Regulatory Focus™ > News Articles > As FDA Avoids Fiscal Cliff, Trouble Looms on Horizon

As FDA Avoids Fiscal Cliff, Trouble Looms on Horizon

Posted 02 January 2013 | By Alexander Gaffney, RAC

US legislators have passed a measure aimed at averting the so-called "fiscal cliff" for at least two months, giving both them and federal employees-including the US Food and Drug Administration (FDA)-a reprieve from potentially massive budget cuts.

The proposed deal, passed in both chambers of Congress and awaiting President Barack Obama's signature, contains a number of tax-related and other provisions mostly aimed at raising revenues while preserving lower tax rates for most Americans. Crucially for federal employees and the life sciences sector, the bill postpones the process of budget sequestration-an across-the-board 8.2% budget cut for nearly all federal agencies-that would have removed approximately $320 million from FDA's budget. That figure includes approximately $110 million in industry-paid user fees, which the Office of Management and Budget (OMB) previously said was subject to the sequestration process.

[For more background, please see our 13 December 2012 story, "As Deadline Looms for Budget Cuts, FDA Faces Loss of $318 Million and Many Employees."]

But the two-month reprieve sets up a potentially precarious trio of must-pass legislation, potentially compounding problems for FDA. The agency is currently operating on the same budget as 2011 thanks to a 2012 continuing resolution (CR). That CR is set to expire in March 2013, necessitating either the passage of an entirely new budget or an additional continuing resolution to bridge the gap between the rest of the fiscal year and a potentially new budget. That would leave FDA without additional funding with which to enact some of its new programs, including ones for food and product safety.

Also at issue: the government has already reached its so-called "debt limit"-the point at which it requires Congress to give it more authority to borrow money-and officials with the Department of the Treasury have said they expect the government to be unable to meet all of its fiscal obligations by March 2013.

These two factors, paired with the prospect of another fight over the sequestration, leaves FDA facing an uncertain future once again. The failure to act on any three of the measures could leave FDA without $320 million in funding, without a budget, without any money to pay its bills, or almost entirely shut down-or some combination thereof. Even in an optimistic scenario, likely cuts to government programs means FDA could still be facing budget cuts even as Congress has increasingly been asking it to do more.

The one potential bright spot for FDA employees: Assuming Congress doesn't emaciate their employer's budget, Obama has announced that he intends to end a two-year pay freeze on all federal employees, reports Government Executive. That proposed raise would give employees a 0.5% increase in pay, though that, too, is on hold until the end of March 2013.


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