Budget Overview: CHAPTER ONE

Federal R&D in the FY 2016 Budget: An Overview


No doubt the national fiscal situation has improved of late, with deficits more than halved over the past five years. But this doesn't mean the long-run picture is particularly positive. Last month, the Congressional Budget Office (CBO) said they expect the national debt to continue rising and entitlements to continue swamping the rest of the budget. The debt limit has not disappeared forever as a political issue. Sequester-level spending remains the law of the land, and many in the new Republican majority will be hesitant to see these spending reductions cease.

Amid this context, President Obama released his fiscal year (FY) 2016 budget request on February 2, 2015, meeting the legal deadline set by the Congressional Budget Act for the first time in five years. Punctuality aside, many elements of the budget may appear familiar from prior years, including robust investment in research and development. The Administration's R&D priorities reflect recurring areas of emphasis, including advanced manufacturing, clean energy technology, climate change research, and neuroscience, as well as targeted increases for STEM education and a permanent R&D tax credit. And on the discretionary spending front, the budget once again proposes a partial rollback of the spending reductions required under the Budget Control Act. With a proposed discretionary base of $1.087 trillion, the President's budget would increase the spending cap by a net of $71 billion in FY 2016.

Such a proposal would have major impact on science and technology programs, but faces difficult prospects in a polarized Congress, some members of which maintain their laser focus on balanced budgets. The budget has already been predictably criticized by the new Republican majority, who have correctly pointed out that it's not a budget that prioritizes deficit control, or in fact ever balances. These political headwinds may render many of the President's more robust science proposals moot.


President Obama's $4.0 trillion FY 2016 budget request would yield a $474 billion deficit per Office of Management and Budget (OMB) estimates, a decrease of 23 percent from the FY 2015 deficit of $583 billion. Deficit reduction would come from a mix of policy changes, including some limitations on tax benefits from high-income earners and closures of loopholes, health reform, and some targeted spending cuts.

The budget is divided into mandatory spending - which consists largely of entitlements "on autopilot" like Social Security and Medicare - and discretionary spending. It's the latter budget slice that contains nearly all R&D expenditures (see Figure 1). The major difference between the two is that discretionary spending is subject to the annual appropriations process, while mandatory spending is not. In FY 2016, discretionary spending would account for only 29.2 percent of the total budget, continuing a long-term drop relative to the rest of the budget (see Table I-3 from this list).

Under current law, the discretionary budget remains at sequester levels in FY 2016, with only a 0.2 percent increase from the current year's level before inflation. The President's budget proposes rolling back most spending reductions under the Budget Control Act, adding $71 billion in FY 2016, a 7.2 percent increase, and $329 billion cumulatively through FY 2021, when the caps expire. Over these six years, the President's request would result in a 5.1 percent increase in discretionary spending above current law, and would offset fully 61 percent of the spending reductions below the pre-sequester baseline required by the Budget Control Act (see Figure 2).

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Although the President's budget presentation each year contains a section devoted to R&D, it is important to recognize that there is no overall "R&D budget" and no special treatment for R&D within most agency budgets. R&D is folded into the budgets of more than two dozen federal departments and independent agencies, and there may be little or no distinction made between activities.

Overall, the budget would provide $145.2 billion in R&D in FY 2016. In nominal dollars, this represents an increase of 6.4 percent above FY 2015 (before factoring in an inflation rate of 1.6 percent). Outlays for the conduct of R&D would represent 3.5 percent of all federal spending in FY 2016, continuing a long-run decline, and 12.4 percent of discretionary outlays, which is in line with historical norms.

The top-line R&D figure can be divided in two ways: split between defense and nondefense R&D, and divided by character. The defense and nondefense division is fairly straightforward. Defense only includes two components: the Department of Defense (DOD) R&D budget and defense-related R&D funded through the Department of Energy, via the National Nuclear Security Administration (NNSA). Nondefense R&D is everything else under the civilian umbrella, including health, space, energy, agriculture, environment, and social science research.

The character division is slightly more complex. There are five classes: basic research, applied research, development, facilities construction, and R&D equipment. Further, basic plus applied research yields "total research," while facilities plus equipment equals "R&D facilities" or "R&D plant" (see definitions).

Defense and nondefense R&D have very different characters, as shown in Figure 3. Most defense R&D consists of development activities, due to DOD activities around high-tech weapons, vehicles, and other in-development systems. On the other hand, nondefense R&D is very much focused on research activities, including intramural and extramural projects at universities, government and industrial labs, and elsewhere.

Total federal investment in research would rise by 3.0 percent to $66.6 billion (see table). Several agencies would see sizable increases in research dollars under the President's budget, including NIH, the National Science Foundation, the Department of Energy technology programs, and USDA. Other smaller science and technology agencies, like the U.S. Geological Survey and NIST, would also see large relative increases.

The overall research increase is devoted to civilian activities, as defense research would be trimmed across multiple accounts. And within the overall mix, applied research funding would somewhat outpace basic research funding.

Development funding would increase by 9.2 percent, largely due to technology increases at DOD, but nondefense development activities in the Departments of Commerce, Energy, and Transportation would gain as well. NASA's development portfolio, the largest among civilian agencies, would be cut.

R&D facilities funding would increase substantially by 15.6 percent, or $373 million, to reach $2.8 billion. Large increases would go towards constructing and renovating USDA's Agricultural Research Service laboratories, certain physics and advanced computing facilities in the DOE Office of Science, and assorted NOAA activities, including new vessel construction.

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The President has regularly drawn a connection between science and technology and the potential for middle-class jobs, including in January's State of the Union address. Accordingly, the Administration's proposed investments, while generous in several areas of science, do pay particular attention to areas that may contribute in the nearer-term to job growth and advanced industry sectors, similar to prior budgets. For an official R&D summary, see the relevant Analytical Perspectives section from OMB or the Office of Science and Technology Policy.

Jobs, Technology, and Innovation. Advanced manufacturing has been a lead strategy for the Administration. The FY 2016 budget provides $2.4 billion for advanced manufacturing-related R&D, including a $1.9 billion mandatory proposal for the National Network of Manufacturing Innovation. Key manufacturing initiatives at the National Science Foundation as well, and the size of the Department of Energy Advanced Manufacturing Office would double.

Beyond manufacturing, other technology areas to receive boosts would include NASA's Space Technology Directorate, which would receive a 22 percent increase. The budget also seeks to increase investment in cybersecurity and advanced computing initiatives across government, notably at DOE.

Low-Carbon Energy. Innovation in efficiency and renewables again takes center stage. Two flagship offices for these efforts are DOE's Office of Energy Efficiency and Renewable Energy (EERE) and the Advanced Research Projects Agency-Energy (ARPA-E), both of which would receive robust funding increases. Elsewhere, NSF would devote $377 million to clean energy technology.

Life Sciences, Health, and Agriculture. NIH would receive the largest dollar increase at fully $1 billion above FY 2015 levels for all program funding. All institutes would receive increases above inflation, with Alzheimer's research and translational science again among the priorities. The BRAIN Initiative (including funding from NSF and DARPA) would increase to over $300 million, while hundreds of millions in funding is included for new initiatives on antibiotic-resistant bacteria and precision medicine.

The U.S. Department of Agriculture (USDA) would also receive funding boosts in multiple areas. On the intramural front, the budget provides $200 million for facilities construction and modernization, while peer-reviewed competitive research on the extramural front would receive a nearly 40 percent increase.

Climate, Environment, and Earth Observation. Of the four environment-oriented agencies - the Environmental Protection Agency (EPA), the U.S. Geological Survey (USGS), the National Oceanic and Atmospheric Administration (NOAA), and the Forest Service - the two largest, NOAA and USGS, would both receive major increases around climate and resilience research. The gains for EPA and the Forest Service are much more modest. Outside these agencies, the NSF Geosciences Directorate, the Biological and Environmental Research Office within the DOE Office of Science, and the NASA Earth Science division would receive varying increases.

Infrastructure R&D. While the Aeronautics directorate at NASA would receive hefty cuts, the Administration remains keenly interested in relative boosts for R&D activities in the transportation realm through the Department of Transportation. These include increases for next-generation aviation technology, high-performance rail, and a new multiyear surface transportation authorization that would increase funding for intelligent transportation systems research.

Many of these priorities show up when collective R&D data in the budget is compiled and arranged according to budget function. Budget functions are 20 or so classifications used to divide up federal outlays, and can be a useful way to organize R&D data as well (Figure 4).

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Even in a budget such as this, with major increases across many areas, there are some programs and agencies that would see reductions. Some of these are listed below.

Fusion Energy Research. Within the Office of Science, the domestic Fusion Energy research program would be subject to some hefty reductions, even as funding remains flat for ITER, the international fusion energy project.

Assorted NASA Activities. As in years past, NASA doesn't make out as well as other agencies. Reductions are targeted for the big-ticket space exploration systems development programs, education, and aeronautics research.

DOD Basic Research. Overall Defense Department basic research activities would decline by 8.3 percent, with most of the cuts targeted at the military departments.

Homeland Security Science and Technology. Even with funding for construction of a new biodefense facility likely to be wrapped up in FY 2015 (which explains the major "drop" in justice function R&D seen in Figure 4 above) funding for other activities would be cut by around five percent.

NNSA Science and Technology. While the civilian side of DOE would post major gains, select science, engineering, and nonproliferation activities at NNSA would experience some reduced funding.

The AAAS Board of Directors, in accordance with Association policy, has approved the publication of this work as a contribution to the understanding of an important area. Any interpretations and conclusions are those of the authors and do not necessarily represent views of the Board or the Council of the Association.