Fiscal cliff deal could have impact locally
Published: Wednesday, January 2, 2013 at 9:39 p.m.
Last Modified: Wednesday, January 2, 2013 at 9:39 p.m.
After weeks of impassioned fiscal cliff negotiations, congressional Democrats and Republicans made an uneasy compromise this week that would delay deep budget cuts for two months.
Local entities ranging from the University of Florida to the city of Gainesville will be monitoring the debate in the coming weeks, as the compromise could impact local government in various arenas as well as UF and others. The deal could impact research to transportation in particular, local officials said Wednesday.
For the University of Florida, research funding is its key asset at risk.
The university relies on federal grants for its research efforts, said David Norton, vice president for research at UF.
In 2012, two-thirds of its research award funding — about $423 million — came from federal funding, Norton said. UF does well compared to its peers in attracting research dollars, but a significant cut to federal research spending would be hard for UF to handle.
Such funding helps economic development overall, Norton said.
"Many of the technologies and developments start with university research, and it could be something that pays off in a few years or it could be something that's a development that takes a decade or two to have an impact," he said.
Calling research the "seedcorn" for new innovations, Norton noted that investing in such efforts is vital to creating future ideas.
UF will be communicating that message to officials in Washington, D.C., with the aid of agencies that represent higher education interests. Norton noted that UF understands some cuts will occur but is interested in mitigating the level of impact.
Cuts to federal research spending would impact the Gainesville community at large, especially given its recent emphasis on innovative, locally based companies, said Tim Giuliani, president of the Gainesville Chamber of Commerce.
"As we push forward with this innovation economy, research and development is clearly an integral part to that," he said.
Local businesses and their employees also will be affected by the fiscal cliff legislation, which would let a 2 percentage point, temporary Social Security payroll tax cut expire. Middle- and lower-class households would be spared from significant income tax increases, however, while rates for single people making more than $400,000 and married couples making more than $450,000 would increase. There was an expectation that taxes would increase in 2013, and the question was to what to degree, Giuliani said.
"When your take-home (pay) is decreased, that has impacts for small business owners and their employees — especially for businesses that are particularly challenged with the economy," he said.
At the local government level, the city of Gainesville will face no immediate impact on its current level of services as a result of the fiscal cliff agreement, wrote city spokesman Bob Woods in an email to The Sun.
Mayor Craig Lowe cited transportation funding as a concern. Transportation, along with research, are "sound, long-term investments for the future," not just of the local community, but the country as a whole, he said. The city's transportation efforts are often contingent on the level of federal funding it receives. "Well, the bottom line is there will be some projects that we can't do if federal funds are not available," he said.
Lowe said the city would not be "sitting on the sidelines" during the spending debate, but working with its local congressional delegation to help shape federal policy. He plans to work with fellow mayors through the U.S. Conference of Mayors on these issues as well.
Transportation funding is a concern for Alachua County as well. The county doesn't depend on federal money for its core services, but rather uses what federal funds it does get for add-on services that are desirable to have but not vital, Acting County Manager Richard Drummond said. Federal money is more important to its transportation efforts since it can use such funding to construct new roads and related infrastructure such as bicycle paths as well as to cover transit needs.
The impact to transportation projects would be long-term, since plans for the near future have already been funded, Drummond said.
Health care issues also will be part of the spending discussion over the next two months.
Potential changes to Medicare could impact Alachua County by raising its threshhold for negotiating contracts with care providers for inmate medical treatment, Drummond said. Medicare rates are often the benchmark for negotiations with companies, and the county's costs could rise along with those rates.
For Shands at the University of Florida, the fiscal cliff is less of an issue than overarching developments related to the Affordable Care Act, said David Guzick, senior vice president for health affairs at UF.
Congress' fiscal cliff agreement would delay a 26.5 percent cut in Medicare reimbursement for physicians for one year and push another 2 percent cut for the program back two months. But the legislation partially offsets the delay of the cut in physician reimbursements by reducing Medicare payments to hospitals.
Controlling the cost of health care is crucial, Guzick said.
"But the solution, it seems to me, isn't to say, ‘OK, we're going to give doctors more money but we're going to take it away from hospitals.' It's a zero-sum game," he said.
The solution, Guzick said, is to intervene in illness before people need hospital care and to reduce the use of expensive services such as emergency care and inpatient stays.
The eventual details of the federal spending cuts that could impact Medicare or other health-related programs are impossible to guess as new ideas for tradeoffs or solutions arise seemingly every hour, he said.
"But there are so many ‘mights' here," he said. "You never know what's going to happen."
Meantime, the unemployed in Alachua County and across North Central Florida will continue to get financial help once their state jobless benefits end.
Federal unemployment benefits — which kick in once state benefits are exhausted — were slated to end Wednesday. But they were spared when Washington lawmakers reached the "fiscal cliff" settlement late Tuesday.
The fiscal cliff vote ensures that the federal unemployment benefits will be funded for all of 2013. How much Floridians are entitled to was not immediately available. The Florida Department of Employment Opportunity is working with the U.S. Department of Labor to determine whether only those people already receiving Emergency Unemployment Compensation were eligible, or if unemployed people who become eligible during 2013 also will receive the federal funding.
Reader comments posted to this article may be published in our print edition. All rights reserved. This copyrighted material may not be re-published without permission. Links are encouraged.