Fiscal cliff threatens money for Penn State, rest of state

McClatchy NewspapersDecember 14, 2012 

— Ross Hardison occasionally peers over the fiscal cliff and doesn’t like what he sees.

The professor of biochemistry and molecular biology at Penn State University and other colleagues at the university’s Huck Institutes of the Life Sciences rely on federal grants from agencies such as the National Institutes of Health to help fund research they’re conducting.

But these days Hardison, whose genome research is funded by a $500,000 NIH grant, has one eye on the microscope and the other on Washington as automatic budget cuts scheduled to take effect Jan. 2 loom with no deal in sight to avert them. Hardison says he finds himself worrying about whether he’ll receive all or just some of his grant money, and whether he’ll have to lay off some of the paid 30 researchers, lab workers and graduate students associated with his genome project.

“You try to keep the research environment enthusiastic and positive. I’m hopeful that they will push the brakes on before going over the cliff,” Hardison said. “But it’s unnerving because you work hard . . . you’ve done everything that you can and then there’s an artificial thing that someone set up. They (federal lawmakers) came up with this game of chicken.”

The automatic federal budget cuts will be accompanied by tax increases unless President Barack Obama and Congress reach a deal. Federal spending would drop by $109 billion the first year, with automatic cuts for most federal programs amounting to 7.6 percent or 8.2 percent for the rest of the fiscal year.

While much of the attention has been devoted to the Washington drama, less attention has been given to what going over the fiscal cliff would mean to states and entities such as Penn State, which receive hundreds of millions of dollars from the federal government, primarily for research.

“It’s been a missing part of the debate,” said Ann Stauffer, project director of the Fiscal Federalism Initiative at Washington’s Pew Center on the States. “There hasn’t been a lot of data available.”

Beyond Penn State, Pennsylvania officials are bracing for substantial cuts. State Budget Director Charles Zogby recently said a plunge over the fiscal cliff would cost Pennsylvania $300 million in the next fiscal year.

Several significant and popular programs would be among those feeling the blunt of the budget ax:

– Special education funding, which helps serve nearly 271,000 students statewide, would be cut by $33 million.

– The Women, Infant and Children Program – WIC – which helps provide food for 265,000 eligible participants statewide, would suffer a $19 million hit.

– Title I, an academic program that assists 610,000 disadvantaged students across the state, would suffer a $43 million blow.

Based on calculations by Washington’s nonpartisan Tax Policy Center, Pennsylvania’s Independent Fiscal Office estimates that going over the fiscal cliff would raise federal taxes by $536 billion. About $22 billion, or 4.1 percent, would come from Pennsylvania taxpayers.

And a recent study by Penn State’s Institute for Research in Training and Development found that going over the cliff would result in an average loss of 47,000 jobs between 2013 and 2022, with 30,000 of the losses coming from the private sector and 12,000 from government jobs.

“We’re already feeling fiscal pressures on the budget,” said Jay Pagni, a spokesman for the state budget office. “We have rising pension costs, less revenues. Any loss or reduction in federal funding, we may not be able to backfill with state dollars.”

A large institution such as Penn State isn’t immune to the fiscal cliff freefall. Hank Foley, the university’s vice president for research and dean of the graduate school, estimates that cuts in federal research grants would cost Penn State about $50 million.

“How do you cover graduate students who are being paid here with grants and contracts?” Foley said. “For the state of Pennsylvania, looking at the big schools – like the University of Pittsburgh and the University of Pennsylvania – it could be $200 million in research lost.”

In its research activity report for fiscal 2011, Penn State reported receiving nearly $804.8 million in research funding with the federal government providing more than $477 million of the total. The university itself was the second-largest source at more than $142.3 million, industry ranked third at nearly $107.3 million and the state last at nearly $78 million.

A cut in research funding would have a trickle-down effect. Penn State is the largest creator of total employment among nongovernmental entities, according to a 2008 economic impact report. The university’s 44,000 employees pack an annual $805 million economic impact through employee spending, the report by Tripp Umbach & Associates states.

“It’s an understatement to use the words ‘ripple effect,’” Hardison said.

For Foley, trying to figure out what the fiscal cliff’s exact damage to his campus would be and how to prepare for it has been a trying exercise.

“We don’t know how it’s going to happen,” he said. “What we got from the White House was ‘Call your legislator.’ No one is providing us guidance. All we can do is sit and wait.”

Michael Doyle contributed to this story.

Email: wdouglas@mcclatchydc.com; Twitter: @williamdouglas

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