Chap. 2 - Political and Policy Context for the FY 2000 Budget

2

Political and Policy Context for the FY 2000 Budget

Stephen D. Nelson and Joanne P. Carney, AAAS

The first two chapters of this book are intended to provide a framework for better understanding the masses of budgetary figures that follow. Chapter 1 provides a structural, historical, and comparative overview of R&D, explaining how it fits into the overall federal budget and the federal budget process, what recent trends in federal R&D support have shown, and how the U.S. and other nations compare in key indicators. This chapter describes the political and policy context within which the FY 2000 budget process will take place. It begins with a brief account of the past year's budget experience and related developments, then moves to a characterization of the proposed budget and its initial reception by Congress, and concludes with some speculations about what may be in store for R&D in the remainder of the budget year and beyond.
R&D IN THE PAST YEAR'S BUDGET PROCESS
The nation's booming economy helped change the dynamics of last year's federal budget process, as it generated federal revenues at an unexpectedly rapid pace, leading to projections of a budget surplus by at least FY 1999 instead of FY 2002 as expected earlier. Surpluses, however, were not yet a significant part of the political calculus when President Clinton submitted his FY 1999 budget proposals in February 1998, based upon estimates of only a small surplus for FY 1999. At that time, uppermost in all policymakers' minds were the caps (spending limits) on discretionary spending that were part of the balanced budget agreement of 1997. The Administration, however, thought it had found a way around the caps by packaging most nondefense R&D programs in a "Research Fund for America," (in some budget documents called the "21^st Century Research Fund") which was not a true dedicated fund but a presentation device for its R&D programs. However, in order for the budget to stay technically within the budget caps, the Administration associated proposed increases for R&D in the Fund with "offsets" from tobacco-control legislation that was assumed would be passed by the Congress.
However, when it became clear that the tobacco legislation had no chance of passage, the initial optimism that greeted the President's proposals faded, and observers settled back, resigned to yet another difficult, protracted competition for funds within severe fiscal constraints. Pessimism deepened when a six-year, $218 billion transportation reauthorization bill was passed relatively early in the budget year, putting even deeper dents in the discretionary funds available.
There was virtually no budgetary action for much of the summer, owing to the distraction of the growing presidential scandal and perhaps tactical political decisions. On October 1, a report by the Office of Management and Budget (OMB) revealed that the government recorded a $70 billion unified budget surplus in FY 1998 and that surpluses were expected to grow well into the 21^st century. The final result: a series of chaotic, last-minute negotiations between the President and congressional leaders, out of which emerged a huge, multi-agency omnibus appropriations bill (Public Law 105-277) that left R&D programs with some of their largest increases in recent years. Flexibility for these and other increases was found by designating more than $21 billion of appropriations for various programs as "emergency" funding (and thus exempt from the discretionary caps), as well as by other accounting devices such as shifting certain budget authority to FY 2000.

Figure 1.
In the end, Congress spent far above the caps (at least $556 billion in spending, as compared with a cap of $532 billion for FY 1999; see Figure 1) but without raising them, and R&D programs shared in the windfall of extra dollars. Total federal R&D for FY 1999 came to $79.3 billion, $3.4 billion (or 4.5 percent) more than in FY 1998. Once more, the National Institutes of Health (NIH) led in the gains, increasing its R&D budget by $1.9 billion (or 14.2 percent) to $15 billion. Every major R&D funding agency except the National Aeronautics and Space Administration (NASA) and the Department of Commerce won increases well ahead of the expected 2.0 percent inflation rate.
CONGRESSIONAL SUPPORT FOR R&D
In the days immediately following the October budgetary scramble, the outlook for federal R&D appeared the most positive of any in recent years. However, almost lost in the frenzy to pass the omnibus bill and rush home to campaign for the November elections were a few critical events for R&D--both favorable and unfavorable. First, the Senate passed the Federal Research Investment Act (S. 2217) introduced by Senators Bill Frist (R-TN) and John D. Rockefeller, IV (D-WV). The Frist-Rockefeller bill, a substitute for the Gramm-Lieberman bill (S.1305), would authorize a doubling of the federal investment in nondefense R&D over twelve years. Its companion in the House, introduced by Representative Heather Wilson (R-NM), did not enjoy a similar success. H.R. 4514 managed to pick up only two additional cosponsors and did not even receive a hearing or mark-up.
Another notable event was the unveiling of the eagerly awaited result of the House Science Committee's National Science Policy study in September. Two weeks after its release, the House of Representatives passed a resolution (H.Res. 578) adopting the study "as a framework for future deliberations on congressional science policy and funding." "Unlocking Our Future: Toward a New National Science Policy" was published as an interim report to serve as a guide in the long-term development of America's science policy. Its reception off Capitol Hill was positive if muted. Many science and technology policy experts agreed with most of the report's recommendations but felt that it did not provide any new or dramatic directions for a national science policy to lead us into the next century. (AAAS has distilled the results of a half-day discussion of the report by members of the science and technology community, in a report entitled Science and Technology for the Nation: Issues and Priorities for the 106th Congress.)
However, most observers conceded that "the Ehlers Report" (colloquially named after its primary architect in the House Science Committee, Representative Vernon J. Ehlers (R-MI)) could be important in raising the profile of science and technology in Congress. Adding to this feeling was the recognition that the study had been commissioned by Speaker of the House Newt Gingrich (R-GA). Speaker Gingrich is a notable and outspoken supporter of science and technology, and with his leadership many had hoped that the study would stir greater interest in the subject.
But the tide swiftly changed in the aftermath of an election nearly overshadowed by the looming House impeachment hearing and characterized by growing dissatisfaction among voters. Although widely expected to benefit from the presidential scandal and to expand their margins of control in both the House and Senate, Republicans actually lost six seats in the House, while maintaining a 55-45 majority in the Senate. Thus, their hold on the House became considerably more tenuous with only a 223-211-1 majority and restive factions from both wings of their party holding the potential for undercutting the party's slim majority. Speaker Gingrich resigned his office within days of the election, and first Representative Bob Livingston (R-LA) and then (following Livingston's resignation due to his own scandal) Representative J. Dennis Hastert (R-IL) was designated as Gingrich's heir apparent.
On a more ominous note, an amendment was inserted in the final omnibus appropriations bill for FY 1999 by Senator Richard Shelby (R-AL), instructing the OMB to revise Circular A-110, which governs administration of research grants. The revisions will "require Federal awarding agencies to ensure that all data produced under an award will be made available to the public through the procedures established under the Freedom of Information Act" (FOIA). In February, OMB announced its proposed revision implementing the change and called for public commentary. Many members of the research community are extremely concerned with the potential consequences of this legislation. Issues such as patient confidentiality, proprietary protection of data, and the potential for outright harassment of researchers have alarmed scientists and engineers, and prompted an unprecedented level of activity on the science and technology (S&T) community's part. The period for public commentary on the OMB proposed revision expired April 5, and at this writing OMB has received over 1,600 comments.
THE PROPOSED BUDGET FOR FY 2000
The actual content of the FY 2000 proposals for R&D appears elsewhere in this report, briefly in Chapter 1 and in much greater detail in Chapters 3 and following. Our purpose in this section is to consider some of the background in the budget's construction and initial reception by the Congress.
The cap for discretionary spending remains, despite projections of budget surpluses (see Figure 1). Once again, the President's total budget request is well above the caps (by almost $21 billion). And once again it proposes offsets that would be credited toward discretionary spending in the form of tobacco-related and other revenue sources. Although a cap might appear to be less necessary in the new environment of budget surpluses, it still controls at least the initial phases of the budget process, for two reasons. First, it is a legal constraint upon the submission and consideration of the budget, as well as being an important political symbol of budgetary discipline. Second, there is considerable disagreement about what should be done with the projected surpluses, and under both the President's and congressional leaders' preferences-although they are markedly different--surpluses may not be available to be spent on regular government programs. Both the President and the Congress agree that a portion of future surpluses should be used to shore up the Social Security trust fund, which is in danger of being depleted in the next century if nothing is done, but neither can agree on what that portion should be. The White House would also like to secure the Medicare trust fund, which is in more imminent danger of going bankrupt, while Congressional Republican leaders would prefer to use the surplus to finance significant tax cuts.
Another key consideration in the budget this year is that the "firewall" between defense and domestic discretionary spending is gone. In previous years, these two categories each had their own cap for spending, and funds could not be moved from one category to the other. In FY 2000 this constraint is removed, raising the possibility of cross-category shifts of money by the Congress. With the high priority being put this year on increases in overall military spending by both the Congress and the Administration, domestic discretionary spending--where all nondefense federal R&D is supported--will be vulnerable to reduction.
In response to the significantly generous treatment of NIH's R&D budget in comparison with almost any other research agency in recent years, the issue of balancing federal support among the various fields of science and engineering has emerged as a major policy consideration. This is certainly true within the S&T community and among some policymakers as well. The principle of balance was invoked by the Administration in calling for a very modest increase for NIH in FY 2000 (2.1 percent), while proposing somewhat higher percentage increases for other selected agencies--a move certain to generate greater activity on the part of the ever-diligent and energetic supporters of biomedical research.
Presented with the Administration's budget proposals, Congress is faced with difficult choices, ranging from cutting discretionary spending to raising the discretionary budget cap, with several other options in between. (Raising the budget cap was until recently considered political heresy, but now it is at least being wistfully looked at if not advocated as yet.) In any case, Congress has high incentive this year to pass its budget resolutions early-- something it did not even get around to last year. At this writing, the Senate and the House are still working to complete its versions before the Passover/Easter recess. Since the budget resolutions control the allocation of funds to the various appropriations subcommittees, the Congress can thereby exercise tighter discipline over budget actions than was evidenced last year.
FORECAST FOR FY 2000 BUDGET AND BEYOND
The congressional environment for science and technology policy has been something of a roller coaster ride over the past several years. The shift in party control and the arrival of a large contingent of new members of Congress in 1995 dramatically changed the political landscape. Eliminating the federal deficit took on a new urgency, and confrontational politics dominated the scene. Today, four years, two elections, and one impeachment later, the deficit--so it appears--is history, at least for now. Many of the most zealous congressional leaders are muted or gone, and the dire R&D projections of 1995 have not come to pass, but the future for S&T is as uncertain as ever.
Both ends of Pennsylvania Avenue are grappling with the aftermath of the November elections and the impeachment trial and attempting to regain control of the political agenda. Social Security, Medicare, taxes, education, and national defense are top priorities for both the executive and legislative branches. The projected budget surpluses have many eyeing them like the proverbial kids in a candy store. Proposals to set aside portions of future surpluses for some of the above priorities, among others, are being floated. However, the level of importance placed on each one, and what the changes in policy should be, depends on the press release or editorial one reads.
Fortunately, it can be said with a certain amount of confidence that a budget resolution will actually make it to conference this session, and the mistakes of last year's final scramble may be avoided. Unfortunately, debates and arguments have already ensued over perennially discussed but rarely resolved issues such as how to fund the disaster relief supplemental, whether to take the aviation trust fund off-budget, and how to define emergency spending. Hence, history may be destined to repeat itself.
It can also be said with an equal amount of confidence that any budget resolution that retains the 1997 discretionary caps will require at least cuts in, and possibly even elimination of, some federal programs. Even with passage of a concurrent budget resolution, congressional leaders are likely to wait until early summer when more optimistic revenue projections may become available before candidly addressing this matter. In either case, the question remains as to who within either chamber of Congress will speak up first.
The forecast for R&D can be summed up by a quote from Speaker Hastert. In a recent interview he stated, "There's good news and bad news. The good news is that we have a surplus. The bad news is that we have a surplus. We have it--[now] we've got to be responsible and do the right thing with it." The real problem facing policymakers is defining what that "right thing" is.