R&D in the FY 2014 Omnibus: The Big Picture
With the Consolidated Appropriations Act of 2014 officially signed into law, it is possible to make some early assessments of how federal R&D funding will ultimely fare in FY 2014. Overall, the result is somewhat mixed, which is unsurprising given that the December budget deal only gave Congress so much room to work with. According to current AAAS estimates, federal R&D could end up at $136.2 billion in FY 2014, compared to $132.7 billion in FY 2013 and $142.5 billion in FY 2012.
On the surface, the FY 2014 figure appears to be a rather limited improvement from post-sequester spending. Indeed, the increase from FY 2013 only adds up to 2.6 percent, which will be almost entirely erased by inflation. But focusing only on the topline number is somewhat misleading, as there are divergent trends underneath those figures. If R&D in the spending omnibus is separated out by function, it becomes apparent that defense and nondefense R&D will move in two different directions (as will research versus technology development). Scroll down for more detail.
Nondefense R&D will (almost) return to FY 2012 levels. Nondefense R&D is mostly basic and applied research, and large portions of it are devoted to extramural research by universities (though universities are not the only performers that receive funding, and there are large intramural research centers as well, such as those funded by NIH or the Agricultural Research Service). As the above table indicates, AAAS estimates suggest nondefense R&D will increase by 7.6 percent above post-sequester levels, and 2.5 percent above FY 2012 levels. This is described as "almost" a return to 2012 because inflation will more than offset this nominal increase. In constant dollars, adjusted for inflation, nondefense R&D would actually end up 1.5 percent below 2012. Still, this figure is certainly higher than it would have been had some spending cuts not been rolled back in the December budget deal. It's also generally closer to the Senate and White House recommendations, which proposed a full sequester rollback, compared to the House recommendations, which would have kept spending at post-sequester levels.
Within nondefense, however, there is some variation, with some agencies making out better than others. For instance, within the Department of Energy (DOE), the Office of Science ended up closer to the Senate mark, and several low-carbon energy technology programs managed to avoid the sharp cuts proposed by the House. Research programs in the U.S. Department of Agriculture also came closer to the Senate proposals, as did the Science and Exploration programs within NASA. Since the December budget deal only rolled back half of the spending cuts under sequestration, the fact that these programs' appropriations are closer to the higher Senate recommendations suggests they're ahead of the curve. But elsewhere, the National Institutes of Health remains about $700 million below FY 2012 levels even after a billion-dollar boost in the omnibus, and research programs at the U.S. Geological Survey and EPA are also recovering relatively less funding compared to other agencies. And Congress canceled a planned transfer of $100 million to the Agency for Healthcare Research and Quality for patient-centered outcomes research funded under the Affordable Care Act. Still, most agencies are in much better shape budget-wise than they had been under full sequestration.
Lastly, one small slice of FY 2014 nondefense R&D funding is actually still in play at the time of this writing. In recent Farm Bill negotiations, the chambers were split on whether or not to provide additional funding to the Biomass R&D Initiative. The parties recently reached a deal on that legislation, and depending on the outcome, it could add an additional $20 to $30 million to USDA's bottom-line R&D budget. [late update: turns out it's only an additional $3 million for biomass R&D; however, the Farm Bill also establishes $200 million in additional mandatory funding for the establishment of a foundation focusing on agricultural research. More on this to come.]
Defense R&D will continue its decline. Defense R&D — dominated by the Department of Defense (DOD) — is of a very different character from nondefense R&D. Most of it is focused on latter-stage technology development, with industry contractors making up a substantial portion of the funding recipients. Per AAAS estimates, defense R&D will decline by 10 percent from FY 2012 levels and 1.6 percent from FY 2013 sequester levels. Adjusted for inflation, this represents a 24.5 percent decline from the peak in FY 2010, and a continuation of recent reductions following the drawdowns in Iraq and Afghanistan.
Defense Science & Technology fared much better than the rest of the portfolio. It's true that defense R&D will come down, but DOD also funds quite a bit of fundamental and applied research through agencies like DARPA and the Army Research Lab and at universities and research institutes, similar to its nondefense counterparts. In fact, DOD has a larger research budget than the National Science Foundation. These accounts are included in the "S&T" line in the above table, and also shown is the Defense Health Program, a peer-reviewed program that funds extramural research in cancer and a variety of other illnesses. Most cuts at DOD were levied on the downstream technology development accounts, while research programs avoided these cuts. In fact, basic research and medical research at DOD would both reach all-time inflation-adjusted highs under the omnibus. This means that industry will likely feel the affect of these cuts most acutely. Visit our DOD breakdown for more detail. In addition, it's worth noting that National Nuclear Security Administration R&D programs (shown under DOE above) also fared better than most of the DOD portfolio.
In historical terms, R&D will remain well below its FY 2010 peak. Under AAAS estimates, R&D funding adjusted for inflation will remain 15.8 percent below its FY 2010 peak. However, as mentioned above, this is almost entirely due to reductions on the defense side, as nondefense R&D is only 3.8 percent below that year. But also note that nondefense R&D also peaked much earlier, in FY 2004, with the end of the NIH budget doubling. Using the earlier year as the baseline, nondefense R&D is down by 6.1 percent.
Federal R&D will reach a postwar low as a share of GDP. AAAS estimated federal R&D would drop to 0.82 percent of GDP in FY 2013, compared to 1.27 percent in 1976. This decline trend will continue in FY 2014, with an estimate of .80 percent of GDP. This again is due entirely to defense cuts, as research funding — more closely associated with nondefense R&D — would tick up slightly as a share of GDP.
Looking Ahead. For now, the President's FY 2015 budget is planned for release March 4. With FY 2015 discretionary spending not slated to increase much at all above FY 2014, the question remains whether the December budget deal and the funding outcomes in the omnibus bill represent a new plateau, or steps on the road to increased investment — and, perhaps, a bigger, better budget deal later. Time will tell.