Iowa could see jobs disappear and lose millions in funding if automatic spending cuts go into effect on Friday.
The state report released by the White House has University of Iowa officials and local experts divided on the potential effects of the so-called impending sequestration.
“Despite all this doom and gloom, not all of it is going to happen on Friday,” said Tim Hagle, a UI associate professor of political science. “Look, Friday is going to come, and the sky is not going to fall.”
Sequestration is rooted in the 2011 Budget Control Act passed during the debt-ceiling debate. The agreement raised the debt ceiling in exchange for $1.2 trillion in spending cuts. The debt ceiling is the total amount the United States can borrow to meet its existing obligations. However, the committee whose responsibility it was to implement the cuts failed to reach an agreement, triggering automatic cuts over the next nine years, including $85 billion over the next seven months.
According to the report on Iowa, financial aid is one area that could hit the UI — 2,370 fewer students would receive aid. However, while Pell Grants are exempt from potential cuts, federal work-study programs are not. Work-study, for example, could be available to 1,020 fewer students.
“You’re squeezing state budgets in the way that the sequestration would; it puts pressure on states,” Jason Furman, principal deputy director of the National Economic Council, said on a conference call Monday. “What some states will do in turn is squeeze some things they do, and one of the biggest uses of any state budget is public education.”
The UI would also see a large effect of the sequestration in research, which one official said could include $30 million in cuts.
“March 2 life is radically different,” said Dan Reed, the UI vice president for Research and Economic Development. “Some pain will manifest itself in ways people may not necessarily expect.”
Reed said everyone at the UI could feel the indirect effects of the cuts because the university budget “touches us all.”
John Keller, the dean of the UI Graduate College, said the biggest aspect he is waiting for is seeing what the direction to take with the cuts, which would be rolled out in the weeks following March 1.
“We’re waiting with bated breath in terms of the direction,” he said. “I don’t want to cause too much alarm, and we’re planning on several different scenarios.”
Keller said the Graduate College could potentially be forced to reconsider the construction of some programs and have officials find funding to help current students finish their programs.
Hagle said he believes a fix will come for the problem before any drastic effects are felt. However, one economic expert believes the cuts amount to “poisoned pill,” which could result in an increase in unemployment.
“The economy is on the upswing and crawling back up,” said Bülent Uyar, an associate professor of economics at the University of Northern Iowa. “All of the sudden, we start slashing the budget in indiscriminate manner … may cause unemployment in foreseeable future.”