American Association for the Advancement of Science

AAAS Analysis of R&D in the FY 2004 Budget - REVISED


FY '04 Budget Proposes Defense and Homeland Security Increases,
Modest Growth or Cuts for Other R&D Programs

AAAS Analysis of R&D in the FY 2004 Budget - REVISED

Go to:

-Highlights

-Agency Highlights

-The Budgetary Context for FY 2004: More Defense, More Deficits, More Tax Cuts

-Outlook for the FY 2004 Budget Process

-Table 1. R&D in the FY 2004 Budget by Agency

-Table 2. Research in the FY 2004 Budget

-Table 3. "Federal Science and Technology" Budget by Agency

-Table 4. Major Functional Categories of R&D

-Table 5.AAAS Analysis of the Outyear Projections for R&D in the FY 2004 Budget

-Table 6. R&D Funding by Congressional Appropriations Subcommittee

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Full Text of AAAS Report XXVIII: R&D FY 2004

 

(All figures in this analysis have been revised since earlier analyses. This analysis has been updated to reflect FY 2003 appropriations finalized on 2/20 and revised agency estimates of R&D. This analysis is a preview of the forthcoming AAAS Report XXVIII: Research and Development FY 2004, a comprehensive look at the President's budget for R&D in FY 2004. More tables and continually updated supplemental materials on R&D in the FY 2004 budget can be found on the AAAS R&D Web site at http://www.aaas.org/spp/rd.)

In a time of great uncertainty, with possible military action against Iraq, a shaky U.S. economy, the return of budget deficits, the loss of the space shuttle and seven astronauts, and a federal budget for fiscal year (FY) 2003 that was then unfinished, President Bush released a FY 2004 budget request on February 3. The budget proposes overall increases for the federal investment in R&D, especially for the priorities of defense development and homeland security research, with a mixture of flat funding, cuts, and modest increases for other R&D programs. In a budget that proposes record deficits for this year and next, an additional $1.5 trillion package of tax cuts over the next decade, continuing increases in defense spending, and new entitlement spending, the Bush proposal calls for only modest increases in domestic programs not related to homeland security, with the consequences of reduced expectations for many R&D programs.

The FY 2004 budget calls for overall discretionary spending to rise just 2.5 percent from the just-completed FY 2003 budget to $782 billion in FY 2004, with the majority of the increase going to the Department of Defense (DOD) and the newly created Department of Homeland Security (DHS). All other programs, including past favorites such as the National Institutes of Health (NIH), would share in a tight funding situation.

R&D in the FY 2004 Budget: DOD and Homeland Security Up, Other Programs Mixed

Because DOD is the largest funding source for federal R&D by far, federal R&D would increase substantially in FY 2004. But with the exception of the new DHS, the other R&D funding agencies would see at best modest increases, and most would see their R&D funding decline over FY 2003. (Year-to-year trends are based on AAAS estimates of final FY 2003 appropriations, which were completed on February 20. For full information on R&D in final FY 2003 appropriations, please see the Congressional Action on R&D in FY 2003 analysis available on the "FY 2003 R&D" section of the AAAS R&D web site).

• The request for total federal R&D in FY 2004 is another record at $122.5 billion, or 4.4 percent more than FY 2003 (see Table 1). Most of the increase would go to defense development of weapons systems, leaving smaller percentage increases for other categories of spending. Total research (basic and applied) would barely increase by 1.5 percent to $53.7 billion (see Table 2). The "FS&T" budget would barely increase by 0.1 percent to $58.9 billion (see Table 3).

• Two agencies may have to adjust to diminished expectations after years of favored treatment. After an almost-completed five-year doubling campaign involving 15 percent increases for each of the past five years, growth in the National Institutes of Health (NIH) budget would slow sharply to just 2.7 percent in FY 2004. Although President Bush signed a NSF authorization bill in December that called for the NSF budget to double over five years, the NSF budget request of $5.5 billion in FY 2004 would fall far short of the $6.4 billion authorized 'doubling track' level; the 3.2 percent increase over FY 2003 follows a 10 percent increase last year instead of the nearly 15 percent increases for both years envisioned in the authorization.

The Department of Homeland Security (DHS), officially created just a month ago, would become a major R&D funding source in FY 2004 with an R&D budget of $1.0 billion, a dramatic increase of 49.6 percent from the estimated FY 2003 level for comparable programs (see Figure 1). On March 1, several R&D programs from existing agencies such as the Departments of Transportation (DOT), Energy (DOE), and Agriculture (USDA) transferred to DHS, but most of the FY 2004 R&D growth would come from the brand-new Homeland Security Advanced Research Projects Agency (HSARPA) within DHS.

• Outside of DOD and DHS, the federal R&D portfolio is a mix of modest increases, flat funding, and cuts from last year, with many R&D funding agencies proposed for cuts (see Figure 1).

• Nondefense R&D would increase by just 1.2 percent or $659 million to $55.0 billion (see Table 1). Excluding the modest growth in the NIH budget, however, nondefense R&D excluding NIH would decline by 0.1 percent from the FY 2003 appropriated level to $28.0 billion.

Figure 1. (click on the image to view or download a color, full-page PDF version of the chart)

• The total federal investment in research (basic and applied research) would increase just 1.5 percent to $53.7 billion in FY 2004 (see Table 2), smaller than the increase for R&D as a whole because DOD's development activities would increase more dramatically. A $1.7 billion increase for NIH research would make up more than the overall increase, leaving non-NIH research collectively down by 3.4 percent from the FY 2003 level. NIH research would increase 7.0 percent, greater than the 2.7 percent increase for the overall NIH budget, because NIH would discontinue most of its FY 2003 facilities funding and shift the money to research in FY 2004. Many agencies would see their research funding increase slightly in the FY 2004 request, but several would decline significantly: despite a multi-billion dollar increase for the DOD R&D portfolio, DOD's "6.1" (basic research) and "6.2" (applied research) activities would fall 18.2 percent to $5.0 billion in FY 2004, below even the FY 2001 funding level. Looking only at basic research, the federal portfolio would grow by 3.1 percent or $813 million to another all-time high of $26.9 billion, with NIH accounting for nearly all of the increase (see Table 2).

The FY 2004 R&D request claims to emphasize investments in the physical sciences with significant increases for several supporters of physical sciences research, but the gains would be modest compared to FY 2003 levels. The Directorate of Mathematical and Physical Sciences (MPS) in the National Science Foundation (NSF) would receive just a 2.6 percent boost in funding. NASA would make new investments in physics and astronomy. DOE, the largest agency sponsor of physical sciences research, would receive a 6.3 percent boost in its research funding to $5.5 billion. Most of the increase would be in DOE's defense programs which fund physics, mathematics, and computing research. DOE's Office of Science, however, would see its budget remain flat for the fourth year in a row, with some shifts to research from facilities funding. And DOD funding of research would decline sharply by 18 percent; DOD is a key supporter of physical sciences research, and especially of related fields such as engineering, computing, and mathematics.

Defense R&D continues to gain prominence in the federal R&D portfolio because of the high priority given military defense and homeland security by the Bush Administration. Defense R&D, which includes DOD, DOE's defense activities and defense-related activities in the new DHS, would total 55 percent of the federal R&D portfolio in FY 2004 (see Table 4) at $67.5 billion, from near-parity with nondefense a few years ago. Table 4 shows federal R&D by mission area; homeland security is included under several national missions including transportation, general science, and defense. R&D for some national missions would show an increase in FY 2004, with large increases going to defense R&D (up 7.2 percent) and general science R&D (up 5.0 percent to $7.4 billion) because of DHS and DOD increases. Funding for most other national missions would remain flat or decline.

• The AAAS analysis of the outyear projections in the FY 2004 budget shows that, in the Bush Administration's long-term budget plans, nondefense R&D would increase from $54.3 billion in FY 2003 to $61.0 billion in FY 2008, a gain of 2.6 percent after adjusting for expected inflation (see Table 5). Defense R&D would climb to $73.4 billion in FY 2008, a 6.5 percent inflation-adjusted gain over FY 2003. The only agency projected to receive a large increase over this time period is DHS because of its contributions to the high priority of homeland security and because DHS will ramp up its R&D funding with new programs, resulting in a 48.9 percent boost over five years after adjusting for inflation. NASA R&D would increase to $13.0 billion in FY 2008 (up 7.6 percent after inflation). The increase is even larger for key R&D programs: NASA plans a dramatic expansion of the Space Science program from $3.6 billion in FY 2003 to $5.6 billion in FY 2008 (up 43.2 percent after inflation). NASA Biological and Physical Research would jump from $935 million this year to $1.1 billion in five years (up 11.6 percent after inflation), with much of this research slated to take place aboard the Space Station. Other programs slated for increases include energy supply R&D in DOE (up 45.6 percent by FY 2008) for increased investments in hydrogen R&D and nuclear energy R&D; Major Research Equipment and Facilities Construction (MREFC) in NSF (up 35.6 percent by FY 2008) to build major laboratory facilities, and both aviation security R&D (up 55.4 percent to FY 2008) and general science R&D (up 11-fold to $297 million by FY 2008) in the new DHS. Most other programs' projections generally show modest increases over the next few years.

The Office of Management and Budget (OMB) again presents a 'Federal Science and Technology' (FS&T) budget in the FY 2004 budget (see Table 3). The FS&T budget is a collection of R&D and non-R&D programs selected by OMB that emphasizes basic and applied research and the creation of new knowledge or technologies. It also includes some S&T education and training activities but excludes most development, and is designed to be an alternative measure for the federal investment in science and technology. FS&T would barely increase 0.1 percent to $58.9 billion in FY 2004, with a majority of programs slated for cuts.

FY 2004 appropriations for R&D programs will be decided by restructured Appropriations Committees in the House and Senate. Last week, both the House and Senate decided to keep 13 appropriations subcommittees, but to shuffle jurisdictions to accommodate the new DHS. Each chamber will have a new Homeland Security subcommittee for DHS appropriations, with the former Transportation and Treasury/Postal subcommittees combined into one. R&D funding is contained in 10 of the 13 appropriations bills, and makes up 15.7 percent of the total $782 billion request for discretionary appropriations (see Table 6). Four subcommittees (Defense, VA/HUD, Labor/HHS, and Energy/Water) fund 94 percent of the total R&D portfolio; in each of these subcommittees, R&D funding makes up more than 15 percent of discretionary spending.

Highlights of the Major R&D Funding Agencies
(Complete coverage of the major R&D funding agencies is available in AAAS Report XXVIII: R&D FY 2004 and on the AAAS R&D web site in agency updates. Agency updates on NIH, DOD, NSF, and DHS are now available on the web site.)

• The National Institutes of Health (NIH) would receive $27.9 billion for its total budget in FY 2004, an increase of $726 million or 2.7 percent over the just-completed FY 2003 budget that would slow NIH budget growth after a five-year doubling path between FY 1998 and 2003. NIH R&D would rise 2.7 percent to $26.9 billion, slightly ahead of the 1.9 percent projected inflation rate. The big winner would again be the National Institute of Allergy and Infectious Diseases (NIAID) which would receive a boost of 17.0 percent to $4.3 billion as NIH's lead institute for its $1.6 billion bioterrorism R&D portfolio. In the FY 2003 NIH budget, Congress boosted the NIAID budget which would boost the NIAID budget by 47 percent over FY 2002 to $3.7 billion. Most NIH institutes would receive increases between 3 and 5 percent within the tight overall funding environment because Buildings and Facilities funding would fall from $629 million in FY 2003 down to $80 million; in FY 2004, NIH would discontinue FY 2003 one-time funding for facilities construction, including funding for extramural and intramural biodefense research laboratories and NIH facilities improvements. NIH would also discontinue an $120 million program for extramural construction in the National Center for Research Resources (NCRR) in FY 2004, leaving NCRR the only NIH institute to see its budget decline (down 7.5 percent to $1.1 billion). (More details of the FY 2004 NIH budget proposal are available in a special NIH R&D Funding Update on the AAAS R&D web site).

• The Department of Defense (DOD), the largest federal sponsor of R&D, would see its R&D budget grow to $62.8 billion, an increase of $4.2 billion or 7.1 percent, with all of the increase going to the development of weapons systems, coming after record increases of $8.8 billion and $6.7 billion the previous two years. The big winner in DOD would be the missile defense program, a high priority for the Bush Administration. Missile defense development would jump 22 percent to $8.3 billion in FY 2004, mostly in the Missile Defense Agency; funding for other big development projects would also climb, particularly a $4.4 billion development request for the Joint Strike Fighter (up 28 percent). By contrast, basic and applied research would both decline. Basic research ("6.1") would fall 7.7 percent to $1.3 billion, while applied research ("6.2") would fall 14.4 percent to $3.7 billion in FY 2004. DOD "Science and Technology" (S&T), which includes research, medical research, and technology development, would fall 8.3 percent to $10.3 billion, below even the FY 2002 funding level (see Table 1 and Figure 2). The Defense Advanced Research Projects Agency would see its R&D funding increase to $3.0 billion in FY 2004, an increase of $264 million or 9.8 percent. (More details of the FY 2004 DOD budget are available in a DOD R&D Funding Update on the AAAS R&D web site).

• A National Science Foundation (NSF) authorization bill calling for a doubling of the NSF budget between FY 2002 and FY 2007 was signed into law in December, but the FY 2004 budget request falls well short of the authorization. The NSF budget would total $5.5 billion in FY 2004, an increase of 3.2 percent over the final FY 2003 budget, but well short of the $6.4 billion FY 2004 authorization. Excluding NSF's non-R&D education activities, NSF R&D would be $4.0 billion, a boost of 2.8 percent (see Figure 2). Some of the research directorates would see declining or flat funding. The Biological Sciences (BIO) directorate would see its budget fall 1.6 percent to $562 million, while the Geosciences (GEO) budget would inch up 0.5 percent in FY 2004 to $688 million. There would be an emphasis on NSF support of the physical sciences, with the Directorate of Mathematical and Physical Sciences (MPS) receiving a 2.6 percent boost to $1.1 billion, including double-digit percentage boosts for NSF support of mathematics and multidisciplinary physical sciences. The Major Research Equipment and Facilities Construction account would also enjoy a sizeable increase, going from $149 million to $202 million. The largest beneficiaries of this increase would be the Atacama Large Millimeter Array, the IceCube Neutrino Observatory, and EarthScope. NSF is once again the only federal agency to receive "green lights" for its implementation of the Bush Administration's management agenda, getting high marks in the areas of financial performance and E-government.

Figure 2. (click on the image to view or download a color, full-page PDF version of the chart)

• The National Aeronautics and Space Administration (NASA)'s budget proposal was finalized before the Columbia shuttle disaster; the loss of seven astronauts and the shuttle throws the proposed FY 2004 budget in disarray and could result in significant repercussions for all NASA programs. The FY 2004 total NASA budget, already proposed for a dramatic restructuring even before the shuttle disaster, would rise from $15.3 billion (finalized after the shuttle disaster) to $15.5 billion, but the budget will have to be reallocated or augmented in the coming weeks. NASA's R&D (two-thirds of the agency's budget) would edge up just 0.2 percent to $11.0 billion because non-R&D programs, of which the largest is the Space Shuttle, would have higher priority. Space Science R&D is proposed for a 12.7 percent boost to $4.0 billion, including a 27 percent boost for exploration of the solar system including funds for developing new propulsion systems using nuclear technology, and missions to Mercury, the asteroids, a comet, Pluto, and the Kuiper Belt. Biological sciences research would also be a high priority, increasing from $312 million to $359 million. The International Space Station would receive $1.7 billion, down from $1.8 billion, but the construction schedule of the station is now in serious doubt; all shuttle flights in 2003 except for Columbia's were planned for station construction.

• The Department of Energy (DOE) would see its R&D funding increase 4.0 percent to $8.5 billion in FY 2004, with the entire increase going to DOE's defense activities. On the nondefense side, funding for the Office of Science (OS) would remain essentially flat at $3.3 billion for the fourth year in a row, affecting programs in high-energy physics, nuclear physics, fusion research, and advanced computing. There would be a large boost in nanoscale science in OS, offset by a planned drop in construction costs of the Spallation Neutron Source. Overall funding for energy R&D would remain flat in FY 2004 but there would be significant shifts in funds based on Administration priorities. The recently announced FreedomCAR and Freedom Fuel programs to develop next-generation efficient automobiles would receive $1.5 billion over five years, including $272 million in R&D funds in FY 2004, of which $68 million would be new funds; as a result, hydrogen R&D and work on fuel cells and vehicle technologies would increase. Coal R&D (including new spending on carbon sequestration research) and nuclear energy R&D would also increase, balanced by cuts in non-coal fossil fuels R&D and energy conservation R&D. DOE's defense R&D programs would jump 8.6 percent to $4.2 billion, including substantial increases for R&D in inertial confinement fusion and advanced scientific computing as well as DOE's core stockpile stewardship.

• R&D in the U.S. Department of Agriculture (USDA) would fall $223 million or 10.3 percent from the recently completed FY 2003 budget to $1.9 billion. The R&D total in FY 2003 was a higher $2.1 billion because of the inclusion of hundreds of congressionally designated projects, which USDA proposes to eliminate in FY 2004 (see Figure 2). USDA's National Research Initiative of competitively awarded grants would receive $200 million in FY 2004, well above the $166 million FY 2003 funding level. USDA would hold the mostly earmarked Special Research Grants to $23 million, down from $112 million in FY 2003. USDA's intramural research would decline 5.6 percent to $1.0 billion because of the deletion of earmarks, with a steeper drop for Buildings and Facilities (down 80 percent to $24 million) from the proposed cancellation of congressionally designated projects.

• The FY 2004 budget would again propose to eliminate two key Department of Commerce programs. The budget would zero out the Advanced Technology Program (ATP) at the National Institute of Standards and Technology (NIST). The ATP has a budget of $179 million in FY 2003. The budget would also close out the $106 million non-R&D Manufacturing Extension Partnership at NIST. Similar proposals failed in FY 2003. Intramural R&D in the NIST laboratories would increase 7.3 percent to $330 million. The NIST R&D budget would fall 22.1 percent to $410 million. National Oceanic and Atmospheric Administration (NOAA) R&D would decline by 1.4 percent to $675 million. The Oceanic and Atmospheric Research (OAR) account in NOAA (included in "FS&T" in Table 3) would fall 2.1 percent to $367 million.

• The Department of Homeland Security (DHS), officially created just two weeks ago, would become a major R&D funding source in FY 2004 with an R&D budget of $1.0 billion, a dramatic increase of 49.6 percent from the estimated FY 2003 level after an even bigger increase in FY 2003, leaving the DHS R&D portfolio nearly four times larger than two years ago (see Figure 2). Most of the FY 2004 R&D growth would come from the brand-new Homeland Security Advanced Research Projects Agency (HSARPA), DHS' own R&D funding agency closely modeled on DOD's DARPA. The majority of DHS R&D would be in the new Directorate of Science and Technology with an R&D budget of $801 million in FY 2004, including the new HSARPA as well as programs formerly housed in USDA, DOD, and DOE. Nearly all of the remaining R&D portfolio would consist of R&D programs in the Transportation Security Administration and the Coast Guard, transferred from the Department of Transportation (DOT). The total DHS budget would be $36.2 billion in FY 2004. (For more on the DHS, see the DHS R&D Funding Update on the AAAS R&D web site).

• The Department of Veterans Affairs (VA) has reorganized its budget accounting structure to fully report all costs associated with its R&D portfolio, including support and personnel costs. VA's federal R&D portfolio would total $822 million in FY 2004, an increase of 2.8 percent (see Table 1). Total VA research, including funds from other sources, now exceeds $1 billion a year for a total of $1.2 billion in FY 2004, an increase of 3.7 percent.

• R&D in the Department of the Interior would rise a modest 1.0 percent over the just-finished FY 2003 budget to $633 million, but there would be a cut of 4.2 percent to $545 million for Interior's lead science agency, the U.S. Geological Survey (USGS). Most USGS programs would receive flat funding or cuts.

• The Environmental Protection Agency (EPA) R&D budget would fall 5.7 percent to $607 million in FY 2004; the FY 2003 total is inflated with one-time building decontamination research funding to respond to the anthrax attacks of fall 2001. There would be flat funding or small cuts for most EPA R&D programs for the second year in a row within a flat overall EPA budget. The total EPA budget would decline to $7.6 billion in FY 2004, down substantially from the recently finalized $8.1 billion FY 2003 level.

Department of Transportation (DOT) R&D funding would fall 1.2 percent to $693 million, cushioned from tight budgetary times elsewhere in the domestic budget because most DOT programs are funded from transportation trust funds. Two DOT agencies, the Transportation Security Administration and the Coast Guard, transfer to the new DHS this year (all figures already adjusted to reflect the transfer).

The Budgetary Context for FY 2004: More Defense, More Deficits, More Tax Cuts

The FY 2004 Bush budget proposes discretionary spending of $782 billion in FY 2004, a 2.5 percent or $19 billion increase over the FY 2003 level of $763 billion based on DOD spending enacted last fall and the FY 2003 omnibus appropriations bill signed into law on February 20, which also included an additional $10 billion in defense funds.

Figure 3. (click on the image to view or download a color, full-page PDF version of the chart)

In contrast to relative restraint for domestic spending, the budget proposes large spending increases and tax cuts in other areas that could contribute to record deficits for years to come. The FY 2004 budget proposes a package of new tax cuts, the acceleration of planned tax cuts enacted in 2001 as part of a $1.35 trillion tax cut package, and the extension of tax cuts scheduled to expire from the 2001 law that could cost the federal government $1.5 trillion in revenue over the next 11 years (some of the tax cuts are proposed to start in FY 2003). Adding in extra interest costs because the national debt would be higher than otherwise, the proposed tax cuts would add $1.8 trillion over 11 years to the national debt. The FY 2004 budget also proposes $400 billion over 10 years to provide a prescription-drug benefit for the Medicare entitlement program, at the low end of estimates of what such a benefit could cost. The Bush Administration also proposes boost DOD's budget from $379 billion this year to $462 billion by FY 2008.

Because of these proposals, the Administration projects the largest budget deficits in U.S. history this year ($304 billion) and FY 2004 ($307 billion), exceeding $290 billion in FY 1992. After adjusting for inflation, the projected deficits would be less than past deficits (see Figure 3), but the deficits could easily exceed $400 billion this year and next year. The budget request assumes funding for only regular DOD operations; any military action against Iraq, even an extension of the current state of heightened deployment in the Middle East, will require additional resources not included in this budget. Estimates of the costs of military action in Iraq range as high as $100 billion this year, even without factoring in the costs of increased domestic security spending and economic disruptions related to oil supplies, nor the costs of possible reconstruction of Iraq.

The four years of surpluses between FY 1998 and FY 2001, backed up by bipartisan promises to keep the federal budget balanced, now seem like a distant mirage. With almost all politicians resigned to or even advocating deficit spending for this year and the future, there is little appetite in Washington for making the hard choices necessary to get the budget back in balance. Only in the area of domestic discretionary spending do lawmakers advocate some fiscal restraint.

Outlook for the FY 2004 Budget Process

The FY 2004 budget now moves to Congress. Unlike the past two years, President Bush faces a Congress controlled in both chambers by his fellow Republicans, so it is much more likely than in past years that his FY 2004 proposal will be enacted in close to its proposed form. Congress must approve an FY 2004 budget resolution, Congress' own blueprint of its priorities for FY 2004 and beyond, but may first have to deal with an FY 2003 supplemental budget, expected to arrive on Capitol Hill sometime this spring, to pay for ongoing military operations in the Middle East. Congress is already well behind schedule, distracted until mid-February by the need to finish the FY 2003 budget and doing so four months late.

For federal R&D funding agencies, uncertainty reigns. Domestic agencies have only recently received their final FY 2003 appropriations, four and a half months into the fiscal year. (For full information on R&D in final FY 2003 appropriations, please see the Congressional Action on R&D in FY 2003 analysis available on the "FY 2003 R&D" section of the AAAS R&D web site). Although most domestic R&D programs received more than the Administration requested for FY 2003, this windfall makes the FY 2004 request look worse by comparison. For the FY 2004 budget, the major fights are likely to be over hot-button items such as tax cuts, Medicare, and supplemental funding for Iraq, pushing FY 2004 appropriations lower on the agenda. While few expect the FY 2004 budget process to drag on as long as the thirteen-month FY 2003 process, Congress may be distracted for most of the next few months with other battles.

Go to Tables 1-6

- March 7, 2003 (revised from February 6 and February 25 analyses)

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Go to Tables 1-6

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