The future of Alaska will be heavily influenced by the contributions of science and engineering R&D. The survival of the North Pacific fisheries; the continued extraction of the state's oil, gas, and other natural resources; the preservation of its wildlife and unique natural environment; solutions to the special construction, transportation, and habitation problems the state faces due to its climate and its volcanic and seismic activity; and the provision of modern living standards for all citizens while preserving the independence and cultural heritage of Alaska's native peoples-all of these and more require the generation and application of new knowledge through research and development.

Some of this research and development will be paid for and conducted by profit-seeking industrial firms. Much, however, will need to be funded by the federal government as public goods. As noted above, however, federal agencies provide nearly three-fourths of all R&D funding in Alaska, far more than their 36 percent share of R&D in the nation as a whole. The federal government is the only body that has the resources and capabilities to sustain much of the R&D vital to Alaska's interests. While the amount of money that the federal government puts into R&D in Alaska-and into R&D on Arctic issues performed outside of the state-is small relative to the national R&D picture, its importance to the Alaska's future is difficult to overestimate.

Alaskans therefore have an especially strong interest in federal R&D funding trends and the future of the federal R&D system-and we stand at a critical juncture for that system. After many years of growth, federal funding for R&D has begun to decline. The end of the Cold War has undermined the long-standing national security rationale under which federal R&D-both defense and civilian-has prospered since the 1950s. At the same time, efforts to balance the federal budget by 2002 have created a climate of unprecedented austerity in federal discretionary expenditures. While most areas of R&D, and particularly basic research, continue to have strong bipartisan support in Congress and the Administration, the nation's research efforts may well become an unwitting casualty of the budget wars.

Congress in 1995 passed a Concurrent Budget Resolution laying out its plans to eliminate the federal deficit in seven years. The resolution marked most nondefense discretionary programs for sharp cuts in FY 1996, followed by progressive reductions in subsequent years out to FY 2002. Although most R&D programs were not targeted for cuts greater than the norm, and NSF and NIH, two key basic research agencies, were given relatively favorable treatment, the net result was a projected cut of one-third in real (inflation adjusted) spending for nondefense R&D over the seven-year period.

Fortunately, the details of the budget resolution are not binding on the Appropriations Committees (which are responsible for the actual spending legislation), and when the dust settled on the budget for FY 1996, the reductions in many R&D areas were smaller than had been called for in the resolution. Overall, nondefense R&D in FY 1996 was down about one percent relative to FY 1995-nothing for the R&D community to celebrate, but better than had been anticipated by many observers.

The FY 1996 budget battle, however, was only the beginning of what is likely to be a lengthy process. In their FY 1997 budget plans, both the President and Congress have projected spending patterns that would eliminate the deficit by FY 2002, primarily by reducing discretionary spending. Once again, R&D programs are at risk of serious reductions. Indeed, because (as agreed to in last January's "treaty" between the President and Congress) the two plans use the same Congressional Budget Office economic assumptions, they both reach approximately the same end-point. By FY 2002, nondefense R&D would be down about 19 percent under the President's plan and about 23 percent under the congressional plan. (The main reason these numbers look somewhat less draconian than the projections in last year's budget resolution is that expectations of future inflation have declined from an annual rate of about 3.0-3.5 percent last year to a rate of about 2.2 percent currently.)

A major difference between the President's plan and that of Congress is in FY 1997. The President proposes to increase some areas of discretionary spending, including most nondefense R&D, in FY 1997 before starting on the downward path toward FY 2002. Congress, under the FY 1997 Budget Resolution, would cut nondefense discretionary spending immediately, making the slope of the curve in subsequent years a bit less steep, but also making it more difficult to return to earlier spending levels, should political leaders wish to do so in future years.

These projections are, of course, not cast in concrete nor locked in the permafrost. As noted above, when push came to shove last year, congressional lawmakers provided more money for R&D programs than had been called for in the FY 1996 budget resolution. This could well happen again in future years. However, with both Congress and the President committed to balancing the budget by FY 2002 without raising taxes and without seriously tackling the growth of entitlement programs, substantial reductions in overall discretionary spending seem inescapable. R&D is part of the discretionary component of the federal budget. It has grown in tandem with increases in discretionary spending. It is likely to decline as the discretionary pie shrinks. The consequences for the future of Alaska's R&D institutions, its economy, and its environment could be profound.