Sequester Cuts to the NIH Budget Look Increasingly Likely

Guest Blog by Luke Bouvier, PhD

The day of reckoning is fast approaching as concerns the sweeping federal budget cuts known as “sequestration,” scheduled to go into effect on March 1.  Originally slated for January 1, 2013, the cuts were mandated by the Budget Control Act of 2011, which was enacted as part of that year’s fight over the increase in the federal debt ceiling.  In the hope that a long-term budget deal would make the automatic cuts unnecessary, their implementation was postponed by the New Year’s Day deal that averted the so-called “fiscal cliff,” but most observers now agree that there is little appetite for a political compromise that could avoid them once again.  On January 24, incoming chair of the Senate Budget Committee Senator Patty Murray (D-WA) released a memo outlining the history of the budget deals reached over the past two years as well as the current state of affairs.  The details are messy, but the consequences for the NIH are clear:  a cut of approximately 5.1% to the current year’s budget, or $1.57 billion, which would be all the more severe in that it would have to be squeezed into the remaining seven months of the fiscal year.

In an interview with Politico last month, NIH Director Francis Collins called the impending cuts “a profound and devastating blow” to medical research, adding that “there’s no sort of lever you can pull and all of a sudden everything will be fine” in the face of a cut of that magnitude.  Collins noted that over the past ten years, the NIH budget has been essentially flat, which means that inflation has whittled away about 20% of its value.  The looming cuts would greatly exacerbate that trend, at a time when cancer research is “just exploding with potential,” Collins said.  “We could go faster and faster; … it’s an incredibly exciting science, but it will go slower.”

Nature reported last week that scientists are already cutting back expenditures in anticipation of the cuts.  Senior officials at the science agencies are under White House orders not to discuss specific plans for implementing the cuts, but the Office of Management and Budget has directed them to minimize the impact of the cuts on their core missions and to give priority to concerns over life, safety, or health.  Nature reports that the cuts to the NIH budget would be spread over all of its 27 institutes and centers, with only its Clinical Center spared in order to avoid putting patients’ lives in danger.  Directors would have some discretion in apportioning the cuts, as long as the total adds up to 5.1%.  Given the uncertainty, the NIH has been paying only 90% of the promised amounts for previously awarded grants; if the sequester goes into effect, the final 10% of these grants would almost certainly suffer a significant cut, leaving principal investigators with difficult spending decisions to make.

As if sequestration weren’t enough, looming right behind it is another impending budget crisis, as the current fiscal year’s Continuing Resolution expires on March 27.  If no budget deal is reached by then, a government shut-down is a real possibility.  And following along close behind that deadline is the expiration of the debt ceiling suspension on May 19, which could lead to a US government default on its payment obligations in the absence of congressional action.

How The Continuing Resolution Affects The NIH Budget– And Your Grant Award

The NIH issued this announcement yesterday:

“The Department of Health and Human Services (HHS), including NIH, operates under a Continuing Resolution (CR) (H. J. Resolution 117) that was signed by President Obama as Public Law 112-175 on September 28, 2012.  The CR continues government operations through March 27, 2013 at the FY 2012 level plus 0.6 percent.

“Until FY 2013 appropriations are enacted, NIH will issue non-competing research grant awards at a level below that indicated on the most recent Notice of Award (generally up to 90% of the previously committed level). This is consistent with our practice during the CRs of FY 2006 – 2012. Upward adjustments to awarded levels will be considered after our FY 2013 appropriations are enacted but NIH expects institutions to monitor their expenditures carefully during this period.  All legislative mandates that were in effect in FY 2012 remain in effect under the CR, including the salary limitation set at Executive Level II of the Federal Pay Scale ($179,700), which was effective with grant awards with an initial Issue Date on or after December 23, 2011 (see NOT-OD-12-034 and NOT-OD-12-035).”

For grant applications that have just been reviewed, look for a delay (possibly lengthy) in funding decision pending the FY13 Appropriation (unless you are lucky enough to have a priority score well within the funding range.) For those in the gray zone (perhaps 7-16%, depending on your funding mechanism and your ESI status), you can expect a lengthy delay in the funding decision. Discuss your specific circumstances with your program officer.

How Will The FY11 Appropriation Affect NIH Funding?

The NIH has issued a notice stating how the FY11 appropriation will affect funding. The Appropriation Act for FY11 allocates $30.9 billion to NIH, which is nearly 1% less than the amount NIH received in FY10 ($31.2B).  As a result, “Modular and non-modular research grants, from all ICs, with the single exception of NCI, will be reduced to 1 percent below the FY 2010 award level.  Inflationary adjustments for recurring costs on non-competing research grants in FY 2012 and beyond will be set at the 2 percent level, calculated based on the adjusted FY 2011 level.”  The policy does not apply to K awards, SBIR/STTRs, and NRSAs. However, “Awards that have already been made in FY 2011 which are impacted by this policy may be revised.”

As for NCI, research grants will be reduced to 3% below FY10 levels. “Inflationary adjustments for recurring costs on non-competing research grants in FY 2012 and beyond will be set at the 2 percent level, calculated based on the adjusted FY 2011 level.” (Does not apply to Ks, SBIR/STTRs, nor NRSAs.)  Again, awards made in FY11 may be revised based on this policy.

NIH anticipates that its ICs will award 9,050 new and competing Research Project Grants (RPGs). It will be up to each IC to apportion its extramural grant money in accordance with their funding priorities. (Future inflationary adjustments for recurring costs on competing grants will be 2%, and awards made in FY11 may be revised.)

New Investigators submitting R01 equivalent awards will be funded at rates comparable to those for established investigators submitting new R01 equivalent awards. NRSAs will get a 2% increase on stipends.