Looming fiscal cliff threatens U. research

The University could face severe cuts in research funding and a shrinking endowment in the near future if Congress fails to reach a deal on the so-called fiscal cliff, which will trigger an array of automatic tax increases and budget cuts on Jan. 1.

The measures result from the failure of the 12-member “super committee” created in the wake of 2011’s debt ceiling crisis to compromise on a plan to reduce the federal deficit by $1.2 trillion between fiscal years 2012 to 2021. In addition to the expiration of the Bush-era tax cuts and shifts in other important revenue mechanisms, the fiscal cliff includes a series of automatic spending cuts — known as sequestration — that will be split evenly between defense and nondefense discretionary spending. Analysts predict that failure to avert the fiscal cliff could trigger a recession that could stop any post-2008 economic recovery in its tracks.

Though not vulnerable to most of the fiscal cliff’s taxation consequences, private universities like Princeton could suffer sizeable losses in federal research funding if sequestration occurs. In fiscal year 2011, almost 75 percent, or $132.5 million, of the University’s sponsored research funding came from federal and state government sources, according to an annual report of the University Research Board and the Office of Research and Project Administration. The National Institutes of Health, the National Science Foundation, the Department of Defense, the Department of Energy and the Department of Commerce provided the bulk of the funding.

These federal agencies could suffer across-the-board cuts that will diminish their ability to disburse current grants or limit the number of grants that they can provide for scientific research in the near future. The magnitude of these losses and the immediate impact of the fiscal cliff on the University’s operations, however, are still unclear.

“I think it’s very hard to say exactly how the University will be affected, and I think some of it depends on how long it takes for Washington to come up with a policy response — whether there’s a short-term failure or whether there’s a long-term one,” said University Provost Christopher Eisgruber ’83, who manages the University’s budget. “If there’s no compromise to avoid the cliff, then there could be effects on all sorts of different revenues.”

Eisgruber noted that an economic recession could diminish the value of Princeton’s endowment, which could in turn affect its yearly budget and financial aid policies for students. The most enduring impact of the spending cuts — and the budget overall — would be on sponsored research.

“We rely on the government to fund the research that goes on in our science and engineering laboratories, but again it’s hard to say what the effects would be, and frankly the sponsored research budget is something that we worry about even in the absence of the fiscal cliff problem,” Eisgruber said.

But Representative Rush Holt, the former assistant director of the University’s Princeton Plasma Physics Laboratory who now represents the Princeton area in Congress, estimates that the University could lose $15 to $20 million in research funds next year if no compromise on the fiscal cliff is reached.

“The University has a large endowment. I don’t know, maybe it has enough push-in that it can bear this,” Holt said. “Even a wealthy university like Princeton, losing $15 to $20 million in a year would be hard to swallow.”

Holt worked at PPPL, Princeton’s largest research facility for alternative energy, from 1989 to 1998. Almost entirely funded by the DOE, the PPPL is especially vulnerable to cliff-related funding cuts and staff reductions.

Holt offered a gloomy prediction on fiscal cliff’s impact on University research overall.

“It will be harmful if it goes as it’s currently structured, and it’s all the more tragic because it’s totally unnecessary,” Holt said. He explained that the fiscal cliff was a “phony crisis” manufactured by factions of Congress for political reasons. While he acknowledged that the national debt is an important issue, “it is not an existential crisis for this country, and it shouldn’t be treated as if it is,” Holt said.

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Dean for Research A.J. Stewart Smith, who manages research funding grants and will leave his current position to be vice president of PPPL next month, shared Holt’s view that the fiscal cliff could have dire implications for research at the University. Although many of the scientific grants awarded to Princeton faculty this year have already been disbursed, he explained that those spanning several years could receive a slight “haircut,” and the percentage of faculty awarded federal grants could shrink in future years if federal agencies suffered sequestration-related losses.

“I’m not an accountant ... but the lion’s share of the funding that comes to Princeton from federally funded research is for people,” Smith said, noting that research salaries for graduate students, postdoctoral students, engineers and faculty members are all affected by the level of federal funding the University receives.

“The only way you can react to a big cut is to reduce the staff. And also, if you can’t handle the equipment in the operation funds, then it’s hard to justify just having people sitting around doing nothing,” he added.

Smith also expressed concern about the competitiveness of American research institutions in an increasingly globalized world. “Will the country just allow itself to lose world leadership in everything?” he asked rhetorically.

University faculty also expressed concern about the impact of the fiscal cliff on their research. Lynn Enquist, the chair of the molecular biology department, said that his research by faculty in his department could be significantly affected by funding cuts to the NIH’s budget.

He also explained that the country was endangering its future competitiveness and scientific progress by defunding research in the present. “If you don’t support research ... you’re just essentially mortgaging your future for some short-term gains,” Enquist said.

Physics professor Daniel Marlow, who is managing a $50-million grant from the NSF for the technical operation of a detector piece for the Large Hadron Collider at CERN, also indicated that the fiscal cliff could affect funding at the University, though he was unsure of the magnitude of the effect.

“What we know is that research will not go up in such a scenario and will probably go down modestly,” he said. But the potential impact of the fiscal cliff on the CERN project is somewhat clearer to Marlow, who acknowledged that, “if the NSF’s budget suffers, then they will need to cut us back.”

“The chances that they would just zero us out are small, but they obviously can’t hand out funds they don’t have and if they suffer a severe budget cutback they will have to cut all their programs,” he explained.

The University’s Office of Government Affairs, the University’s lobbying arm, has conveyed concerns about sequestration in conversations with members of Congress and the White House, according to OGA director Joyce Rechtschaffen. University President Shirley Tilghman also joined other university presidents in signing a letter urging Congress and the President to negotiate a solution to the fiscal cliff. The letter was sent by the Association of American Universities, an organization comprised of 62 leading research universities in the United States and Canada.

Calling sequestration “an undiscerning and blunt budget tool that would substantially harm our nation’s future,” the letter encouraged the president and Congress to find a mutually acceptable compromise that would reduce budget deficits but prevent the indiscriminate cuts of sequestration.

“As national leaders in higher education, we urge you to show America and the world that our country’s political system is capable of solving serious problems,” the letter continued. “The choices will not be easy, but throughout our nation’s history, American leaders have overcome great challenges with difficult decisions and sensible compromises. Please do so again, and do so now.”

But Smith and Holt expressed hope that the fiscal cliff could be avoided through some parliamentary maneuver.

“Everybody in Washington will tell you ... [that] the fiscal cliff will be avoided, but nobody can tell you how,” Holt said. “I’m inclined to believe that it will be avoided, but I can’t tell you how either.”