Central Mass. Sweating Federal Budget Cuts’ Potential Impacts

Paul Osenar, CEO of Protonex Technology in Southborough, which does all its business with the U.S. military, said his company has held back on investments and hiring as it awaits the final results of mandated federal budget cuts, also known as sequestration.

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By Emily Micucci

The apparent cure of a Mississippi toddler, whom doctors say was infected with HIV at birth but now shows no signs of the disease, was heralded earlier this month as a dramatic stride in health care.

But the kind of research that leads to such results is expensive, According to Michael F. Collins, chancellor of the University of Massachusetts Medical School (UMMS) in Worcester, funding sources to continue progress likely won't be as available, now that Congress and the White House have let $85 billion in federal budget cuts known as sequestration take effect.

Collins has been vocal about the need for a federal budget that doesn't make across-the-board cuts that threaten such efforts as medical research.

Researchers at UMMS were involved in developing the testing mechanisms that helped confirm the toddler's virus was gone, Fessenden said. That kind of work is paid for with money from the National Institutes of Health (NIH), the school's largest funding source, and is slated to lose $1.6 billion in 2013.

”One day we wake up and one of our scientists has been involved with what could be a groundbreaking cure for HIV, and then we hear the research effort could be cut by millions of dollars,” Collins said.

Other area business owners are beginning to take stock of what the cuts mean for them.

The UMass Memorial Health Care system, which partners with UMMS on research programs, will also feel the NIH cuts, said Rob Brogna, spokesman for UMass Memorial. But cuts to Medicare payments may be more significant for the health care system. Brogna said UMass Memorial will lose about $70 million over the next 10 years.

Though sequestration has loomed large for months, others say it could take a while to get a clear picture of its effects

Breaking Down The Budget Cuts

According to the Bipartisan Policy Center, a Washington-based think tank, the Department of Defense will be hardest hit, losing $492 billion by 2021, while cuts to non-defense departments will total $322 billion. Interest payments will be reduced by $142 billion, and Medicare is expected to lose $85 billion. Mandatory spending programs will lose $41 billion.

Though there hasn't been a formal analysis at the state level on which industries will be hardest hit, Bryan Engelhardt, assistant professor of economics at the College of the Holy Cross in Worcester, expects research and education institutions will see the greatest impact. The visible impact will be job losses, Engelhardt said.

What's harder to quantify is the cost of uncertainty. Engelhardt said companies and organizations take a wait-and-see approach on new projects and hiring when budgets that impact their operations are uncertain, and that's likely compounding the problem of sequestration.

“These companies could be cutting back, even though they don't necessarily have to,” Engelhardt said.

This is the case for Protonex Technology Corp., a Southborough-based company that does all its business with the military. Protonex CEO Paul Osenar said the company held back on investments and hiring early this year as Department of Defense customers wait for the final results of sequestration.

“Fortunately for us, power and energy are high growth within the military, so we are not seeing contraction in our core business,” Osenar said in an e-mail. “Sadly, we are seeing many of our government customers unable to make decisions while they wait for the sequester impact to filter down to their level.”

Attitudes are similar with nonprofits.

Marc Doan, executive director of Twin Cities CDC, a community development organization that serves Fitchburg and Leominster, was to meet with officials in Washington last week to learn more about federally funded program cuts, especially for housing renovations.

“As far as pulling the trigger and saying, 'Yes, let's buy that property,' we're more cautious about it,” Doan said.

Karen A. Koller, executive director at RCAP Solutions, a Gardner-based community development organization that administers housing vouchers, is simply hoping that none of RCAP's programs receive a complete cut.

Nearly all of RCAP's programs receive federal funding, Koller said. She noted that less housing funds will have a ripple effect on the region's rental market.

“I think it's just not feasible that the government is going to allow all of this to happen,” Koller said.