Archive for Monday, December 10, 2012

Fiscal cliff’ could cost millions for KU, students

December 10, 2012


Millions in student-loan costs, clinical cancer trials, research into treatments for autism and Alzheimers, who-knows-how-many jobs at the city of Lawrence's largest employer — all these could be at stake at Kansas University as the calendar turns to 2013.

Should the nation tumble over the "fiscal cliff" as January begins, the potential effects on KU during 2013 add up to tens of millions of dollars.

"Fiscal cliff" is the nickname that's been stuck to the federal budget sequestration — billions' worth of mandatory spending cuts and tax increases — that will go into effect Jan. 1 if Congress does not reach a deficit-reduction agreement by then. To major research universities like KU, where millions of federal dollars each year flow to students and faculty in the form of financial aid and research grants, it's a particularly perilous prospect.

Should Congress go the entirety of 2013 without reaching a deal, the effect on KU would be staggering. Tim Caboni, KU's vice chancellor for public affairs, said officials estimate the potential annual damage at $27.1 million in additional student-loan costs and $18.1 million in lost research funding between the Lawrence campus and the KU Medical Center in Kansas City, Kan.

"That is a tremendous hit to the university," Caboni said.

That said, if midnight strikes on Dec. 31 and no deal has been reached, it won't exactly signal panic alarms on the KU campus. Steve Warren, KU's vice chancellor of research and graduate studies, said the severity of the effects would depend on how long a sequestration lasts.

If the cuts stretch on for only a month or two, he said, the university could largely function as it normally does. It could dip into cash reserves to tide over federally funded research projects and the jobs and student assistantships they fund.

"It'll be a weird and maybe challenging couple of months for us, but we'll come out of it OK," Warren said.

So if political pressure ramps up and forces congressional leaders to get a deal done by around the end of February — something Warren said many onlookers think is likely — the effects would likely not be calamitous.

But if the situation stretched out much longer than that, it could be a different story. Research projects could slow or stop. Graduate students might lose assistantships that pay their tuition and provide them stipends to live on. Research assistants or others could lose their jobs. At the Medical Center, cancer patients who could have had access to clinical trials could be cut off.

"It would get really ugly and really sad, frankly," Warren said.

And then there would be student loans. Federal direct unsubsidized loans would tack on an additional origination cost of about 0.1 percentage points, and federal direct PLUS loans would gain an extra cost of about 0.4 points.

Altogether, the potential annual cost for all KU students would total $27 million, Caboni said.

"We don't think it's in the best interest of preparing the trained young people we're going to need to attract business to the state of Kansas," Caboni said.

The effects on research are a bit tougher to pin down.

About $215 million in federal research funding flowed into KU and the medical center during the 2011 fiscal year. That funds about 85 percent of the university's research.

The federal agencies that grant such funds — the National Institutes of Health, National Science Foundation and Department of Education primary among them for KU — would be forced to cut their research budgets by about 8.4 percent.

So a corresponding cut to KU's research funding would be about $18 million.

But agencies haven't announced how exactly those cuts would affect their funding. Would all research projects face an across-the-board cut? Would some projects continue freely, while others are halted?

The answer's not clear, Warren said.

"I don't know if they know," Warren said, "but if they know, they're not saying."

KU officials' best guess, he said, is that the first thing to go will be the awarding of new grants. That could end as soon as the calendar hits January, or perhaps even this month as agencies brace for impact.

That could put the brakes on a successful run of landed grants for KU researchers this fall, including the largest single grant in the university's history.

If the sequester stretches on, then existing grants may see cuts.

A typical research grant, Warren said, might pay for the tuition and stipends for a couple of graduate student assistants, part of a faculty member's salary and perhaps provide jobs for one or two other research assistants. Reserve funds might allow the university to bridge those people along if a sequester lasts a month or two.

But any longer than that, and it could spell danger.

"It would not just stop research," Warren said. "There would be people who'd lose their jobs."

Wayne Sailor, a professor of special education, is administering that largest grant ever awarded to KU: $24.5 million from the U.S. Department of Education over five years to create a center aiming to change the way children with disabilities are taught in the country's schools.

He said he's waiting to see if Washington can solve the problem before sequestration sets in, and wondering how it might affect the project. Some observers say education grants would be largely safe, he said; others say they could be first on the chopping block.

"I'm worried about it, clearly," Sailor said.

Cuts to such a grant could ruin a great deal of planning and affect many people's lives, he said.

As a result of such risks, the university is working this month to push congressional representatives to work for a sustainable budget solution.

Caboni spent this past week meeting with the Kansas congressional delegation in Washington, and the university's full-time federal lobbyist is working on the issue, as well.

"For the next four weeks, this is where all of our time, effort and energy will be spent," Caboni said.

KU Chancellor Bernadette Gray-Little joined with Brady Deaton, chancellor of the University of Missouri, to write an op-ed piece published in the Kansas City Star this week spelling out the risks posed by the fiscal cliff to students and research universities.

"The best way to solve our long-term debt challenge is by creating an economy that has both the educated workers and new discoveries that lead to sustained growth," they wrote.

Caboni said KU will push representatives to reach an agreement that considers the outsize role that entitlement programs play in the federal budget picture compared to discretionary spending, which is the pool from which research and student-loan funding comes. The pitch is that those funds lead to innovation, development in industry and healthcare and jobs.

But Warren said that any long-term solution would be preferable to kicking the can down the road for another year, even if it included cuts to research budgets.

"If we knew what to plan for, even if it led to long-term cuts in some of the research agencies, at least it would be orderly and we could plan for it," Warren said.

At the very least, he said he believes a doomsday scenario — sequestration lasting for a year or more — is unlikely, as the economic damage would force Washington to act.

"We believe that, at least, if any of it occurs, saner minds will somehow prevail," he said, "and the worst case will be avoided."


Richard Heckler 1 year, 4 months ago

BTW Kansas has the 9th highest sales tax in the nation. Lawrence must be in the top ten then add the "secret sales taxes" into the scenario...

Talk about student unfriendly...

Talk about business unfriendly...

Talk about senior citizen unfriendly...

Talk about unfriendly for shoppers...

Talk about unfriendly...


rockchalk1977 1 year, 4 months ago

Even without a deal, taxes are still going up Jan 1 thanks to Obamacare. Investment income for the "evil rich" will be subject to a new 3.8% tax and regular income will be hit with a .9% Medicare surtax. Obama's takeover of healthcare also imposed the 2.3% tax on medical devices. This tax could push us off an innovation cliff, costing as many as 43,000 jobs. In addition, the health insurance industry is already raising alarm bells about a tax on insurers taking effect in 2014. The cost will be passed onto the consumer, leading to another $2,000 in premium costs over the next decade for the average individual purchaser. If you think healthcare is expensive now, wait until the government takes over!


Liberal 1 year, 4 months ago

It is going to be bad when the education bubble bursts. The institutions have done it to themselves. It is going to come crashing down, just like tech, Residential Real Estate and soon Commercial Real Estate.


FalseFlag 1 year, 4 months ago

Here a flag that tax payers wish were false.

The total number of Americans on food stamps in September was 47,710,324, according to the Agriculture Department. The average recipient was collecting $134.29 per month.

Hmmm... That works out to about $77 billion a year.

In the Great Correction era, food stamps are what get all the publicity when it comes to federal poverty programs. The growth looks scary-big on a chart, and there's a visceral quality to the notion of Americans gathering at a 24-hour Wal-Mart at 11:45 p.m. the last night of the month... waiting for their EBT cards to be reloaded at midnight

Medicaid. Enrollment has swelled from 49 million in 2008 to 56 million today. Tab: The feds' share was roughly $240 billion in fiscal 2012 and is set to explode; 16 million more Americans will be added to the rolls by 2019 under "Obamacare"

Extended unemployment. Two million people collect these benefits, first enacted by President Bush in 2008. These are straight-up transfer payments that kick in after the first 26 weeks of benefits -- paid for by employer/employee premiums -- run out. These benefits are due to expire at year-end and have thus gotten tangled up in all the fiscal cliff sturm und drang. Tab: $44 billion if extended for another year

Social Security disability. The number of Americans collecting these benefits has more than doubled... from 4.9 million in 2009 to 10.8 million as of last August. Some of these recipients began collecting when their extended unemployment ran out. Tab: $190 billion in fiscal year 2012.

Obama is bringing the best out of people.

Into this dizzying and depressing array of numbers, we add one more: $42 billion. That's the amount of money generated by letting the "Bush tax cuts" expire on families making over $250,000.

The figure we've cited up to now is $70 billion. But buried in a Congressional Budget Office report last summer was the revised $42 billion. (In theory, that number would grow steadily to total $824 billion over 10 years. Right.)

Add up the total spending on food stamps, Medicaid, extended unemployment and Social Security disability... and you get $551 billion. The $42 billion extracted from "the 1%" (more like 3%) would cover 8 cents of every dollar of spending under those four anti-poverty programs.

Obama is a false flag of an actual President of anything.


Clickker 1 year, 4 months ago

Looks like the folks who voted for Obama are going to get what they voted for. Whats the problem?


patkindle 1 year, 4 months ago

i assume the next obama stimulus will be to simply cancel all of the student loans so that will put more money back in the good old usa.


electedface 1 year, 4 months ago

Student debt is stunting the growth of the economy. Student loans have increased by 275% over past decade. As the next generation graduates from college, they are plagued by insurmountable debt that places demands on their income, limiting their ability to spend their earnings in ways that stimulate the economy.


rockchalk1977 1 year, 4 months ago

A huge point in contention between Obama and Boehner in the fiscal cliff negotiations is raising tax rates on the top 2%. However in 2011, candidate Obama said we can get $1.2 trillion in revenues without raising tax rates.

Now in 2012, Obama suddenly moves the goalposts once again. What has changed? Obama continues to play political games at the expense of our economy and KU students. No wonder the stubborn kicking donkey is the symbol for the Democratic Party.


Darin wade 1 year, 4 months ago

"Demo...or Republican...poor or rich, we all Contribute to the nations fiscal cliff"


Darin wade 1 year, 4 months ago

Fiscal cliffs are yellow lights to your economy Which means there is hope.

LACK OF PLANNING.... Fiscal preparedness.

These are leftovers of the recession in your Economy.


just_another_bozo_on_this_bus 1 year, 4 months ago

What's described in this article is precisely what would happen if Republicans could impose the austerity hysteria they advocate, with or without the so-called "fiscal cliff."


Steven Gaudreau 1 year, 4 months ago

D What rate are student loans at today? I paid mine off about 25 yrs ago but I think buy the final year I was paying 7%. Interest jumped after I graduated per agreement and the rate increased every few yrs. .05% is not much a deterrent.


FalseFlag 1 year, 4 months ago

More fear mongering false flags from people good at promulgating diatribes.

Millions in student-loan costs, clinical cancer trials, research into treatments for autism and Alzheimers, who-knows-how-many jobs at the city of Lawrence's largest employer — all these could be at stake...aahhhhhhh! we're all going to die!!

lol...don't forget massive floods and raging uncontrollable fires...


JohnJacob 1 year, 4 months ago

The Democrats don't mind playing politics with this, because it's exactly what they want. Tax hikes, etc. The Republicans need to step up here and stand up for what they want. Mr. Forbes is the only one who knows how this should be handled.


Bob Forer 1 year, 4 months ago

The repugs lost their fight to make Obama a one-term president. If they keep up their obstructionist methods they will be in a world of hurt come the mid-term elections. I think many citizens are sick and tired of their methods.


Gandalf 1 year, 4 months ago

And all courtesy of the party of no!


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