of California's size and its disproportionate share of total
federal R&D, trends in federal R&D in California have
always closely tracked trends in total federal R&D spending,
especially defense R&D. Chart 6 illustrates the trend
in total federal R&D, which peaked in the early 1990s
in real terms. California's peak came earlier than in the
rest of the nation, in fiscal year 1989, because defense R&D
peaked at that time, even as nondefense R&D continued
to grow for a few more years.
though the latest complete data available for California are
for obligations for fiscal year 1993, we can project future
trends in federal R&D funding in California based on national
trends. R&D in the defense budget, accounting as noted
earlier for two-thirds of California's federal R&D, has
declined each year of the 1990s in real terms. (Even the small
increase in FY 1996 is less than the rate of inflation.) By
now it has fallen more than 30 percent below its peak of the
late 1980s. This trend has mirrored the well-known trend in
defense procurement that led to California's recession of
the early 1990s, from which the state is only now recovering.
modest (1.7 percent) increase in defense R&D (including
both DOD and DOE's atomic energy defense activities) in FY
1996, although smaller than the rate of inflation, will be
helpful to California. Although it is unclear how these FY
1996 R&D funds will be distributed, California is likely
to get its traditional 25 to 30 percent share of the total,
which stands at approximately $38.5 billion, up $0.7 billion.
Industry is especially likely to benefit as this money is
obligated over the coming year, because the development, testing
and evaluation parts of the R&D budget enjoyed the bulk
of the increase. Basic and applied research, however, were
cut, meaning that California universities and colleges and
other performers receiving DOD funds are likely to see less
this year than last year, even before factoring in the effects
long-term future for California defense R&D, however,
is still uncertain because of the continuing struggle between
Congress and the President over defense. Congress has protected
defense spending from cuts even in the push to achieve a balanced
budget and was responsible for the increases both to DOD's
R&D and the overall defense budget. The President, however,
has placed greater emphasis on domestic programs and has called
for declining defense spending over the next several years.
in an update released in mid-May 1996, estimates that under
the President's FY 1997 budget defense R&D will fall from
$38.3 billion in FY 1997 (itself a drop from the $38.5 billion
FY 1996 appropriation) to $30.8 billion in FY 2002. After
factoring in expected inflation, this amounts to a more than
a 30 percent drop over the FY 1995-2002 period. Barring unusual
changes in the allocation of DOD's R&D, California can
expect a proportional share of this cut if the President's
plan is followed.
R&D, although only a third of California's total R&D,
has disproportionate impact on the state's universities, FFRDCs
and nonprofits. Here, the future looks similarly bleak. AAAS's
mid-May estimates indicate that the latest budget proposals
from both the White House and the House Budget Committee would
reduce funding for nondefense R&D programs by about 25
percent in constant dollars by FY 2002.
House Budget Committee plan, which has not been approved by
the full Congress, but seems likely to set the pattern for
long-range congressional budget plans, would cut the President's
request for nondefense R&D in FY 1997 by about 9 percent.
A similar decline is proposed for FY 1998, then flat budgets
(in current dollars) out to FY 2002. The President's plan,
which includes a proposed increase for nondefense R&D
in FY 1997, would begin trending downward in FY 1998, winding
up at $30.2 billion in FY 2002, slightly below the House projection.
into account anticipated inflation, both budget plans would
mean a virtually identical inflation-adjusted reduction of
about one-fourth from the original FY 1995 spending level
over the seven-year period from FY 1995 to FY 2002 (24.4 percent
for the House, 24.5 percent for the Administration). Last
year, AAAS's analysis of the final congressional budget resolution
projected a one-third cut in nondefense R&D by FY 2002.
The difference in this year's outlook is largely a matter
of a lower anticipated rate of inflation, about 2.2 percent
a year instead of the 3.0 to 3.5 percent forecast last year.
be noted that the AAAS projections of the President's budget
differ from those released by the White House in March because
AAAS has re-estimated the Administration's R&D figures
for FY 2001 and 2002 following a Congressional Budget Office
finding that the President's original plan did not balance
the budget by FY 2002.
again, California's size makes it likely that the state's
share will mirror national trends. The specifics are, of course,
subject to negotiations (which are likely to be protracted,
if the past year is any guide) between the President and Congress.
And many things may change between now and FY 2002. The Administration
plan would impose deeper cuts on basic research agencies than
the congressional plan, while providing more generously for
applied programs. NIH, favored by budget-makers in the rough
climate of the past year, could nevertheless lose between
10 and 15 percent in constant dollars by FY 2002. NSF could
lose even morefrom 7 percent in the congressional plan to
an estimated 24 percent in the Administration's projections.
NASA and DOE's nondefense program fare worse than NSF and
NIH, under both congressional and Administration plans.
projections are not cast in concrete. When push came to shove
in the FY 1996 budget battle, congressional appropriators
provided considerably 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
in seven years 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 budget. It has
grown in the context of increasing discretionary spending.
It is likely to decline as the discretionary pie shrinks.
The consequences for California's R&D institutions and
the state's economy could be profound.