Across-the-board cuts to federal programs known as sequestration became effective March 1, 2013. Virtually all federal programs, including almost all of those of interest to community colleges, are subject to these cuts, although the Pell Grant program is exempt for fiscal year (FY) 2013. This document is designed to provide a brief update of how these cuts might impact your campus.
Sequestration was authorized by the Budget Control Act of 2011 [PDF]. The act mandated automatic across-the-board cuts—or sequestration—if Congress failed to act to reduce the federal deficit by $1.2 trillion over the next 10 years. Since Congress did not pass the required deficit reduction legislation, sequestration was triggered. The sequester was originally scheduled to begin on January 2, but was delayed for 2 months, until March 1, as part of the fiscal cliff deal reached earlier this year.
Congress and the Administration continue to discuss the possibility of providing some flexibility to individual federal agency heads to shift funding as part of the final FY 2013 continuing appropriations. This legislation must be extended by March 27. However, while efforts continue to replace sequestration with a more balanced approach to deficit reduction, pressure is on to finalize the current fiscal year funding and move to FY 2014 funding.
Virtually all nonexempt, nondefense discretionary programs are subject to an across-the-board cut of 5% in the current fiscal year (FY 2013) and nonexempt, nondefense mandatory programs are subject to a cut of 5.1%. These cuts will impact nearly every federal program that touches community colleges. Fortunately, the Pell Grant program is exempt from sequestration this year.
The sequester applies to most U.S. Department of Education (ED) student aid and grant programs, such as Supplemental Educational Opportunity Grants, Federal Work-Study, TRIO, GEAR UP, Title III-A, Hispanic-Serving Institutions, Predominantly Black Institutions, and others. The U.S. Department of Labor’s Workforce Investment Act also will be affected, as will grant programs in other agencies, such as the Advanced Technological Education program at the National Science Foundation.
The full effects of sequestration will not be felt immediately, because most federal education funding is forward-funded, i.e., it becomes available at the beginning of the new award year that begins on July 1.
Sequestration does not alter current grants awarded from prior years’ funding. For example, if your college received a grant in either of the first two rounds of the Trade Adjustment Assistance Community College and Career Training (TAACCCT) Program, it will not be reduced as a result of sequestration. However, sequestration will result in the next round of grants being reduced by approximately $25 million, from the $500 million originally provided.
Sequestration also will impact the operations of the federal government, as salaries, expenses and other administrative expenses are also being cut by the same 5%. Disruptions in the delivery of government services could be significant, especially given the fact that half of the fiscal year has elapsed, making the impact of the reductions that much greater.
The focus on the immediate impact of sequestration has diverted attention from the fact that it also substantially lowers aggregate appropriations caps for defense and nondefense spending each year from FY 2014 to FY 2021 by $109 billion annually. These caps were already deeply reduced once by the Budget Control Act, dramatically reducing federal investments over time. Congressional appropriators have to produce bills meeting these new targets, and, if they fail, automatic across-the-board cuts would occur. The Pell Grant program is not exempt from these potential future cuts.
AACC continues to advocate a balanced approach to deficit reduction that does not disproportionately cut education and job training programs. We will provide guidance and additional details as it becomes available.
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