Federal R&D Budget Testimony 1997

Testimony before the
Senate Science, Technology and Space Subcommittee
Senate Commerce, Science and Transportation Committee
by
Dr. Albert H. Teich
Director, Science and Policy Programs
American Association for the Advancement of Science
April 16, 1997
 

Contents

Introduction
Research and Development in the FY 1998 Budget
Impact of FY 1998 Proposals on R&D Trends
Conclusion

Table 1. R&D in the FY 1998 Budget by Agency
Table 2. Basic Research by Agency
Table 3. Estimated Support for Conduct of R&D at Colleges and Universities
Table 4. Trends in R&D, FY 1994-1998
Table 5. AAAS Analysis of the President’s FY 1998 Budget on Federal R&D

Figure 1. Trends in R&D, FYs 1994-98
Figure 2. AAAS Analysis of Outyear Effects of Balanced Budget Plans on Nondefense R&D

Biography of Dr. Albert H. Teich

 


Introduction

Mr. Chairman, members of the Subcommittee, my name is Al Teich, I am the head of the Directorate for Science and Policy Programs at the American Association for the Advancement of Science (AAAS). I would like to thank you for inviting me to testify before you today.

Founded in 1848, AAAS is the world’s largest federation of scientific and engineering societies, with nearly 300 affiliates. AAAS counts more than 142,000 individual scientists, engineers, science educators, policymakers, and interested citizens among its members, making it the largest general scientific organization in the world. The continuing objectives of AAAS are to further the work of scientists, facilitate cooperation among them, foster scientific freedom and responsibility, improve the effectiveness of science in the promotion of human welfare, advance education in science, and increase the public understanding and appreciation of the importance of the methods of science in human progress. The Directorate for Science and Policy Programs, one of three program directorates, furthers AAAS’s objectives in six program areas where the interests of science, government, and society intersect: Science, Technology and Government; the Center for Science, Technology, and Congress; Research Competitiveness; Science and Human Rights; the Dialogue between Science and Religion; and Scientific Freedom, Responsibility, and Law.

Since 1976, AAAS has published an annual report analyzing research and development in the proposed federal budget in order to make available to the scientific and engineering communities and to policymakers timely and objective information about the Administration’s plans for the coming fiscal year. I have been associated with the budget analysis efforts since 1980, initially as the principal budget analyst and for the past several years as head of the directorate that is responsible for it. The most recent of the program’s reports, AAAS Report XXII: Research and Development FY 1998 , is a collaborative effort involving contributions from approximately 20 scientific, engineering, higher education, and industrial associations known collectively as the Intersociety Working Group. At the end of each congressional session, AAAS also publishes a report reviewing the impact of appropriations decisions on research and development, entitled Congressional Action on Research and Development in the FY 199x Budget.

Research and Development in the FY 1998 Budget

In the United States, unlike some nations, there is no overall, separately-identified budget for research and development (R&D) and no special treatment of R&D in the federal budget. R&D programs are contained within the budgets of various federal agencies, in some cases representing a major share of the agency’s budget and activities, in others, a relatively small portion of a much larger set of programs. In most cases, the R&D funds are not line items but are included within general program funding. The Office of Management and Budget (OMB), however, requires agencies whose annual R&D funding is greater than $10 million to submit data on their R&D programs as part of their annual budget submissions. The agencies provide data (reported on OMB Circular A-11, Exhibit 44A, “Research and Development Activities”) on funding levels for basic research, applied research, development, R&D facilities, and R&D support to universities and colleges. Although definitions for each category exist (as outlined by the National Science Foundation in Federal R&D Funding by Budget Function: Fiscal Years 1995-1997), agencies are not always consistent in their reporting. For example, some agencies classify program direction or management support as R&D while others do not.

Given that they are less than perfect the OMB data do provide a good basic source of material for conducting an analysis of R&D budget trends. My testimony today is designed to highlight trends in federal support for R&D in the current budget proposal, and to provide a look at the projections for federal R&D for the next several years.

In the FY 1998 budget request the President’s budget would provide $75.0 billion for the federal investment in R&D, an increase of 1.8 percent or $1.3 billion above the current FY 1997 estimate (see Table 1). With 2.6 percent inflation projected over the next year, the total federal R&D portfolio would lose purchasing power. However, it is important to note that the 1.8 percent increase may overstate the year-to-year trend because the $75.0 billion total includes approximately $1.2 billion in DOE to fully fund construction costs for a number of R&D facilities projects in advance. Approximately $883 million of these funds would not be spent until FY 1999 and later. The President requested similar up-front facilities funding in DOE, NASA, and NIH in the FY 1997 budget, but Congress rejected these proposals and appropriated only the current year’s costs. Therefore, if one subtracts the outyear costs from DOE’s request results in an adjusted FY 1998 total of $74.1 billion, which would be only 0.6 percent more than FY 1997, or 1.9 percent less after inflation.

When analyzing R&D requests it is important to separate nondefense and defense R&D in any analysis since these two functions are generally separated by legislative “firewalls” established by Section 602 (b) of the Budget Act. The request for nondefense R&D would increase by 3.3 percent to $34.6 billion in FY 1998, an increase that is mostly unaffected by the DOE facilities request. Within the nondefense account every major civilian R&D agency except Agriculture would enjoy an increase at or greater than the rate of inflation. Agencies and programs under this Subcommittee’s jurisdiction include NASA (increase of 3.1%), NSF (increase of 3.9%), NOAA (increase of 1.7%) and NIST (increase of 13.4%). Defense R&D, on the other hand, would increase only 0.5 percent to $40.5 billion. Without the DOE request for construction costs in FY 1999 and later, defense R&D would decline by 1.5 percent.

From its position at the interface of science and government, AAAS maintains a close watch on basic research trends as an important component to the R&D process given the contributions it makes to expanding our knowledge or understanding of phenomena quite apart from any specific applications this understanding may yield. Total support for basic research in FY 1998 would barely stay ahead of inflation at $15.3 billion (see Table 2), a 3.0 percent increase. NIH would continue to be the dominant supporter of basic research in FY 1998. NIH’s support of basic research would increase by 2.8 percent to reach $7.0 billion. All other agencies except NASA (which decreases 2.9%) would also increase their support of basic research. NSF is committed to increasing its support of basic research, mostly through competitive merit-reviewed grants, by shifting resources away from facilities and instrumentation support, a commitment that shows in its 3.8 percent increase for basic research to $2.1 billion. DOE would provide $2.1 billion for basic research, up 5.0 percent, due to increases for Computational Technology Research and Basic Energy Sciences. DOD would increase its support for basic research by 7.8 percent to $1.2 billion, after several years of decline from its peak funding level of $1.3 billion in FY 1993.

Despite their comparatively modest share of federal R&D funding, colleges and universities have long played a key role in the nation’s R&D effort. Academia serves as a primary site for the performance of basic research and the training of future scientists and engineers. Sixty percent of the R&D performed by colleges and universities is funded by the federal government, with most of the rest coming from the institutions’ own funds. Total federal support of R&D at colleges and universities is expected to increase by 2.4 percent to $13.3 billion, an increase lower than the expected rate of inflation. DOD, Interior, and Transportation would reduce their support of academic R&D, while NASA, NSF, NIH, and DOE would keep their funding of academic R&D ahead of the rate of inflation. An overview of the estimated federal support for conduct of R&D at colleges and universities by agency can be found in Table 3.

Impact of FY 1998 Proposals on R&D Trends

Despite the President’s proposed increases for FY 1998, federal R&D funding would continue its downward slide of the past several years. In analyzing the impact of the FY 1998 budget proposal on R&D, AAAS used the FY 1994 actual estimates as a baseline for comparison. The rationale for doing so is that FY 1994 was the last year that was not impacted by budget reductions voted by the 104th Congress. Between FY 1994 and FY 1997, total federal R&D funding declined 3.3 percent in constant, inflation-adjusted dollars. Nondefense R&D is down 4.8 percent, while defense R&D has fallen 2.1 percent. Every federal agency except for NIH and NSF has less to spend on R&D in FY 1997 than it did three years ago. As Table 4 illustrates, some agencies are down considerably from recent funding levels – EPA, down 19.1 percent; DOE, down 15.6 percent; NASA, down 7.7 percent; and Interior, down 23.5 percent. NIH, bastion of basic biomedical research, and the beneficiary of remarkably favorable appropriations action in the last two congressional sessions, is the lone significant gainer among R&D agencies, showing an 8.7 percent increase above FY 1994. NSF, primary supporter of academic basic research in most non-biomedical fields, is up just slightly, about 0.8 percent above the level of inflation in the past three years.

Table 4 also shows the impact of the President’s FY 1998 budget on these trends. an impact that is depicted graphically in Figure 1. Total R&D would lose additional ground to inflation, falling 4.1 percent below its FY 1994 level, the net of a further decline in defense R&D (down 4.0 percent from FY 1994 to FY 1998) and a slight improvement in nondefense R&D (down 4.2 percent from FY 1994, compared with the 4.8 percent decline between FY 1994 and FY 1997).

NIH would essentially hold level with inflation, retaining its 8.7 percent increase. NSF would gain a bit of ground, with a 2.1 percent increase between FY 1994 and FY 1998. As the table and figure show, however, constant dollar R&D funding levels in all other federal agencies would remain lower in FY 1998 than they were in FY 1994. Discounting the impact of DOE’s request for full funding of R&D facilities construction to be carried out over the next several years would reduce total R&D by a full percentage point to 5.1 percent below FY 1994, with significant impacts on defense R&D and, of course, on DOE, as shown in the footnote to Table 4.

The Outlook for Federal R&D to FY 2002

In general, neither the President nor Congress include specific details of R&D funding in their outyear projections. In the absence of other information, AAAS extrapolated outyear funding levels for R&D by calculating how much of each account in the current budget represents R&D and then applying that percentage to proposed funding levels for each account in future years.

The President’s FY 1998 budget, like the FY 1997 budget, sets out a plan to balance the federal budget by FY 2002. Included in the budget are detailed proposals by budget account for discretionary spending, out of which all federal R&D is funded. The AAAS analysis, Projected Effects of the President’s FY 1998 Budget on Federal R&D (see Table 5), calculates the effects of the President’s latest budget proposals on federal R&D during the period FY 1997-2002.

The analysis, using the same methodology as previous AAAS analyses of the President’s FY 1997 budget and the FY 1996 and 1997 congressional budget resolutions, shows that federal R&D would decline from $73.7 billion in FY 1997 to $72.1 billion in FY 2002, a 2.2 percent cut in nominal dollars. After taking into account expected inflation, the cut to total R&D would be 14.0 percent. Nondefense R&D would fall 9.4 percent after inflation. Defense R&D would fare far worse than nondefense R&D, with a 17.8 percent cut. Only two agencies, EPA and Commerce, would see their R&D budgets stay ahead of inflation during this time period.

It must be noted that this analysis presents only one possible scenario for the future of federal support of R&D. Outyear projections, whether from the Administration or Congress, have always been unreliable. Figure 2 shows that every successive budget plan over the past two years has allocated more to nondefense R&D than the plan before, in part because of continually improving economic forecasts but also because of concerted efforts to protect R&D programs from projected budget cuts.

In July 1995, a AAAS analysis of the FY 1996 Congressional budget resolution projected a 33 percent cut in nondefense R&D between FY 1995 and FY 2002, using the then-current inflation assumptions. Using this year’s revised inflation assumptions, the cut would be 30 percent (lowest dotted line in Figure 2). Later that July, nearly $1 billion in R&D rescissions reduced the FY 1995 funding level, thus lowering the projected cut from the new FY 1995 base (the bold marker on the FY 1995 axis) to 28 percent.

In April 1996, after a protracted showdown between the President and Congress, FY 1996 appropriations were finalized at levels far higher than projected in the budget resolution (first segment of the bold line). Both the President and Congress formulated their FY 1997 budget plans from this higher funding base. The AAAS analysis of the FY 1997 budget resolution projected a 22 percent cut to nondefense R&D (middle dotted line). The President’s FY 1997 budget would have led to a 18 percent cut over the same period (light solid line).

In September 1996, FY 1997 appropriations were finalized at a level approximately midway between the two projections (second segment of bold line). The FY 1998 budget relies on sustained economic growth over the past two years, more optimistic economic forecasts, and greater cuts in non-discretionary programs to call for still higher levels of discretionary spending than previous budget plans. The analysis of the FY 1998 budget shows a FY 1995-2002 cut of 13 percent (upper solid line – 9.4 percent between FY 1997 and 2002 plus 4.6 percent in cuts already enacted between FY 1995 and 1997). In total, the President’s budget contains about $50 billion more in FY 2002 in nondefense discretionary spending (out of which all nondefense R&D is funded) than the FY 1996 congressional budget resolution. Because of these additional funds, there is room for a $5 billion improvement in projected nondefense R&D spending.

It is important to remember, however, that these projected additional funds are not increases, but merely smaller potential cuts that follow cuts that have already been enacted. While the outlook for federal R&D has improved somewhat from the gloomy forecasts of two years ago, all signs still point downward as long as both the Administration and Congress continue to press for a balanced budget through cuts in discretionary spending.

Conclusion

The U.S. R&D enterprise has contributed enormously to the quality of American life, to the nation’s health and security, and to its world leadership in many areas of industrial technology. The United States today is faced with many challenges that will require continued strength in science and technology. In a very real sense, today’s R&D is helping to create a better world for future generations. Most political leaders recognize this and support a strong R&D enterprise. Yet, the budget-balancing path on which the nation has embarkedas a means, ironically, of protecting future generations against the burden of a growing national debtmay well have the unintended effect of weakening U.S. science and technology. It is essential that those involved in policy decisions that will affect the future of government-supported science and technology have a solid understanding of the impact of these decisions on the S&T enterpriseas well as an appreciation of the fragility of that enterprise.

Table 1. R&D in the FY 1998 Budget by Agency

(budget authority in millions of dollars)

 

FY 1996
FY 1997
FY 1998
% Chg. FY 97-98
Actual
Estimate
Budget
Current $ Constant $
Total R&D (Conduct and Facilities) – see notes at end of table
Defense (military) 35,783 37,461 36,780 -1.8% -4.3%
Science & Technology (6.1-6.3) 7,544 7,752 7,392 -4.7% -7.1%
All Other DOD R&D 28,239 29,708 29,389 -1.1% -3.6%
Health and Human Services 12,033 12,920 13,226 2.4% -0.2%
Nat’l Institutes of Health 11,425 12,206 12,531 2.7% 0.1%
NASA 9,432 9,315 9,604 3.1% 0.5%
Energy * 6,273 6,129 7,250 18.3% 15.3%
Nat’l Science Foundation 2,391 2,424 2,519 3.9% 1.3%
Agriculture 1,488 1,544 1,484 -3.9% -6.3%
Commerce 992 1,016 1,088 7.1% 4.4%
Interior 571 581 608 4.7% 2.0%
Transportation 601 650 684 5.2% 2.6%
Environ. Protection Agency 482 510 554 8.5% 5.8%
All Other 1,186 1,150 1,229 6.9% 4.2%
______ ______ ______
Total R&D * 71,232 73,700 75,028 1.8% -0.8%
Defense R&D* 38,465 40,236 40,457 0.5% -2.0%
Nondefense R&D * 32,767 33,464 34,571 3.3% 0.7%
Basic Research 14,442 14,857 15,297 3.0% 0.4%
Applied Research 14,107 14,511 15,052 3.7% 1.1%
Development 40,557 42,132 41,602 -1.3% -3.8%
R&D Facilities * 2,125 2,200 3,077 39.9% 36.3%

Source: AAAS, based on OMB data for R&D for FY 1998, agency budget justifications, and information from agency budget offices. Constant dollar estimates based on OMB’s GDP deflators.

* – DOE figures include proposed upfront funding for fixed assets. There is a special DOE request of $1.2 billion, of which $883 million is reserved for project costs in FY 1999 and later. Subtracting the FY 1999- costs results in the following R&D totals, which may more accurately reflect year-to-year trends in R&D:


FY 1996
FY 1997
FY 1998
% Chg. FY 97-98
Actual
Estimate
Budget
Current $ Const. $
Total R&D (adjusted) 71,232 73,700 74,145 0.6% -1.9%
Defense R&D (adjusted) 38,465 40,236 39,613 -1.5% -4.0%
Nondefense R&D (adjusted) 32,767 33,464 34,531 3.2% 0.6%

Table 2. Basic Research by Agency

(budget authority in millions of dollars)

 

FY 1996
FY 1997
FY 1998
% Chg. FY 97-98
Actual
Estimate
Budget
Current $ Const. $
Health and Human Services 6,395 6,826 7,015 2.8% 0.2%
Nat’l Institutes of Health 6,394 6,825 7,015 2.8% 0.2%
Nat’l Science Foundation 1,991 2,068 2,147 3.8% 1.2%
Defense 1,099 1,080 1,164 7.8% 5.0%
Energy 1,918 1,980 2,080 5.0% 2.4%
NASA 2,102 1,957 1,901 -2.9% -5.4%
Agriculture 582 580 599 3.3% 0.7%
Commerce 37 39 40 2.6% 0.0%
Interior 56 57 65 14.8% 11.9%
Transportation 39 45 45 0.0% -2.5%
Smithsonian 134 134 139 3.7% 1.1%
Environ. Protection Agency 54 54 54 0.5% -2.0%
All Other 36 37 49 32.4% 29.1%
______ ______ ______
Total Basic Research 14,442 14,857 15,297 3.0%
Total in FY 1997
Constant Dollars 14,803 14,857 14,909 0.4%

Source: OMB data for R&D for FY 1998 and agency budget justifications.


Table 3. Estimated Support for Conduct of R&D at Colleges and Universities

(budget authority in millions of dollars)

 

FY 1996
FY 1997
FY 1998
% Change FY 97-98
Actual
Estimate
Budget
Current $
Constant $
Health & Human Services 7,004 7,425 7,645 3.0% 0.4%
Nat’l Institutes of Health 6,914 7,323 7,549 3.1% 0.5%
Nat’l Science Foundation 1,927 1,898 1,964 3.5% 0.9%
Defense (Military) 1,430 1,435 1,347 -6.1% -8.5%
NASA 745 752 807 7.3% 4.6%
Energy 580 563 596 5.9% 3.2%
Agriculture 423 419 423 1.0% -1.6%
EPA 149 155 186 20.0% 17.0%
Interior 51 53 50 -5.9% -8.3%
Transportation 61 63 49 -22.2% -24.2%
Commerce 77 80 80 0.0% -2.5%
Education 117 120 129 7.5% 4.8%
All Other 12 12 12 0.0% -2.5%
______ ______ ______
Total R&D at Colleges
and Universities 12,576 12,975 13,288 2.4% -0.2%

Source: AAAS, based on OMB supporting data for R&D and agency budget justifications. Constant FY 1997 dollars based on OMB’s GDP deflators.

 


Table 4. Trends in R&D, FY 1994-1998

Change in constant dollars

 

FY 1994 FY 1997 FY 1998 % Chg. FY 94-97 % Chg. FY 94-98
Actual Estimate Budget in Constant $ in Constant $
Dept. of Defense 35,510 37,461 36,780 -1.7% -5.9%
Health and Human Serv. 11,324 12,920 13,226 6.4% 6.1%
Nat’l. Institutes of Health 10,474 12,206 12,531 8.7% 8.7%
NASA 9,406 9,315 9,604 -7.7% -7.2%
Dept. of Energy * 6,771 6,129 7,250 -15.6% -2.7%
Nat’l Science Foundation 2,243 2,424 2,519 0.8% 2.1%
Agriculture 1,528 1,544 1,484 -5.8% -11.8%
Commerce 1,022 1,016 1,088 -7.3% -3.3%
Interior 708 581 608 -23.5% -21.9%
Transportation 641 650 684 -5.4% -3.0%
EPA 588 510 554 -19.1% -14.4%
All Other 1,335 1,149 1,230 -19.7% -13.2%
____ ____ ____
Total R&D * 71,074 73,700 75,028 -3.3% -4.1%
Defense R&D * 38,299 40,236 40,457 -2.1% -4.0%
Nondefense R&D * 32,775 33,464 34,571 -4.8% -4.2%

Source: AAAS Reports XX-XII, based on OMB R&D data and revised agency R&D estimates.
Adjusted for inflation according to OMB’s GDP deflators.
* – FY 1998 figures include proposed up-front funding for fixed assets in DOE. Subtracting FY 1999-2002 costs would reduce total R&D 1.0 percent further to 5.1 percent below FY 1994. Defense R&D would be down 6.0 percent; nondefense R&D down 4.3 percent and DOE’s adjusted percentage reduction would be 13.3 percent between FY 1994 and FY 1998.

 


Table 5. AAAS Analysis of the Projected Effects of the President’s Budget on Federal R&D

(budget authority in millions of dollars)

 

FY 1997
FY 1998
FY 1999
FY 2000
FY 2001
FY 2002
% Change FY 97-02
Estimate
Budget
Projected
Projected
Projected
Projected
current $
constant $
Total R&D (Conduct and Facilities)
Defense (military) 37,461 36,780 35,870 34,190 33,672 35,056 -6.4% -17.7%
Health & Human Services 12,920 13,226 13,272 13,321 13,369 13,416 3.8% -8.7%
Nat’l Institutes of Health 12,206 12,531 12,583 12,635 12,687 12,738 4.4% -8.2%
NASA 9,315 9,604 9,537 9,387 9,293 9,331 0.2% -11.9%
Energy 6,129 7,250 6,185 5,967 5,962 5,886 -4.0% -15.5%
Defense 2,775 3,676 2,543 2,514 2,585 2,556 -7.9% -19.0%
Nondefense 3,353 3,574 3,642 3,453 3,377 3,330 -0.7% -12.7%
Nat’l Science Foundation 2,424 2,519 2,530 2,536 2,543 2,550 5.2% -7.5%
Agriculture 1,544 1,484 1,463 1,475 1,482 1,494 -3.3% -14.9%
Commerce 1,016 1,088 1,109 1,136 1,187 1,260 24.0% 9.1%
Interior 581 608 608 609 609 610 5.0% -7.6%
Transportation 650 684 684 684 684 684 5.2% -7.4%
Environ. Protection Agency 510 554 571 588 605 624 22.3% 7.6%
All Other 1,150 1,229 1,145 1,150 1,156 1,160 0.9% -11.3%
______ ______ ______ ______ ______ ______
Total R&D 73,700 75,028 72,973 71,043 70,562 72,070 -2.2% -14.0%
Defense R&D 40,236 40,457 38,412 36,703 36,257 37,611 -6.5% -17.8%
Nondefense R&D 33,464 34,571 34,561 34,340 34,305 34,459 3.0% -9.4%

Source: AAAS analyses of defense and nondefense R&D, based on detailed budget account projections in the Public Budget Database of the Budget of the United States Government FY 1998. FY 1997 figures represent latest agency estimates of R&D. FY 1998 figures represent latest revised agency requests. Constant dollar conversions based on GDP deflators from OMB.

97-04-16_fig1

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ALBERT H. TEICH

Albert H. Teich has been Director of Science and Policy Programs at the American Association for the Advancement of Science (AAAS) since 1990. AAAS, founded in 1848, is the world’s largest federation of scientific and engineering societies as well as a professional organization with over 140,000 members and the publisher of Science magazine. Dr. Teich is responsible for the Association’s activities in science and technology policy (including the AAAS R&D Budget and Policy Program, the Congressional Science and Engineering Fellows Program, and a new Research Competitiveness Program) as well as programs in science and ethics, law, religion, and human rights, a Program of Dialogue between Science and Religion, and a Center for Science, Technology, and Congress. His directorate has a staff of 30 and a budget of approximately $3 million a year.

Prior to joining the AAAS staff in 1980, Dr. Teich served on the faculty and in research and administrative positions at George Washington University, the State University of New York, and Syracuse University.

Dr. Teich is author of numerous articles and editor of several books, including Technology and the Future, a widely-used textbook on technology and society, the seventh edition of which was published by St. Martin’s Press in September 1996, and Science and Technology in the USA, volume 5 of Longman’s “World Guides to Science and Technology,” published in 1986.

Dr. Teich is a Fellow of AAAS, and a member of the editorial advisory boards to the journals, Science Communication and Science, Technology, and Human Values. He has been a consultant to government agencies, national laboratories, industrial firms, and international organizations. He served as chairman of the advisory committee to the National Science Foundation’s Division of Science Resources Studies from 1987 through 1990 and is currently a member of the Advisory Boards of the School of Public Policy at Georgia Tech, the School of Management and Technology of the University of Maryland’s University College, and the Loka Institute, as well as the Policy Council of the Association of Public Policy Analysis and Management. He holds a B.S. in physics and a Ph.D. in political science, both from M.I.T.