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NEWS RELEASE

11/28/95

CONTACT: Stanford University News Service (415) 723-2558

Latest action on the federal budget front

STANFORD -- In addition to a firestorm of rhetoric from the nation's capital, the past few weeks have produced a number of developments on the federal budget front, one of which may result in the layoff of 60 to 70 employees at the Stanford Linear Accelerator Center (SLAC).

The largest impact on Stanford thus far in the appropriations process has resulted from the energy and water appropriations bill that has been passed and signed into law. The bill includes the Department of Energy's budget and directly affects SLAC, which is funded by the department.

Although SLAC officials expect their overall funding to increase slightly, and say that construction for the new B-Factory will continue on schedule, they also anticipate a $5 million to $7 million cut in their operating budget which pays staff salaries. Last week SLAC officials announced that they will lreduce the current staff of 1,350 by 5 percent. Center managers are seeking volunteers before issuing layoff notices.

"We have a very sound science program here. But because of the budget restrictions, we must operate on a somewhat smaller scale than we have before," said SLAC Director Burton Richter, who personally announced the layoffs in meetings with the SLAC staff.

In other federal budget developments:

  • Congress has passed and the president has signed a continuing resolution that keeps the government running through Dec. 15.
  • Congress has passed a "final reconciliation bill" that the president has said that he will veto.

"Throughout the budget and appropriations process, university science has been treated very well so far this year," said Dale Tate, university associate director for government relations. "In a way, we are lucky in the appropriations for research because we get to fight the battle every year. That is unlike the case with Medicare where Congress is making major reforms and once they are in place, we are going to have to live with them until another major change comes along," she said.

Unlike the energy appropriations bill, the continuing resolution is unlikely to have a significant impact on the campus, Tate said.

The basic criterion in the resolution is to take the lowest of either the funding levels passed by the House or the Senate, or the level designated in the fiscal year 1995 budget. Programs targeted for elimination by Congress are funded at 75 percent of last year's level.

"I don't think that there will be any appreciable effects on us in the next month," Tate said. "We were terribly concerned in the first round because of the proposed 5 percent cut in the National Institutes of Health budget. But that is no longer the case."

If Congress isn't able to resolve outstanding budget issues before the end of the session, it will be forced to pass another continuing resolution, possibly providing program funding for an entire year. "My guess is that Congress will be working on this until the 22nd or the 23rd," Tate said.

Should Congress' "final reconciliation bill" become law, it contains a number of provisions that would affect the campus. President Clinton has said repeatedly that he will veto it. However, these measures provide some insight into congressional thinking on budget priorities.

Impacts of coming Medicare reform

In particular, the changes to Medicare contained in the reconciliation bill could have major impacts on the Medical Center and Medical School. These provisions could produce up to $121 million in losses over seven years, officials there have estimated.

About $84 million in losses is the result of changes in the way the costs of medical education are reimbursed, an issue that provokes intensive lobbying on the part of teaching hospitals.

The biggest potential problem, according to Tate, is the way that the bill allocates money for Medicare patients who enroll in health Maintenance organizations (HMOs). HMO payments in the bill are based on a formula called the Average Adjusted Per Capita Cost (AAPCC). This formula includes money for indirect medical education, direct medical education and "disproportionate sharing," the term for the percentage of needy patients who are treated. The central problem is that the legislation does not require HMOs to pass this money through to the teaching hospitals that bear the costs.

"We have been arguing since last January or February that this was unfair and that this piece should be carved out and given back to the teaching hospitals." Tate said. "We succeeded in convincing the Senate, which included a provision that this be done in phases. But the House did not agree, so it's not in the final bill."

Such a provision would have only a marginal effect on Stanford because there are still relatively few Medicare patients in HMOs. But as more and more seniors move into HMOs, the Medical School would begin to lose a substantial amount of money, particularly because California is in the forefront of managed care, Tate said.

The teaching hospital lobby did manage to get Congress to include a new $13.7 billion trust fund to support graduate medical education, and that fund would partially offset the anticipated losses. The fund, which would be built up over seven years, would be bankrolled by a combination of dollars from the Medicare Trust Fund and general revenues, with the latter subject to annual appropriations battles.

The lobby also managed to moderate another potentially major hit on reimbursements for indirect medical education. This is money that every hospital now receives, based on a complex formula involving the ratio of the number of residents to the number of hospital beds. This formula includes a critical adjustment factor that is now 7.7 percent. Initial proposals would have slashed this to 3.5 percent immediately, and Tate said such a move "would have had a devastating effect." The final bill includes a provision that reduces the adjustment factor to 6.7 percent in fiscal year 1996, and then gradually decreases it to 5 percent in 2002.

But the bill also limits support for medical residents to five years, or until they first receive board certification. This measure will have some impact on Stanford because the Medical Center has a number of residents who stay longer than five years to train in sub- specialties, Tate said.

"In the second round, after the president has vetoed the reconciliation bill, we will continue to plead our case to the House and the administration, who hopefully will raise this as an issue," Tate said.

Student financial aid

Another area of potential impact is student financial aid. In this area, provisions are divided between the Labor, Health and Human Services appropriations bill and the final budget reconciliation bill.

Student grant programs are included in the appropriations bill, which Congress has not yet finalized. Currently, it includes a 3 percent reduction in the Pell Grant Program down to $59.8 million from $61.8 million last year. It also contains several relevant programs that Clinton would phase out and the House would eliminate immediately. These include the State Student Incentive Grant Program; federal contributions to campus-based programs like the Perkins Loan Program; and the Patricia Harris and Jacob Javits graduate fellowships, according to Bradley Cohen, assistant director of government relations.

In California, the State Student Incentive Grant money has provided about 4

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