Study Sees $1.3B Sequestration Hit For Mass.
Massachusetts will suffer more than most states from this year’s automatic federal budget cuts triggered by sequestration, according to a study released this week by the University of Massachusetts Donahue Institute.
The study estimates that the Bay State lost $1.3 billion in federal funding for the U.S. government’s 2013 fiscal year, which ended Sept. 30. And the Donahue report warned that amount could climb in the coming years because of the commonwealth’s greater success at winning federal research and defense grants and contracts.
The reduction in funding affects both public- and private-sector economic activity in Massachusetts, with an estimated total employment impact of more than 14,000 jobs during the federal 2013 fiscal year, adding up to a “significant drag” on economic growth, the Donahue Institute said in a statement.
“Because the state’s universities, high tech companies and research institutes have had tremendous success in winning contracts over the years from agencies such as the Department of Defense, NIH and the National Science Foundation, cuts to Massachusetts will be relatively large,” the statement said, adding, “the federal grants awarded to universities and high tech companies have helped fuel the growth of the Massachusetts innovation economy and world-leading life sciences industry. With a major reduction in the economic stimulus provided by these grants – a kind of ‘seed corn’ for the innovation economy – prospects for future economic growth are seriously threatened.”
The Donahue statement also said that:
- Based on the economic impact analysis conducted for this study, the employment impact of sequestration on the commonwealth is projected to be 12,607 jobs in during the current 2014 fiscal cycle under the new budget agreement passed by Congress this week.
- Without that agreement, the impact would have jumped to 20,875 jobs, posing an ongoing obstacle to economic growth that Massachusetts would have been forced to confront in future years.
- The cuts will mean a loss of almost $1 billion in labor income for Massachusetts residents, more than $1.4 billion in reduced gross state product, and a drop of $63 million in state tax revenue during the 2013 federal fiscal year.
“The impacts estimated in this study are consistent with the slowdown in economic growth experienced by Massachusetts earlier this year,” said Daniel Hodge, director of economic and public policy research at the Donahue Institute. “And the risk is that long-term funding cuts to science, technology and research will have an outsized impact on a state like Massachusetts, whose economic engine is so closely tied to basic research and innovation.”
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