Universities will not Take a Huge Hit from Sequester Cuts
April 5, 2013 Leave a comment
According to a recent report from Moody’s, federal budget cuts that will occur as an effect of the sequestration will not have a huge impact on public universities. The majority of American universities and nonprofit organizations will “face only minimal effects’ from the budget cuts, according to a Moody’s Investor Service report. Just 1 percent of institutions, which are mainly stand-alone research institutions, are at risk. This is due to the lack of revenue diversity, which can bring in room-and-board feeds, tuition, etc. At the most, these organizations will lose about 3 percent of their revenue during the first year of the sequestration.
“There are a lot of careers on the line, a lot of disappointed young researchers and older researchers who were used to certain success rates on their grants,” he said. But “we don’t read this as any kind of major loss of faith in research universities. It’s more a function of the difficult choices that government faces.”
Moody’s analyzed the impact of the sequester on the universities from a risk perspective, and believe that there is nothing to worry about.
“We don’t make any statements about whether the government policy on funding is a good idea,” said John Nelson, Moody’s managing director of the health-care and higher-education rating terms. “We’re just saying that universities have a lot of adaptable abilities, and from the perspective of ‘Are bondholders going to get their money back?,’ this is not a serious threat to them.”