In the post-World War II era, the rapid expansion and development of world-class research capabilities at universities in the University of California system, at Stanford University, and in other institutions was fueled by generous federal support for both the conduct of research and research infrastructure. As a result of state commitment to higher education combined with federal support, California's universities are world-class centers for research and education.

California's universities and colleges are also major recipients of federal dollars in the form of research grants. (Universities receive federal funds from a variety of sources including education aid, training grants, and fellowships. This report does not cover these other types of federal funds). Three out of the top ten and five of the top twenty university recipients of federal R&D funds nationwide are located in California, led by Stanford University at number three. The University of California system received nearly $1 billion in federal support for R&D in FY 1993, nearly three times the amount that flowed to the next-largest system recipient, the University of Texas system.

The federal government has long played a major role in supporting R&D at the nation's colleges and universities. Although this role has decreased somewhat since the 1980s, the federal government still supports over 60 percent of the R&D performed at the nation's colleges and universities, with the remainder coming from institutional funds, state and local governments, and industry.

California's universities are even more dependent on federal funds to support their R&D than universities nationwide. In FY 1994, California's universities expended $2.5 billion for R&D, of which $1.7 billion, or 69 percent, came from the federal government. The next largest source of funds, institutional funds derived from tuition and other sources, accounted for $365 million or 15 percent. The state, along with local governments, provided $120 million, or 5 percent, while industry contributed $106 million.

In FY 1994, several California universities received more than 80 percent of their R&D funds from the federal government, including UC San Diego (80 percent), UC Santa Barbara (81 percent), Stanford (84 percent), and CalTech (88 percent). This unusually heavy dependence on federal funding is likely to continue because of continuing cutbacks in state support for higher education. Although industrial firms are the fastest-growing funding source for university R&D nationwide, they still represent a relatively small share overall, and they are are unlikely to replace other funding sources.

Federal support for academic R&D is spread throughout the state, with seven campuses receiving more than $100 million in FY 1993 as shown in Table 3 and Chart 5. Over half of these funds come in the form of research grants from the National Institutes of Health, which finance biomedical research primarily in medical schools and life sciences departments. In FY 1993, $794 million flowed to California universities through NIH grants.

NIH's continuing support is crucial to the ability of many universities to carry out research. For example, NIH accounts for over 90 percent of federal support for R&D at UC San Francisco, a world-class biomedical research and teaching institution which ranks behind only the medical school at Johns Hopkins University as the largest university recipient of NIH grants. Even counting other sources of support such as the state, industry, and institutional funds, NIH alone finances two-thirds of UC San Francisco's R&D. Three other university campuses in California receive more than $100 million annually from NIH.

The next largest source of federal support for university R&D in California is the National Science Foundation, which funds merit-reviewed research in a wide range of disciplines. California universities received $255 million in research grants and facilities support from NSF in FY 1993. The largest beneficiary was CalTech, which received $51 million, evenly divided between research grants and R&D infrastructure support. Three other universities received more than $20 million each. Although NSF's R&D budget increased by more than 10 percent a year between FY 1993 and FY 1995, it was virtually flat between FY 1995 and FY 1996 and it is unlikely see significant growth (and may well decline) in coming years as discretionary spending comes under increasing deficit-reduction pressure.

Rounding out the university funding picture are the Department of Defense, which focuses its funding on basic and applied research in computer science and engineering (DOD's development work, as noted earlier, takes place mostly in industry), the Department of Energy which mostly funds physics and energy sciences, and NASA which funds aeronautics, astronomy, and space sciences. Stanford is the largest recipient of these funds.