[an error occurred while processing this directive]

April 15, 2003

FY '04 R&D Budget Proposes Modest Growth

Table: Congressional Action on R&D in the FY 2003 Budget

On February 13, the 108th Congress approved the 11 unfinished fiscal year (FY) 2003 appropriations bills in an omnibus package, completing a task that should have been finished by the 107th Congress. The budget provides a record-breaking increase for defense research and development (R&D), nearly completes the campaign to double the National Institutes of Health (NIH) budget over five years, and offers a substantial increase for the National Science Foundation (NSF).

The total federal investment in research and development hits a new record of $117.3 billion in FY 2003, a $14.2 billion or 13.8 percent increase over FY 2002 (see table). This represents the largest dollar increase in history coming after another record increase last year, and it is the largest percentage increase in 20 years.

In contrast to proposed cuts for most agencies in the original budget request, the FY 2003 budget provides at least modest increases for nearly all the major R&D funding agencies. The largest dollar and percentage increases go to the two principal R&D funding agencies, the Department of Defense (DOD) and NIH, reflecting the high priority placed on defense and health by the Bush Administration and Congress. DOD R&D increases by $8.8 billion or 17.6 percent to reach $58.6 billion following a similar increase last year. NIH R&D increases 15.5 percent to $26.2 billion just slightly short of completing a five-year campaign to double the NIH budget. Among other agencies, NSF does well with an 11.4 percent boost in R&D funding to achieve an all-time high of $3.9 billion, which could be the first installment of a five-year campaign to double its budget.

Basic and applied research in FY 2003 fares extremely well with a combined investment of $52.9 billion, an increase of 9.7 percent or $4.7 billion over FY 2002 that is well above the FY 2003 request. NIH remains the largest single sponsor of basic and applied research; in FY 2003, NIH alone will fund 47 percent of all federal support of research, its highest share in history. All other federal departments except the Departments of Transportation (DOT) and Commerce also receive increases for their basic and applied research portfolios, with especially large increases for research in NSF and the National Aeronautics and Space Administration (NASA).

Although it was officially created only at the end of January, the new Department of Homeland Security (DHS) is poised to become a major player in federal R&D funding. For FY 2003, R&D programs scheduled to transfer to the new department this year will receive $669 million in R&D funding, nearly triple the $266 million for comparable programs in FY 2002. Because there is no budget account yet for DHS, these programs are funded in FY 2003 in their current agencies (DOT, DOD, USDA, and DOE) and will be transferred to DHS in the coming months. In FY 2004, when the new DHS initiates its own R&D programs, DHS R&D would jump to $1.0 billion in the
president's request.

Nondefense R&D reaches another all-time high, for the seventh year in a row. A large part of this, however, is due strictly to the steady growth in the NIH budget, an agency that enjoyed increases of approximately 15 percent for five years in a row. As a result, NIH R&D has become nearly as large as all other nondefense agencies' R&D funding combined.

Funding for nondefense R&D—excluding NIH—has stagnated in recent years. After steady growth in the 1980s, funding peaked in FY 1994 and then declined sharply as a result of tight budget conditions in the mid-1990s. The FY 2003 increases for non-NIH agencies, while large, just barely bring these agencies back to the funding levels of the early 1990s. The FY 2004 budget request would provide increases smaller than the expected rate of inflation for nondefense R&D compared to FY 2003.

"The process was not the best, but we're finally here." Such was the assessment of Congressman C.W. Bill Young (R-FL), chairman of the House Appropriations Committee, upon completion of the massive omnibus appropriations bill. Though offered specifically in reference to concluding the omnibus bill, Chairman Young's observation could just as well have been said of the entire FY 2003 budget process. The session was marked by the failure of the House and Senate to arrive at a concurrent budget resolution, partisan squabbles over the wisdom of deficit spending in which Democrats and Republicans continued to all but reverse their historical positions on the issue, and growing concern over the budgetary implications of a looming military confrontation with Iraq. When President Bush signed the bill into law on February 20, 2003—some two weeks after he had submitted his FY 2004 request to Congress—all parties involved were left hoping that the FY 2003 process would soon be forgotten. •••