or renewed funding may intensify.

But much is still unknown at this stage, and decisions on the timing and distribution of the announced cuts will vary across federal agencies. Agencies have flexibility on how to distribute budget cuts within their individual divisions and institutes. As a result, the timing and mechanism for those cuts to ripple down to individual grant-holders is not known.

Says Vice President for Research Steve Forrest: “This could be quite painful for us, but much will depend on how the agencies decide to implement the cuts. We have been monitoring this situation very carefully over the last several months, and schools and colleges across U-M have been assessing how they might be able to minimize the impact of any changes.”

Although the delay of sequestration from its original start date of Jan. 1 to March 1 means agencies will need to implement deeper cuts for a shorter period of time, some have already altered grant decision-making in recent months in anticipation of possible sequestration.

Patient care

Medicare reimbursement to all health care providers, including the hospitals and physicians of the U-M Health System, is subject to reduction under the sequestration rules. The Health System has been planning for a potential sequestration-related cut — as much as $10 million —in its budgets since last year.

Sequestration is among the many factors that are guiding careful budget management across the Medical School and the Hospitals & Health Centers at this time.

Other federal health care reimbursement, including Medicaid and VA care, is not subject to sequestration.

Work force training

A number of programs that help train various types of professionals and support U-M education and internship programs may face cuts. Specifics on the nature and extent of cuts are not yet known.

Student financial aid

Sequestration may affect support for the federal work-study program, which students rely on to finance their education. Many U-M offices employ student workers.

Students with current work-study assignments and funding will not be affected if sequestration takes effect, but the amount of funding for work-study positions in the fall 2013 and winter 2014 terms may be affected. More will be known as the year progresses.

Supplemental Educational Opportunity Grants also will be cut; specific information about the extent of cuts is still unknown.

Under sequestration, Pell Grants are protected for one year. For all types of federal student and parent loans, loan origination fees will increase and service levels at loan processors will likely decline.

Travel, study abroad and international visitors

The U.S. Department of Transportation has indicated that airport security and air traffic control staffing will be impacted, so faculty, staff and students who are preparing to travel should pay careful attention to messages from their airline and the Transportation Security Agency about schedules and wait times.

No details are yet available about how passport and visa operations at the U.S. State Department may be impacted, but it is always wise to plan ahead for obtaining necessary passport renewals and international visas.

Meals on Wheels

For nearly 40 years, the U-M Health System has received federal funding and private donations to run the Ann Arbor Meals on Wheels agency. Every day, volunteers deliver nutritious hot meals made in the hospital kitchens to hundreds of homebound individuals in the area, including the elderly and disabled. The federal funds to support this program will be cut substantially under sequestration. To make a gift to offset these cuts, visit http://umhealth.me/MoWdonate.

Further updates on these and other impacts will be shared.