URBANA — The last-minute agreement to avoid the "fiscal cliff" spared a popular college tax credit and averted costly Medicare reductions, but it merely postponed across-the-board spending cuts that could cost the University of Illinois $65 million next year, officials said Friday.
The bill approved late Tuesday by Congress avoided tax hikes for all but the wealthiest Americans, those earning more than $400,000 a year. But it put off sequestration — automatic cuts originally scheduled to take effect at the end of 2012 if Congress failed to reach a budget deal. The new agreement gives lawmakers two months to cut $6 billion from the federal budget.
"The big picture for the university is that this threat didn't go away," said Jon Pyatt, director of federal relations for the UI's Office of Governmental Relations. "We're kind of back where we were two months ago."
The sequestration calls for 8.4 percent spending cuts for most programs, including many federal research agencies.
UI officials estimate that could mean $46 million in cuts to UI research grants from the National Science Foundation, National Institutes of Health and other major research agencies. That doesn't include $12.38 million in research funding and other miscellaneous appropriations from the National Endowment for the Arts, Environmental Protection Agency, Department of Labor, Department of Transportation, Department of Justice, Homeland Security, Library of Congress and other agencies, said UI spokesman Tom Hardy.
In addition, sequestration would cut about $6.8 million in financial aid programs for UI students, money that now goes toward work-study jobs and Supplemental Educational Opportunity Grants, Pyatt said. They benefit the "most at-risk students" whose families can't afford any contribution toward their educations, he said.
"College has got to be affordable for everybody," Pyatt said.
The automatic cuts would also mean a loss of $1 million to $2.5 million annually for the UI health system, which relies financially on federal health insurance programs for the poor or elderly. A majority of the patients at the UI Hospital and clinics are covered by Medicaid or Medicare, and Medicare funding also subsidizes the cost of educating UI medical students, Pyatt said.
The Jan. 1 budget agreement did include a five-year extension of the $2,500 American Opportunity Tax Credit, which helps families pay for college, Pyatt noted.
And it put off a proposed reduction in Medicare reimbursements, which is important to the UI's hospital and health services system, and extended the Farm Bill for another nine months, UI President Robert Easter wrote in a message to UI employees early Thursday.
Easter was in Washington, D.C., on Thursday with Chancellor Phyllis Wise to meet with newly sworn in legislators and other members of the Illinois congressional delegation. In his letter Easter said he would urge them to avoid "indiscriminate cuts in the sequester so that we may continue to make wise investments in education and scientific research that will help grow our state and national economies."
Pyatt was somewhat optimistic after those meetings.
"I think there's a desire and a hope for more pragmatism in the House," he said, noting that a number of Illinois Republicans voted for the Jan. 1 agreement.
Republican Rodney Davis, newly elected representative from the 13th Congressional District, said he feels a spirit of bipartisanship among his fellow freshman legislators.
He said the fiscal cliff agreement "punts major decisions down the road" without solving the debt problem.
"We're just prolonging the agony," said Davis, who campaigned against "artificial deadlines" and across-the-board spending cuts.
"We need to prioritize the way Washington spends money so people don't mind sending their tax dollars" to the government, he said. "We have to invest in research and development as a country."
He called for a "serious" debt-repayment plan and said the best way to bring down the deficit is to encourage economic growth, in part by simplifying the tax code and giving businesses more certainty about tax rates. He also said spending reductions are inevitable.
"We were sent here to make some tough decisions. We won't make everybody happy," he said.
Estimated impact of budget sequestration cuts on University of Illinois
Major research funding: $46.2 million, including the following:
— National Science Foundation: $10.9 million
— National Institutes of Health: $19.37 million
— Department of Defense: $5.97 million
— Department of Energy: $4.8 million
— Department of Agriculture: $3.23 million
— Department of Education (research only): $1.4 million
— NASA: $578,000
Student financial aid: $6.85 million
Other federal funding:* $12.38 million
Total: $65.5 million
Source: University of Illinois
*Includes miscelleanous grants/funding from NEA, NEH, EPA, Library of Congress, Departments of Labor, Justice, Homeland Security, and more.