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Fiscal cliff cuts would impact Georgia health, education and defense industry

  • McClatchy Newspapers
  • Published Thursday, Dec. 6, 2012, at 5:22 p.m.
  • Updated Tuesday, Jan. 22, 2013, at 5:28 p.m.

— If Congress can’t strike a deal to avoid going over the “fiscal cliff,” nursing home operator Debbie Meade of Warner Robins, Ga., will have to trim staff next year because of a projected $50,000 cut in Medicare payments.

“It’s going to be devastating,” said Meade, chief executive officer at Health Management LLC, which employs 470 people at four nursing homes in the Macon, Warner Robins and Savannah areas. “I have no other areas in which to cut. We don’t budget to the dollar. We budget to the penny. It is very, very, very tight right now.”

Meade’s dilemma is shared by officials at Georgia universities, businesses, community health centers, hospitals, local governments and other institutions, which will be on the receiving end of $1.2 trillion in federal spending cuts over the next decade – known as a sequester – if Congress and the White House can’t reach an agreement to avert a series of tax increases and spending cuts – the fiscal cliff.

The federal budget will shrink by $109 billion under sequester as defense spending is reduced 9.4 percent and non-defense discretionary and mandatory spending falls by roughly 8 percent for the rest of fiscal 2013.

Georgia’s 359 nursing homes collectively face $13.3 million in sequester-induced payment cuts from Medicare next year, according to an analysis by Avalere Health, a health business strategy firm, and the Alliance for Quality Nursing Home Care, a coalition of 11 groups providing skilled care to the elderly.

Unlike other government programs, Medicare faces a 2 percent spending cut under the sequester. The reductions come mainly in payments to health care providers and insurers and would begin in February 2013.

Medicare saves $11.6 billion because of the cuts, but Meade and other nursing home operators like Mark Todd, chief executive officer of Magnolia Manor, will feel the pinch. With five nursing homes in southern Georgia, including two in Columbus, Magnolia’s Medicare fee-for-service payments will likely take a $200,000 hit next year because of sequestration. That could mean layoffs among the company’s 1,100 employees, Todd said.

Sequestration would be the fifth Medicare payment cut for nursing homes since 2009, making it harder for businesses like Magnolia to plan a budget.

“You don’t know what’s going to happen to you, not only from month to month, but from year to year, so any kind of long-term strategic planning is almost nonexistent now,” Todd said.

The National Education Association estimates that across-the-board sequestration cuts to 19 federal education programs would cost Georgia more than $94 million in federal funding next year.

For example, funding for the federal Head Start program would be cut by $16.3 million in Georgia, affecting more than 2,000 students and putting 680 jobs at risk, the NEA estimates. And funding to Georgia school districts with high numbers of poor students would fall by more than $41 million, affecting 73,000 students and possibly causing job losses of nearly 600, according to the NEA analysis.

“It goes without saying that any further reduction of funding from any source, local, state or federal, will have even more devastating effects on our state’s ability to meet the charge of our state constitution to educate our young people,” said Calvine Rollins, president of the Georgia Association of Educators.

An estimated $525 million funding cut for Centers for Disease Control and Prevention could cause layoffs at the agency’s Atlanta headquarters. And research at Georgia’s universities could also suffer as grants from the National Science Foundation, the CDC and the National Institutes of Health could all be reduced next year.

The NIH is facing a $2.5 billion funding cut that could result in 2,400 fewer grants being issued under sequestration.

The Georgia Health Sciences University in Augusta receives more than $46 million from the NIH for 116 research grants. As the school tries to expand its cancer research activities, the sequestration cuts would make it harder to recruit researchers with NIH funding, said Mark Hamrick, the university’s senior vice president for research.

If current staff researchers find it harder to obtain funding, Hamrick said, the university would use internal “bridge funds” to make up any shortfalls. But the school may have to postpone new hires until the funding situation is cleared up.

“It would be rare to have a funding interruption of this magnitude,” Hamrick said. “This would certainly be more significant than anything we’ve ever encountered in the past.”

Georgia’s 500-plus aerospace companies and its 85,000 state employees could also feel the effects of sequestration if funding cuts force private contracts with NASA, the Department of Defense, the Federal Aviation Administration and other agencies to be broken.

It’s unclear how industry giant Lockheed Martin would be affected. Lockheed employs 7,000 people at its Marietta, Ga., plant.

“We don’t know how sequestration will affect any individual program or facility, including Marietta, but as we’ve consistently said, we will follow the law with respect to sequestration,” said Lockheed spokeswoman Jen Allen.

Lockheed will not issue sequester-related layoff warnings in 2012, since any required workforce adjustments wouldn’t likely occur for several months after President Barack Obama signs the sequestration order, presumably on Jan. 2, 2013, if no compromise deal is reached.

Email:tpugh@mcclatchydc.com; Twitter: @TonyPughDC

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