Federal Budget Cuts Will Have ‘Limited Impact’ On Universities, Moody’s Says

As universities raise alarms about the potentially devastating effects of more than $1-billion in looming cuts in federal research spending, a leading credit-rating agency issued a report on Thursday that seemed to say: “Calm down. This will sting for just a moment.”

The vast majority of American universities and nonprofit organizations will “face only minimal effects” from the budget cuts in the 2013 fiscal year, according to the report by Moody’s Investors Service. Just 1 percent of institutions—”primarily stand-alone research institutes”—are at risk of losing more than 3 percent of revenue during the first year of the across-the-board budget cuts known as sequestration.

Moody’s issued a grim report in January on the general outlook for higher education, but Thursday’s report—part of a series about the effect of sequestration—was optimistic, if measured.

John Nelson, managing director of the health-care and higher-education rating teams at Moody’s, acknowledged that the new report may come as cold comfort for worried federal-grant administrators at research universities.

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