March 1, 2013

Sequester Effects on National Endowment for the Arts

Today, the federal government began a process of across-the-board cuts to federal domestic and defense spending known as sequestration. The reductions are mandatory and will be phased in over the remainder of federal fiscal year 2013.

In a letter to state and regional directors, National Endowment for the Arts (NEA) Director for State and Regional Partnerships Laura Scanlan confirmed that overall funding for the NEA will be reduced by 5% ($7.3 million). As you may recall, sequestration requires the Obama administration to reduce spending from all federal domestic discretionary accounts equally, while also imposing cuts to defense and certain mandatory programs like Medicare. The NEA plans to implement the sequestration cuts in the following ways:
  • Direct grant allocations will reduced by 3.2%.
  • Partnership funds to state arts agencies and regions will be reduced by 2.7%. (The NEA is able to mitigate the effect of sequestration on states by applying funds that were de-obligated in the prior year.)
The NEA has confirmed that sequestration reductions will apply only to state arts agency grants awarded in the federal FY2013 funding cycle. Cuts will not be applied retroactively. This means that state arts agencies should expect reductions to their NEA FY2013 Partnership Agreements, used by most states to support their FY2014 activities. Current (NEA FY2012/state FY2013) Partnership Agreements will not be affected.

Unfortunately, the implementation of sequestration does not mean that budget uncertainty is fully resolved for the remainder of the year. No official FY2013 budget was ever passed, and the federal government currently is running on an interim "continuing resolution" authorizing agencies to spend funds at FY2012 levels (minus the amounts now mandated by sequestration). This continuing resolution expires on March 27, and Washington is bracing itself for another budget battle.