The Gulf States region is heavily dependent on a few major institutions for federal funding rather than a broad base of researchers competing nationally for their R&D finding. Almost 83 percent of the region's federal funds come from just two federal agencies, DOD and NASA, and their prospects for FY 2000 funding levels appear to be trending downward. A somewhat higher proportion of federal funding goes to industry (53 percent) compared with the national average of 45 percent. A somewhat lower proportion goes to universities and colleges (13.9 percent) compared with the national average of 18 percent.

The academic community, however, can boast some strengths. The Gulf States region is home to several major universities that receive over half of their R&D funding from various federal agencies. Almost 8 percent of the total USDA R&D portfolio went to academic institutions in the region, and almost 6 percent of NASA's R&D supports research at universities and colleges in the region. Most importantly, the academic institutions in the Gulf States region have captured a significant amount of funding support from their own states. Almost 6 percent of total R&D expenditures to universities and colleges in the region came from state and local governments, a higher percentage than other states.

The future outlook for federal funding for R&D is dependent on political and economic factors that do not directly relate to research. In the FY 1999 budget process, R&D funding grew 4.5 percent above FY 1998 and support for almost every major R&D agency received significant increases. The President's budget for FY 2000, however, is constrained by a cap on discretionary spending put into place two years ago. Despite the fact that the government is forecasting significant surpluses well into the future, the caps remain in place in the concurrent budget resolution passed by Congress.

Within the Administration's FY 2000 budget request, the two federal agencies that the Gulf States region relies upon most heavily, namely DOD and NASA, are expected to decline. The FY 2000 budget request for DOD is 7.7 percent below FY 1999 levels. Nearly all DOD support for R&D at colleges and universities comes from its Science and Technology accounts (6.1-6.3) which is expected to decline 5.2 percent. Industrial firms rely on DOD's R&D accounts (6-4-6.7) for funding research, which is expected to decline 8.1 percent in FY 2000. NASA's R&D funding request for FY 2000 called for a 0.6 percent increase, which is below the expected rate of inflation.

Furthermore, the outlook from the congressional perspective is not much brighter. The concurrent budget resolution accords lower priority for discretionary programs, including federal R&D. The budgetary increases of the past two years passed by Congress have raised hopes in the research community. Nevertheless, the caps on discretionary spending and the debates about using the surplus for Social Security versus tax reduction will take priority. Hence, federal funding for R&D, whether to support research conducted in government laboratories, industry, or academic institutions, faces an uphill battle.

It is clear that the new era of budget surpluses is far from a dawning golden age for federal investments in R&D. There are many claims to the surplus, and more importantly there are restrictive caps. The good news for federal R&D is that projections are not the same as predictions. As we have witnessed in recent years, expectations and plans for the future can change significantly as economic conditions improve, and estimates of the deficit or surplus change.

With respect to the Gulf States, the outlook for the federal budget may not appear to be very bright. The region is heavily wedded to DOD and NASA for federal funds, one of the region's weaknesses. This is sobering news for the government laboratories and industrial firms in the region that rely on a significant amount of support from these agencies. The universities and colleges too may find their research programs threatened by this dependence. Fortunately, the region's university research system has built strong ties with other agencies, notably HHS and USDA. In addition to its research diversification, the academic institutions in the Gulf States have developed state initiatives to bridge ties between academia, industry, and state governments. Developing partnerships between industry and academia, or federal and state governments may lessen the blow of decreasing federal dollars for R&D.