New Season for the Budget Battle

The Spring of Panic already seems like ancient history to Harvard professors and administrators. With obvious relief, they downplay the memory of the Reagan administration's initial attack on the federal budget for higher education and point with pride to the programs Congress salvaged over the summer. But new problems have surfaced in recent weeks: slumping financial markets and upward revisions of federal deficit predictions have prompted the administration to propose $10 billion to $15 billion in additional budget cuts, some in the military and some in departments that support universities. "It's always possible we could be getting some more discouraging news," one Harvard official admits a bit wearily.

Regardless of how Congress resolves the details of its appropriation measures this month, the relationship between the government and higher education will not change drastically in the foreseeable future. Billions of dollars, flowing from numerous agencies, support everything from student tuition to high-level scientific research. After 30 years of growing dependence on Washington, major universities simply could not survive in their current form without federal aid. In defending their turf, educators can count on continuing political clout on Capitol Hill, as was demonstrated on several occasions in June and July. What the professors and scientists fear, however, is that certain crucial fields which need increased support will be crippled in an atmosphere hostile to generous government spending.

Of all the Congressional debates related to higher education, the jousting over student loans provoked the loudest protests from college spokesmen, and the final proposals may hurt more than 800,000 students nationwide. Meanwhile, the clamor in Harvard's financial aid office has all but ceased. New family income restrictions will, in fact, be considerably more lenient than expected for students attending expensive Ivy League schools, and the cuts will not keep anyone out of the University this year or next [see sidebar].

Secretary of Education T.H. Bell, with ample encouragement from the Reagan budget office, has warned against premature celebrations. Acknowledging his mandate to trim the department's budget from $14.8 billion to $13.1 billion for the 1983 fiscal year, Bell announced recently that some of the new reductions would be in student loans. "To borrow a line from Macbeth, 'We have scotched the snake but not killed it,'" he reportedly told financial aid administrators in August.

If another attack on popular tuition aid programs proves too costly, in political terms, the administration may seek added cuts in less visible areas like basic scientific research and support for the arts. "We have seen the potential dangers that Reagan has caused," says Parker L. Coddington, Harvard's director of government relations, "and we really have no time to waste in preparing for 1983." He agrees with the widely held belief that Congress would probably extend debate through January on new proposals from the White House by granting short-term appropriations for federal agencies under a so-called continuing resolution.

On many fronts, Coddington and his fellow education lobbyists have already succeeded in countering Budget Director David A. Stockman's campaign to reduce or eliminate programs. For example, Congress decided against proposed spending ceilings for the National Institutes of Health (NIH) and National Science Foundation (NSF), which together support about 90 per cent of biomedical research at universities. In the case of NIH, researchers have long opposed any specific spending limits, fearing that restrictions could subject the institutes to political pressure to pursue particular fields. Calling the decision a "major victory," Coddington points out that the continuing absence of ceilings also gives Congress greater flexibility to step up funding for successful new projects.

The measures Congress took up again last week after returning from recess included small increases for both the NSF and the NIH, which last year spent $3.56 billion and $1.04 billion, respectively. The National Endowments for the Arts and the Humanities each received far smaller cuts in their budgets than Stockman had asked for. The Museum Services Administration, which Stockman had sought to eliminate, received $9.6 million. "Considering where we could have been with some of these things, we escaped in pretty good shape," says Richard G. Leahy, associate dean for research and the allied institutions. The backlog of grant applications is actually slightly up from last year at this time, he reports, and few professors anticipate immediate crises. "Sheer inertia (in the federal grant process) will tide us over for this year and perhaps the next; the danger will be in the future, when more cuts could overtake some of our programs," Leahy says.

If that inertia gives way to significant alterations, however, many Harvard professors could suffer, and some already are. James A. Davis, chairman of the Sociology department, has the coming year's money in hand for the nationwide General Social Survey, but 1983 "is still very much up in the air," he says. The $300,000 to $400,000 Davis will need from the NSF to continue his study, considered one of the most important basic data sources in that field, would have to come from a division vulnerable to additional reductions. In general, research in the social sciences and in basic, rather than applied science, will probably face more unpleasant cutbacks in 1983 and 1984 as the administration seeks to balance the budget. The president and his advisers have "a very strange attitude toward social science," Davis says, voicing a complaint common among his colleagues. "They rely on all kinds of evaluations of the population and business patterns to make their policies, but they want to cut out the research that produces those evaluations," he adds. "They seem to have this notion that the study of economics is completed."

With level funding, Davis could salvage most of his survey for years to come. But Coddington, Leahy and officials at the Association of American Universities, a group representing the 50 top research universities in the country, point out that some fields will dwindle into non-existence unless the Administration and Congress make an abrupt 180-degree policy change and increase federal support. High-energy physics, for example, is severely threatened, because results from that extraordinarily expensive research do not promise specific technological advancements. Harvard and MIT closed their joint facility for high-energy research several years ago because of funding problems, and the University of Pennsylvania-Princeton laboratory was recently shut down for similar reasons. Two of the principal remaining facilities, at Brookhaven and Stanford, are now struggling to survive.

Inflation has taken such a big bite out of universities' budgets for improvement of laboratories and equipment in general that their facilities across the board are now considered twice as old as those owned by private corporations. Level funding will lead to continued deterioration of university research over the next ten years, "and that is unquestionably a bad situation," Coddington says. Harvard scientists had expected up to $2 million from a $75 million NSF fund set aside specifically for renovation and new instrumentation, but Reagan killed the authorization last spring. Congress has since allocated $16.5 million for improvements--a "promising symbol," says Leahy--though the action will have little effect on a nationwide shortfall President Bok has estimated at about about $500 million. Bok was out of town last week and could not be reached for comment, but in his Commencement Day speech last June he said that over the past 15 years federal funds for laboratories had fallen by 50 per cent in constant dollars because of inflation. He predicted that "If we neglect our facilities, the initiative in science will simply pass to other countries that have chosen to make a more determined effort to provide the best environment for scientific work."

Several aspects of the Reagan budget that would seem to include benefits for universities either will have little impact at Harvard or may actually aggravate existing financial problems. Increases in the Department of Defense (DOD) budget will probably filter down to some Pentagon-related research within the University, but Coddington says that large percentage gains in DOD funding reported recently are deceiving because Harvard has traditionally done little work for the military.

In addition, University officials and some economists agree that large tax reductions designed to spark growth in the private sector will probably discourage private contributions to Harvard rather than aid fundraising, as the Reagan administration claims it will. By cutting maximum personal income tax rates from 70 per cent to 50 per cent, for example, the administration raises the net "cost" of donating money to Harvard. Under the old law, a person in the highest tax bracket keeps only 30 cents out of every dollar earned, so if he gives a dollar to Harvard--a non-taxable gift--it costs him only 30 cents. With the tax cut, the same person will keep 50 cents for every dollar earned, thus the cost of giving a dollar to Harvard rises from 30 to 50 cents. Alan J. Auerbach, assistant professor of Economics and an expert on tax policy, notes that "charitable givers are very sensitive to the tax price, or cost, of giving, and changes should have fairly important results for universities."

Making matters worse for Harvard, some administration tax analysts are considering proposals to increase certain taxes on the wealthy--such as user fees for yachts and private aircraft--to help offset a federal deficit which they now say could climb as high as $60 billion. Since the added levies would in no way encourage charitable giving, "they can only be viewed in a negative light," says Coddington, adding, "It is true, we are getting hit both by reductions and increases." On the other hand, tax incentives designed to encourage corporate investment in university research remain "insignificant," the lobbyist notes.

Ironically, University officials must now set aside resentment over Reagan's spending and taxation policies, Coddington says, and cling to "one chief hope that the administration program does achieve its ends" in cutting inflation, increasing the Gross National Product, "and building a generally stronger economy, so that there will be money to give to places like Harvard." Yet at the same time, University financial officers will have to use shortfalls in funding from the NSF, the NIH and elsewhere to drum up individual donations. "If we can make a case to private contributors that we have been hurt in enough areas, perhaps we can encourage support in spite of the tax problems," Coddington says.

Harvard fundraising has yet to suffer because of new guidelines from the Treasury. Over the summer, in fact, the $250-million capital fund drive moved briskly past its halfway point. Similarly, the warm months brought qualified good news for students, researchers and administrators. Those associated with higher education acknowledge, though, that the Reagan Administration and a cooperative Congress could turn some of those summer smiles into frowns in the coming months and over the next three years.