• In FY 1995, Arizona was 19^th out of the 50 states and the District of Columbia as a recipient of federal funds for research and development (R&D). The state received $958 million, 1.4 percent of the national total.


• The Department of Defense (DOD) supplies over two-thirds of Arizona’s federal R&D funds. Defense obligations to the state, which totaled $657 million in FY 1995, account for 1.9 percent of DOD’s total R&D funds.
  
• The National Science Foundation (NSF) is second as a source of federal R&D funds to Arizona. In FY 1995, NSF allocated $103 million for research conducted by Arizona universities and by the state’s only federally funded research and development center (FFRDC), the National Optical Astronomy Observatories.
  
• The Department of Health and Human Services (HHS) is the largest sponsor of federal R&D at Arizona universities, providing $66 million in FY 1995. NASA is second with $39 million, followed by NSF with $30 million.
  
• The University of Arizona (UA) is by far the state’s largest university recipient of federal R&D funding; it ranks 25^th in the nation. In FY 1995, it received $137 million, or 77 percent of all federal R&D funding to Arizona universities. UA is a Research I university and received $152 million in federal funds for total science and engineering (S&E; includes R&D as well as facilities support, training, and other S&E activities).
  
• Arizona State University (ASU) received $33 million in federal R&D funding in FY 1995. The Carnegie Foundation for the Advancement of Teaching classified ASU as a Research I university in 1996. ASU received $41 million in federal funding for total S&E in FY 1995, placing it 96^th in the nation.
  
• In 1995, Arizona universities awarded over 8,600 bachelors, masters, and doctoral degrees in science and engineering. Arizona graduates in math and computer science account for 2 percent of the national total.
• Industrial firms are the major recipients of federal R&D funding to Arizona, receiving 55 percent ($528 million) of the state’s total federal R&D obligations in FY 1995.
• Arizona hosts numerous businesses specializing in aeronautics and space. Boeing, AlliedSignal, and Honeywell each have facilities in the state. Arizona is also an important site of semiconductor and electronics development and production, an Arizona industry sector led by Intel and Motorola.
• Federal laboratories in Arizona received $178 million in FY 1995, almost one-fifth of the state’s federal R&D funds. Three-quarters of these funds come from DOD.
• Federal support for R&D, particularly DOD support for industrial R&D, in Arizona has been on the rise for the past several years, despite a downward trend in federal R&D funding for the nation as a whole.

Over 100 years ago, Percival Lowell sought to investigate the possibility of intelligent life on Mars. He chose Flagstaff as the site for his observations of the solar system, establishing the Lowell Observatory in 1894. Since then, Arizona’s research institutions have led the nation in astronomy, optics, and planetary science. More recently, the state’s R&D enterprise has grown to include aeronautics, telecommunications, and many other fields. Arizona now has a thriving high technology sector, several federal labs, and some of the country’s top universities. Almost $2 billion worth of R&D was performed in Arizona in 1995 (see Table 1). 

The federal government supplies over half of Arizona’s R&D funding. The state received $958 million in FY 1995, or 1.4 percent of the national total (see Table 2). This places it 19^th out of the 50 states and the District of Columbia. The largest share of the federal R&D funds goes to industry and is provided by the Department of Defense (DOD) and the National Aeronautics and Space Administration (NASA). Arizona is home to many companies and corporate subsidiaries involved in developing space and military technologies. These and other contractors account-ed for over half a billion dollars in federal R&D obligations. 

Arizona has a diverse set of federal labs that together receive $178 million from the federal government for R&D. DOD provided most of this, mainly for researching, developing, testing, and evaluating electronic systems. Arizona has one federally funded research and development center (FFRDC), the National Science Foundation (NSF)-funded National Optical Astronomy  

Observatories (NOAO). NSF gave NOAO $29 million in FY 1995, not including facilities support, to conduct astronomical research at its sites in the United States and abroad. Arizona is also home to a branch of the National Institute of Diabetes and Digestive and Kidney Diseases, one of the National Institutes of Health (NIH), which are funded by the Department of Health and Human Services (HHS). 
  
The University of Arizona and Arizona State University are the state’s top two research universities. Together, these two schools received over 95 percent of the federal R&D funding to Arizona universities and colleges in FY 1995. HHS provides over one-third of these funds. NASA, NSF, and DOD, in that order, are the other main sponsors (see Table 4). 

Technology plays an important role in Arizona’s economy. A 1995 report to the Governor’s Arizona Science and Technology Council and the Governor’s Strategic Partnership for Economic Development states that the high technology sector was responsible for nine percent of the state’s total employment, primarily related to the areas of electronics, aircraft and missiles, and scientific instruments, including optics. High technology products account for 63 percent of the state’s foreign exports. The report estimates that about 20 percent of people employed by high technology companies are engaged in R&D. In calendar year 1995, Arizona businesses spent a total of $759 million on R&D in order to maintain their innovative edge (see Table 1).