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Go to:
-Highlights
-Agency Highlights
-The Budgetary
Context for FY 2002: Tax Cuts and Three Priorities Squeeze Out Other Programs
-Outyear Projections
for Federal R&D to FY 2006
-U.S. Industry
Support for R&D
-Historical
Trends and Outlook
-Table 1. R&D
in the FY 2002 Budget by Agency
-Table 2. Research
in the FY 2002 Budget
-Table 3. AAAS
Analysis of the Outyear Projections for R&D in the FY 2002 Budget
-Table 4. Major
Functional Categories of R&D
-Table 5. Total
U.S. R&D, 1998-2000
PDF version
of this document
Full
Text of AAAS Report XXVI: R&D FY 2002
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(This analysis is a preview of AAAS
Report XXVI: R&D FY 2002, a comprehensive analysis of R&D
in the FY 2002 budget produced by AAAS in collaboration with 21 other
science and engineering societies. The 274-page book will be available
in mid-June in print and is now
available on the AAAS R&D web site.
This AAAS analysis supresedes previous preliminary analyses of R&D
in the FY 2002 budget. It contains revised AAAS estimates of R&D,
based on agency data obtained after the release of the President's budget;
DOD and summary data will be revised again when the Department of Defense
releases its revised FY 2002 budget request.)
Highlights
On April 9, President Bush released a fiscal year (FY)
2002 budget request containing overall increases for the federal investment
in research and development (R&D), but cuts in most of the major
R&D funding agencies. The budget calls for tax cuts totaling $1.6
trillion over ten years, an extra $153 billion over ten years for Medicare,
a reserve for unanticipated needs, and the retirement of $2.0 trillion
in publicly held debt over ten years. These proposals, however, leave
little room for increases in discretionary spending.
Discretionary spending, the one-third of the budget
subject to annual appropriations decisions by Congress and the President,
is the part of the budget out of which nearly all federal R&D is
funded. The Bush budget calls for discretionary spending to rise 4.0
percent or $26 billion in FY 2002 to $661 billion. But the entire increase
would go just to the top priorities of the Department of Defense (DOD),
the Department of Education, the National Institutes of Health (NIH),
and a reserve for emergencies, leaving all other discretionary programs,
including most federal R&D programs, with flat or declining funding
overall. (References in italics are to chapters in the full report.)
- Because DOD and NIH are the two largest funding sources of federal
R&D, the special treatment given to them in the budget would allow
total federal R&D to increase in FY 2002. The request for total
federal R&D in FY 2002 is a record $96.5 billion, $5.6 billion
or 6.1 percent more than FY 2001 (see Table
1). The expected rate of inflation is 2.1 percent.
- The proposed increases for DOD ($3.6 billion) and NIH ($2.7 billion)
would be more than the overall $5.6 billion increase, leaving all
other R&D funding agencies combined with less money than in FY
2001. Six of the 11 largest R&D funding agencies would see
their R&D decline in FY 2002 (see Figure 1). NIH, DOD, the
Department of Transportation (DOT), the National Aeronautics and Space
Administration (NASA), and the Department of Veterans Affairs (VA)
would see increases, but the National Science Foundation (NSF), the
Environmental Protection Agency (EPA), and the Departments of Energy,
Agriculture, Commerce, and Interior would see their R&D budgets
decline.
Figure 1. (click on image to view or download a full-size PDF version
of the chart)
· Nondefense
R&D would increase by 4.3 percent to $47.1 billion. NIH would
receive a 13.6 percent increase in its R&D funding to $22.4 billion;
NIH would make up almost half of the entire nondefense R&D portfolio.
Excluding NIH, however, all other nondefense R&D would fall by
3.0 percent to $24.7 billion, a loss of $752 million (see
Table 1).
· Defense
R&D would increase 8.0 percent to reach $49.4 billion. The
Bush Administration would fulfill a campaign promise by aggressively
expanding defense R&D investments. DOD did not submit a full FY
2002 budget in April; the agency is conducting a major review of defense
priorities that will result in a full FY 2002 budget request in May.
Most of the DOD request consists of placeholder figures assuming the
FY 2001 budget plus inflation, but there is also a request for an
extra $2.6 billion in unallocated funds for development (see Chapter
6). Defense R&D in the Department of Energy (DOE) would grow
by a modest 1.2 percent to $3.5 billion.
· The federal
investment in basic research would grow by 6.0 percent or $1.3
billion to an all-time high of $23.3 billion, primarily because of
a 12.4 percent requested increase for basic research in NIH (see Table
2 and Chapter 3). NIH would provide the majority (56 percent)
of federal basic research. Although other federal agencies have enjoyed
increases for their basic research programs in the last few years,
basic research excluding NIH would decline 1.0 percent to $10.4
billion in FY 2002. The total federal investment in research
(basic and applied research) would increase 5.4 percent to $45.8 billion
(see Table 2), but excluding a large
increase for NIH all other federal research would fall 0.7 percent
to $23.8 billion.
· The AAAS analysis
of the outyear projections in the FY 2002 budget shows that
nondefense R&D would increase from $45.1 billion in FY 2001 to
$55.5 billion in FY 2006, a 10.9 percent gain after adjusting for
expected inflation (see Table 3 and
Chapter 3). NIH would be responsible for the increase. The budget
assumes NIH funding would double between FY 1998 and 2003 and hold
steady with inflation thereafter; excluding NIH, nondefense R&D
would fall 2.8 percent in inflation-adjusted terms between FY 2001
and FY 2006. Most nondefense R&D agencies, with the exception
of NASA and NIH, would see their R&D funding lose ground to inflation.
· Two major multi-agency
initiatives would receive increases in the FY 2002 budget. After nearly
doubling from $270 million to $446 million in FY 2001, funding for
the Nanoscale Science, Engineering, and Technology Initiative
would rise by 8.1 percent to $482 million in FY 2002 (see Chapter
25). Within a shrinking research budget, NSF's lead contribution
would rise by 16.1 percent to $174 million. After a nearly 30 percent
increase last year, the Networking and Information Technology R&D
initiative would rise by a more modest 2.1 percent to $2.0 billion
(see Chapter 24). The U.S. Global Change Research Program
would see its funding drop 4.4 percent to $1.6 billion, mostly because
of steep cuts to NASA's Earth Science program, the largest component
of the initiative (see Chapter 15).
· The high priority
placed by the Bush Administration on defense and health is evident
in Table 4 (see Chapter 3),
which shows federal R&D by national mission. Defense R&D
(up 8.0 percent) and health R&D (up 12.4 percent) would increase
substantially and would together make up more than three-quarters
of the federal R&D portfolio. R&D funding for most of the
other national missions would decline. There would be steep cuts
to energy-related R&D (down 25.8 percent), commerce-related R&D
(down 29.1 percent), and agriculture R&D (down 9.5 percent).
- Industry support for R&D continues to grow far faster
than federal R&D or the U.S. economy as a whole. U.S. industry-funded
R&D increased by 10.8 percent to $181 billion in 2000, following
similar increases in the previous five years; private industry now
funds 68 percent of all U.S. R&D. Total U.S. R&D reached $265
billion in 2000, and further increases are expected in 2001 (see Table
5 and Chapter 4).
Agency Highlights
· The National
Institutes of Health (NIH) would receive $23.1 billion for its
total budget in FY 2002, an unprecedented increase of $2.8 billion
(13.5 percent) that would keep NIH on track to double its budget between
FY 1998 and 2003. NIH R&D would rise 13.6 percent to $22.4 billion.
Most of the institutes would receive increases between 11.5 and 12.5
percent. The NIH budget would emphasize investments in R&D facilities,
both for extramural research facilities grants ($100 million, up from
$78 million) and intramural construction ($307 million, double the
FY 2001 funding level). Funding for the Office of Research on Women's
Health within the Office of the Director would more than double, and
the new National Institute of Minority Health and Health Disparities
would receive a 20 percent boost in its budget to $158 million. The
new National Institute of Biomedical Imaging and Bioengineering would
receive $40 million, up from $2 million. (See Chapter 8.)
- The Department of Defense (DOD), the largest federal sponsor
of R&D, did not submit a full FY 2002 budget; DOD is conducting
a major review of defense spending priorities that is expected to
result in a full FY 2002 request in May. In the meantime, most of
the DOD request consists of placeholder figures assuming the FY 2001
budget plus inflation, but there is also a request for an extra $2.6
billion in unallocated funds for DOD development. DOD R&D would
increase 8.5 percent because of the special request, for a total of
$45.9 billion. Much of the $2.6 billion special request may eventually
be allocated to national missile defense in the Ballistic Missile
Defense Organization (BMDO). (See Chapter 6.)
- Although the National Science Foundation (NSF) enjoyed a
nearly 13 percent increase in its budget and its R&D funding in
FY 2001, the total NSF budget would barely increase in FY 2002 and
NSF's R&D investments would actually decline 1.6 percent to $3.2
billion (see Figure 1 and Table 1). There
would be an expansion of NSF's science and mathematics education activities,
but most of the research directorates in Research and Related Activities
(R&RA; down 0.5 percent to $3.3 billion) would face budget cuts.
Only mathematics and nanotechology-related research would receive
inflationary increases, leaving research in nearly 30 other program
areas such as information technology research, physics, and the social
sciences with flat or declining funding. (See Chapter 7.)
· The National
Aeronautics and Space Administration (NASA) would see its total
budget increase by 1.8 percent to $14.5 billion in FY 2002. NASA's
R&D would increase 0.4 percent to $10.0 billion. NASA proposes
a major restructuring of its accounts to incorporate formerly separate
mission support costs into program costs. While Space Science would
increase by 6.2 percent to $2.8 billion, there would be cuts totaling
$201 million in the Earth Science enterprise (down 11.7 percent to
$1.5 billion). Biological and Physical Research (formerly Life and
Microgravity Sciences) would decline 4.7 percent to $361 million.
Aero-Space Technology would increase 7.3 percent to $2.4 billion because
of a 75 percent increase to $475 million for the Space Launch Initiative
to explore technologies for reusable launch vehicles. While the budget
contains a $2.1 billion request for the International Space Station
(down 1.2 percent), there are few details for FY 2002 because the
entire project is currently undergoing a major review which will likely
result in a heavily restructured and scaled-down station. (See
Chapter 10.)
· The Department
of Energy (DOE) would see its R&D programs decline 4.5 percent
to $7.4 billion after a 12 percent increase last year. Most programs
in the Office of Science would receive level or slightly increasing
funding. Funding for the Spallation Neutron Source would rise $13
million to $291 million. Energy R&D, however,
would suffer steep cuts: solar and renewable energy R&D would
drop by 30.8 percent, nuclear energy R&D would fall 29.4 percent,
and energy conservation R&D would fall 28.3 percent. In Fossil
Energy, a new $150 million coal grants program would only partially
offset steep cuts in gas, oil, and other fossil energy R&D program
areas. Fossil Energy R&D would decline 25.3 percent. In DOE's
defense programs, construction of the troubled National Ignition Facility
would continue with a 24 percent boost to $245 million. (See Chapter
9.)
· R&D in
the U.S. Department of Agriculture (USDA) would fall 8.1 percent
in FY 2002 to $1.8 billion, reversing a similarly-sized increase last
year. Funding for competitive research grants in the National Research
Initiative ($106 million) and formula research funds in the Hatch
Act ($180 million) would stay even with FY 2001; the Bush Administration
would find savings by not renewing more than $120 million in congressionally
designated research projects. Intramural research in the Agricultural
Research Service would stay even with FY 2001 at $852 million, but
there would be $44 million in cuts to ARS Buildings and Facilities
(down 27.2 percent to $118 million). R&D projects in the competitively
awarded, mandatory Initiative for Future Agriculture and Food Systems
program would stay level at $64 million. (See Chapter 11.)
· Department
of Commerce R&D funding would decline 7.6 percent to $1.1
billion. The budget would eliminate R&D in the Advanced Technology
Program at the National Institute of Standards and Technology (NIST).
Intramural R&D in the NIST laboratories, however, would increase
8.9 percent to $292 million. National Oceanic and Atmospheric Administration
(NOAA) R&D would increase 6.4 percent to $772 million, including
substantial program increases for Oceanic and Atmospheric Research
(OAR; up 7.8 percent to $290 million) and the National Marine Fisheries
Service (NMFS; up 6.0 percent to $329 million). (See Chapter 12.)
· R&D in
the Department of the Interior would fall 6.1 percent to $593
million, but steeper cuts would fall on Interior's lead science agency,
the U.S. Geological Survey (USGS). USGS R&D would fall
10.7 percent to $491 million. R&D in all four USGS divisions would
decline, but hardest hit would be programs in Water Resources (down
25.5 percent from the elimination of some programs and dramatic reductions
in the National Water Quality Assessment program) and Biological Research
(down 7.0 percent because of the elimination of the National Biological
Information Infrastructure program). (See Chapter 12.)
- Department of Transportation (DOT) R&D funding would
climb 6.8 percent to $798 million. Many DOT programs do not compete
with other discretionary programs for funding because they rely on
guaranteed spending from transportation trust funds. Because transportation
tax revenues have been rising steadily, R&D funding would also
rise. (See Chapter 12.)
- The Environmental Protection Agency (EPA) R&D budget
would fall 6.5 percent to $569 million, mostly because of the elimination
of dozens of congressionally designated research projects. EPA's core
research programs would mostly be held to level funding. (See Chapter
12.)
- In other agencies, the Department of Veterans Affairs would
increase its R&D funding 2.7 percent to $722 million. About half
of this amount is for medical and prosthetic research programs; the
other half pays for clinical and other support costs and for VA researchers'
salaries. While the Smithsonian Institution's overall R&D
budget of $118 million would remain unchanged in FY 2002, there would
be reorganizations of its science centers, including a proposed closing
of the Conservation Research Center that has generated a great deal
of controversy and protest. Although education funding would be a
high priority for the Bush Administration, R&D in the Department
of Education would decline 2.3 percent to $259 million because
of a proposed cut in funding for the Office of Educational Research
and Improvement. (See Chapter 12.)
The Budgetary Context for FY 2002:
Tax Cuts and Three Priorities Squeeze Out Other Programs
The FY 2002 Bush budget proposes discretionary spending
of $661 billion in FY 2002, an increase of $26 billion or 4.0 percent
over FY 2001 (see Figure 2). But the entire increase would go to the
Bush Administration's top three priorities in discretionary spending,
the Department of Defense (DOD, up $14 billion), the Department of Education
(up $5 billion), and the National Institutes of Health (NIH, up $2.8
billion), plus a separate $5 billion contingency fund intended to provide
for emergencies such as farm aid or natural disaster relief. This would
leave all other discretionary programs with $1 billion less than FY
2001, for a total of $277 billion. Non-NIH nondefense R&D joins
other programs such as foreign aid, immigration, justice programs, national
parks, and environmental protection in a competition for shrinking resources.
Not surprisingly, then, NIH and DOD R&D programs would receive substantial
increases while other agencies' R&D programs would decline.
Figure 2. (click on image to view or download a full-size PDF version
of the chart)
Holding overall discretionary spending growth to 4.0
percent in FY 2002 and roughly the rate of inflation thereafter allows
President Bush to spend the bulk of projected budget surpluses on tax
cuts and debt reduction. The FY 2002 budget projects baseline budget
surpluses of $5.6 trillion over ten years (FY 2002-2011; the baseline
projection is one which assumes no changes in current tax or entitlement
policies, only inflationary growth in discretionary spending, and moderate
economic growth and inflation over the next decade). The FY 2002 budget
proposes to allocate this 10-year surplus as follows: $1.6 trillion
in tax cuts, $0.4 trillion in additional debt service costs resulting
from tax cuts and additional spending, $153 billion for Medicare reform
and a possible prescription drug benefit, a $0.8 trillion reserve for
contingencies (future priorities, emergency spending, etc.), and just
$30 billion for additional discretionary spending over ten years above
inflationary growth. This would leave $2.6 trillion in surpluses from
the Social Security trust funds, all of which automatically become Social
Security-held debt. Of the $2.6 trillion, the President proposes to
use $2.0 trillion to pay down the national debt to the public, and $0.6
trillion to keep as a cash reserve for Social Security reform, including
possible use for private Social Security accounts.
The Bush budget has little to no margin for error.
On-budget (non Social Security) surpluses are expected to total only
$30 to $60 billion a year for the next several years, and even these
small surpluses will shrink or disappear if any of the contingencies
should materialize, or if discretionary spending rises above the request
level. For example, even within the next two months several events could
vaporize the surpluses: defense observers expect DOD's strategic review
to result in even higher DOD requests in FY 2002 and future years than
in the current budget; there is growing pressure in Congress to spend
billions immediately on aid to farmers; and unforeseen natural disasters
such as the current flooding of the Mississippi have in each of the
past several years added far more to spending than the $5 billion set
aside for FY 2002. There is also widespread agreement that even a minimal
prescription-drug benefit for Medicare will require more than double
the $153 billion over ten years set aside in the budget, and many Republicans
in Congress would like to expand tax cuts beyond $1.6 trillion; even
the Bush proposal, if enacted as is, will probably require alternative-minimum
tax (AMT) reform of $400 billion or up over 10 years to prevent middle-class
families from becoming having to pay the AMT.
The FY 2002 budget also depends crucially on continuing
economic growth to keep the budget in surplus. Even a slight economic
slowdown in a $10 trillion U.S. economy would lower tax revenues enough
to easily wipe out projected on-budget surpluses. Although the U.S.
budget shifted to surplus because higher-than-expected economic growth
resulted in unexpected tax revenues, this year the process could shift
into reverse and plunge the U.S. budget back into deficits. With a U.S.
economic slowdown looking increasingly likely this year, projections
of a $59 billion FY 2002 on-budget surplus could easily disappear even
before additional spending and tax cut proposals can be considered.
Outyear Projections for Federal
R&D to FY 2006
The FY 2002 budget also contains detailed projections
for nondefense federal spending to FY 2006. (Detailed defense projections
will not be available until completion of the Defense Strategy Review
in late May.) Although these projections are mostly mere extrapolations
of current policies, they are a statement of the Bush Administration's
priorities and their implications for the future. The AAAS analysis
of these outyear projections reveals that the Bush budget would hold
most discretionary programs to at best inflationary growth over the
next several years; most R&D programs would fall behind expected
inflation and see real losses in the longer term while entitlement programs,
annual revenue losses from tax cuts, defense spending, and debt reduction
would all increase over the next several years.
Figure 3.. (click on image to view or download a full-size PDF version
of the chart)
Federal support for nondefense R&D is projected
to increase from $45.1 billion in FY 2001 to $55.5 billion in FY 2006,
a 10.9 percent increase after adjusting for expected inflation (see
Table 3). As shown in Figure 3, the Bush
Administration would fulfill a campaign pledge to complete the doubling
of the NIH budget between FY 1998 and FY 2003; although NIH funding
would only stay even with inflation thereafter, the large increases
in FY 2002 and FY 2003 would allow NIH R&D to increase 28.4 percent
ahead of inflation between FY 2001 and FY 2006. Excluding NIH, however,
nondefense R&D would fall 2.8 percent in inflation-adjusted terms
over this time period. Most nondefense R&D agencies, with the exception
of NASA and NIH, would see their R&D funding lose ground to inflation
(see Table 3 and Figure 3), mostly through
cuts in FY 2002 and steady funding thereafter.
Included in the budget projections are a few increases.
NASA R&D would increase from $9.9 billion in FY 2001 to $11.4 billion
in FY 2005 (up 3.4 percent after inflation; see Figure 3). The increase
is even larger for key R&D programs because the International Space
Station would see its R&D budget nearly halved over the next five
years as development and construction wind down, leaving more room for
other programs. NASA plans a dramatic expansion of the Space Science
program from $2.6 billion in FY 2001 to $4.0 billion in FY 2006 (37.6
percent after inflation). NASA Aero-Space Technology would jump from
$2.2 billion to $3.4 billion (up 38.5 percent after inflation) because
of efforts to develop a new generation of reusable launch vehicles.
Other programs slated for increases include: intramural research in
NIST, up 7.2 percent after inflation; NOAA R&D (up 4.3 percent);
and DOT highway R&D (up 11.1 percent).
Most other programs' projections generally show cuts
in FY 2002 and increases at the rate of inflation thereafter. NSF's
R&D would fall in FY 2002 but would keep pace with inflation thereafter
to end up 3.1 percent below the FY 2001 level after adjusting for inflation
(see Figure 3). Some programs would face steep cuts over the next several
years, mostly in DOE: energy supply R&D (down 31.5 percent FY 2001
to FY 2006), fossil energy R&D (down 26.5 percent), and energy conservation
R&D (down 19.0 percent) would all fall steeply. (See Chapter
3.)
U.S. Industry Support for R&D
Including non-federal funding sources, the U.S. invested
an estimated $265 billion in R&D in 2000 (up 7.1 percent; see Table
5). This represents 2.66 percent of the nation's Gross Domestic
Product (GDP). The largest share of this money (about 68 percent; total
$181 billion) came from industrial firms. Most of the balance (26 percent)
came from the federal government. Colleges and universities, private
foundations, other nonprofit institutions, and state and local governments
provided the remainder.
In 2000, industry support of R&D grew by 10.8 percent,
the sixth consecutive year with increases at or near double-digit levels.
A recent forecast by the Industrial Research Institute predicts that
this growth will continue in 2001, but perhaps at a slower rate. Battelle
Memorial Institute forecasts that industry's funding of R&D will
rise 6.0 percent in 2001.
The fastest rising component of this growth in industrial
R&D was basic research, which increased 142 percent over the past
five years, followed by development, which rose 61 percent; development
accounts for the vast majority of industrial R&D (See Chapter 4).
Historical Trends and Outlook
Increases for NIH over the past few decades have resulted
in a dramatic expansion in federal support for health research, an expansion
which has accelerated in the past few years with the effort to double
the NIH budget in five years beginning in FY 1998 (see Figure 4). Other
national missions, funded by agencies with stagnant or declining budgets,
have not fared as well in recent years; as a result, health is now the
majority of the nondefense R&D portfolio.
As shown in Figure 4, the relative priority of different
areas of R&D has varied over the years, reflecting changing national
priorities. Nondefense R&D reached a high point in the mid-1960s,
declining for several years thereafter. After several years of significant
growth in the late 1980s and late 1990s, nondefense R&D would finally
exceed the mid-1960s funding levels in FY 2002.
Priorities, however, are different now than they were
in the 1960s. Space was the dominant mission in the 1960s in the heyday
of the Apollo program. Energy R&D gained priority following the
oil shortages in the 1970s and then retreated. Health R&D, meanwhile,
has shown practically uninterrupted growth over four decades, a trend
the Bush Administration would continue.
Figure 4. (click on image to view or download a full-size PDF version
of the chart)
The President's budget is now under consideration in
Congress. In April, the House of Representatives approved a budget resolution
closely following the President's plan. But the Senate voted to increase
FY 2002 discretionary spending to $688 billion, $27 billion above the
President's request. In order to stay within projected surpluses, the
Senate then had to lower its 10-year tax cut to $1.2 trillion instead
of $1.6 trillion. Within the next few weeks, Congress is expected to
hammer out a compromise final FY 2002 budget resolution setting out
broad spending targets for the appropriations process. The House and
Senate are expected to meet somewhere in the middle for both the total
tax cut and the FY 2002 discretionary spending level. After that, Congress
will begin the arduous task of setting appropriations for individual
programs within the broad spending targets.
Wherever the final budget resolution sets discretionary
spending, Congress is likely to draft appropriations bills providing
more than the request for R&D in agencies such as DOE, NSF, and
USDA. Whether these increases can be sustained will depend on how insistent
President Bush and congressional fiscal conservatives will be on restraining
government spending, and how willing they will be to compromise on tax
cuts. For federal R&D programs, the only thing certain is that NIH
will eventually receive its request and probably even more. For other
agencies, Congress may disagree with the President, and the flat or
declining funding for most nondefense R&D programs may change before
the FY 2002 budget process is over. But with tax cut proposals competing
for spending proposals for a share of projected surpluses that could
disappear quickly, R&D and other programs will face steep competition.
Go to Tables
1-5
- May 1, 2001
AAAS R&D Budget and Policy Program
American Association for the Advancement of Science
1200 New York Ave, NW
Washington, DC 20005
(202) 326-6607
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http://www.aaas.org/spp/R&D
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