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A CR Gets Passed … But Has Fiscal Implications

October 1, 2016

As we predicted several weeks ago, the negotiations on the Continuing Resolution dragged on, despite widespread agreement on the key item: funding until December 9 at the FY 16 funding level. With a CR in place, the FDA — along with other government agencies — should be able to operate smoothly for the next 10 weeks. However, this comes with a cost: long-term planning is disrupted by the lack of year-long funding and new projects (depending on how defined) may be delayed because they are not “continued” from FY 16.

Despite media reports to the contrary, the status quo has not been fully maintained. Rather than providing funding at the FY 16 level, the CR actually calls for spending at a level that is roughly 0.5 percent less than the FY 16 level. This is to conform with total spending allowed under the FY 17 budget ceilings. The exact language of the across-the-board (ATB) reduction can be found at the bottom of page 125 of the legislation.

Over the 10-week period, the reduction will cost FDA about $2.6 million, an unpleasant surprise for an agency that can ill-afford to have its budget cut, even by a small amount. NIH (by my calculations) will lose about $30 million during the same 10-week period. Were the reduction to extend for the entire fiscal year, it would produce a $13.5 million hit on the agency. The comparable figure for NIH would probably be about $150 million. No one knows if the reductions will extend for the whole year, so these are just extrapolations.

What is driving things now and may drive things again after December 9 is the need to “stay within the FY 17 budget ceilings.” Unless Congress increases those ceilings, there is a risk that ATB cuts may continue to be needed. Under one of the more likely scenarios, FDA receives the increase that the appropriations committees have under consideration (+$30 to $40 million), but then has to give some of it back as part of the ATB cut.

Under the budget act amendments, if the Congress appropriates more than the specified spending ceiling, a sequestration goes into effect so that every account is rateably reduced until spending comes under the ceiling. To avoid sequestration, Congress can just act on its own to do the same thing — mandate ATB cuts. This could be a significant difference for FDA. Our best understanding at this moment: user fees are affected by sequestration, but not by ATB cuts.

In sum, if an ATB cut is necessary to keep the 10-week CR spending under the budget caps, it is possible that an ATB cut may be needed post-December 9 to stay within the budget ceilings. The money lost by individual agencies, such as FDA, will be real and likely to delay important programming and/or important hires.

Note: This week’s Analysis and Commentary was written by Steven Grossman, the deputy executive director of the Alliance for a Stronger FDA.

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