How will the sequester affect Santa Cruz?
Uncertainty is the name of the game for anyone writing a local program’s 2013-14 budget now that sequestration has taken effect. Cuts amounting to $1.2 trillion over 10 years went into effect on March 1.
The cuts amount to 5 percent of federal contributions to all domestic programs and 7.8 percent of Department of Defense funds. The fact that the cuts are scheduled to hit the 2012-13 year make matters even worse, says Adam Russell, press secretary for Congressional Representative Sam Farr.
“They have to deal with these cuts to their yearly budgets, but we are already five months through the fiscal year,” says Russell. “So in some cases they have to make a yearly cut (of 5 percent) over the span of seven months.”
These cuts were designed during stalled congressional negotiations in 2011. The idea was that, with domestic programs staring down equal cuts of 5 percent—and slightly deeper gouges of 7.8 percent targeted at the Department of Defense—congress would find a solution to the federal budget deficit, which now stands at $901 billion for the upcoming year.
That didn’t happen. Now the cuts are in effect, with no one outside a small number of congressmen knowing how they will play out.
“No one disagrees that we need to pay off our national debt,” Russell says. “But Republicans are insisting we do it in 10 years, which is too quick and it’s reckless.”
He says that the three counties represented by Farr (Santa Cruz, Monterey and San Benito) receive about $3 billion annually in federal funds collectively—including Social Security. More than a third of that amount goes to Monterey County because they have several military facilities, such as the Post Naval Graduate School campus in Monterey.
Santa Cruz’s portion is strictly for what are called “formula” items. These are social programs like schools and health programs, and research projects at UC Santa Cruz.
UCSC could be hit hard by cuts to the National Institute of Health and the National Cancer Institute, for instance.
The university’s Baskin School of Engineering relies on these agencies for about two thirds of their total research funding, including about $10 million per year to carry out the school’s role of organizing data in the Human Genome Project, says Dean Art Ramirez. But he says it is anyone’s guess as to how those will play into day-to-day life on the campus.
“It really depends on how cuts are made,” says Ramirez. “If they cut one out of every 10 grants, then they may hold off on new experiments to keep existing ones going.”
The UC system has been dealing with budget cuts at the state level for years and Ramirez says they have been increasing dialogue with private companies and foundations to keep their doors open and work rolling forward. However, this approach has limits. Because companies have the responsibility to make profits for their shareholders, they cannot simply make philanthropic donations to academic programs.
“We are moving into [an] uncharted area,” he says. “Companies have an interest in having educated students who can perform jobs using the latest technologies, so many—like eBay—have scholarship programs. Companies will give to programs that may benefit them in a societal way.”
This is helpful with short-term research, such as developing the a new processor for the next smartphone, but offers little in long-term research into fields that may not even be known yet.
“Government funding is supposed to work in a catalytic role,” says Ramirez. “Companies don’t really have a role in long-term research.”
Genome research has so far identified 1,800 DNA codes that make the carrier more susceptible to diseases, including many forms of cancer. The current hypothesis is that people without these genes may never get cancer without a drastic transformation. This type of information has no immediate profitable use to companies yet, so government funding is essential.
On the county government side of the looming cuts, social program managers—although just as much in the dark—are doing their best to update their departments on the latest news as they learn more. A memo sent out by County Administrative Officer Susan Mauriello listed some expected casualties, mainly to county health programs and probation services, but added a disclaimer about the vagueness of any predictions at this early stage.
“The local impacts are difficult to determine at this time due to the lack of details from state and federal governments,” reads the memo. “Specific information will be made available as details are released. In addition, the length of the sequester could impact the FY 13-14 budget.”
The White House Office of Management and Budget has advised her office to prepare for cuts up to 9 percent for non-military funds, although the amounts being floated by Congress are about 5 percent.
Bill Manov, Santa Cruz County Alcohol and Drug administrator, is one of the people trying to prepare for a fall off the so-called “fiscal cliff” while surrounded by a fog of missing information.
“The numbers are changing daily from the feds as they are learning how to digest this,” says Manov. “The cuts to local drug and alcohol block grants look to be $92,000 for this year.”
This amounts to treating about 28 fewer people in a year’s time. Dealing with a year’s worth of cuts with only six months remaining in their fiscal year, however, makes that drop off slightly trickier.
“The way it often works in government is that we may be able to find a short-term patch to make something work this year, but those often run out,” says Manov. “We are going to do our best to avoid layoffs and mitigate long-term impacts. It’s hard to say.”
Child welfare and Worker Investment Act funds (for career training) could be cut $1.2 million. Manov’s office works closely with these programs while helping an addict get his or her life back together. He has not had a chance to work out the details of how they will work to ensure the health and safety of a patient’s child during the course of treatment.
Ramirez says that the lack of direction is a natural consequence of how government agencies write their budgets.
“You have all these decisions being made by Congress and then these agencies deciding how to deal with it,” he says. “As a government agency you can’t budget anything on the expectation of funds, and we were all told to wait until March 1.”
Farr is unable to pick one area of the cuts he finds most painful.
“That’s like being asked to say which of your kids you want to get rid of,” he says.
He is most fearful that the tentacles of the cuts are stretching into the general economy, which has barely recovered form the 2008 financial crash with just 2 percent annual growth last year.
“The tragedy, the stupidity of this way of reducing expenditures, is the harm to the economy,” says Farr. According to him, the layoffs that could result from these cuts could exorcise one half of 1 percent of activity off the economy as a whole, reversing a quarter of the ongoing recovery.
In a county heavily dependent on housing prices continuing to climb and people having disposable income, this could take a toll on Santa Cruz businesses. Hotels, restaurants and other businesses that people patronize in their free time could suffer.
Less grim, says Farr, is that the NIH and others who distribute research grants will be able to manage the cuts on their own without interference from Congress. This makes it likely that new projects will be delayed in favor of keeping existing ones rolling.
“This is another one of those stupid cuts, because Germany, Japan and China are not going to cut back,” says Farr. “This could set back American research two years.”