Potential Impacts of the House Budget on Federal R&D

Date Published: 
18 Apr 2012

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Nondefense R&D Through 2017

Nondefense R&D Through 2017

The recently passed House budget resolution would reduce discretionary spending dramatically, and many are concerned about the potential impacts of these cuts on federal R&D, especially in light of the looming across-the-board cuts known as the sequestration; yet it has not been clear exactly what the impacts might be. To try to answer this question, we’ve produced an estimate that gets at some actual dollar figures and percentage changes, organized by R&D category. The estimate is based on House (PDF) and Administration (PDF) spending proposals, analyses of the automatic spending cuts in the Budget Control Act, and current R&D spending patterns, and additionally relies on a couple reasonable assumptions explained below.

What have we found? In short, the impacts of the House budget on the federal research enterprise could be substantial, especially when coupled with the sequester. The budget could reduce total baseline spending in key budget accounts by 15 percent below the President’s budget request, amounting to a three percent cut in total R&D from FY 2012 and a five percent cut in nondefense R&D, without accounting for the sequestration. Factoring in these additional cuts, the House budget could yield reductions in total R&D of up to 12 percent below the current year, with nondefense R&D receiving a disproportionate share of the cuts. Over the next decade, the House budget could reduce nondefense R&D by up to 27 percent, or $161 billion, below the President’s request. While most research areas would be hard-hit, some would fare worse than others.

The Basics: What’s a Budget Resolution?

A budget resolution is not law, and it does not actually allocate funding to federal agencies. What it does do is set an overall framework that Congress must follow during the appropriations process, by establishing the overall spending level for the year. The Senate is unlikely agree to the budget passed by the House, so the House’s budget resolution will act as the guide for the House alone. Budget resolutions also recommend spending levels by budget function, for the next year and for each year over the next decade. Budget functions are simply categories of spending: there’s one for agriculture, one for defense, one for Social Security, and so on. There are 20 functions in all, though 98 percent of federal R&D funding is contained in only eight functions. These are the eight we focused on (see the full brief for the complete list).

It’s important to remember that no one can actually say how the House budget might really impact R&D funding, because budget resolutions are simply not that detailed. Their numbers only address broad budget categories, and not specific agencies or programs. However, even these broad numbers can say quite a bit about overall spending priorities in key areas. We used the House’s proposed spending in these broad categories, coupled with earlier analyses of the automatic spending cuts and current R&D patterns, to infer potential impacts.

Data and Some Key Assumptions

There are a few pieces of information that went into the analysis. First, of course, were the broad categorical spending levels proposed by the House and the Administration, tabulated by budget function. Second, we looked at the ratio of R&D funding within each budget function. For instance, spending in the “defense” budget function is quite high, but only 14 percent of it actually goes to R&D; for energy, the R&D ratio is much higher. We assumed that these ratios would hold steady in future years, even as total spending might change. This is a fairly safe assumption, as the ratios have been surprisingly stable over the past decade.

Lastly, we included Congressional Budget Office estimates of the automatic spending cuts required by the Budget Control Act. These spending cuts require certain amounts be reduced from defense and nondefense spending over the course of the decade. There are actually two versions of these cuts: the version passed by Congress and contained in current law, and an alternative version proposed in the House budget. This alternative version basically shifts future cuts away from defense and onto nondefense categories, but is unlikely to be accepted by the Senate. We compared the impacts of both of these versions on federal R&D; to do so, we made the working assumption that the nondefense cuts would be distributed proportionally across most agencies.

What We Found

There are a few different ways to slice the findings, since we compared multiple scenarios. We’ll take them one at a time.

Baseline spending (no sequestration). If we just look at baseline spending between the President’s budget and the House budget—without worrying about the sequester for now—it appears the House budget would reduce total discretionary spending by 5 percent, or about $39 billion below the President’s request. This is not distributed evenly, as nondefense would actually be cut by 15 percent, or $43 billion (defense would get an increase relative to the President’s budget). This works out to about 8 percent less for nondefense R&D than the President’s budget, and 5 percent less than in FY 2012.

But not all research areas would be effected evenly: clean energy and energy efficiency R&D would be effectively cut in half. R&D at general science agencies (like the National Science Foundation or NASA) would receive a 6 percent cut from their current budget. Environmental research at places like EPA or the U.S. Geological Survey could see a 4 percent cut. Health research—primarily the National Institutes of Health—would receive only a 1 percent cut. See the below table for more detail (click to enlarge).

Estimated R&D Fundingin FY 2013 under the House Budget

Estimated R&D Funding in FY 2013 under the House Budget

But this doesn’t factor in the sequestration, which is where the real cutting will begin. Remember again that there are two versions of the sequestration: they both would achieve about the same overall reduction, but the House version would be much worse for nondefense R&D.

Current Law Sequestration. Under the sequestration as currently written, across-the-board cuts (of around 8 percent in nondefense and 10 percent in defense, give or take) would take effect in January 2013. Applying these automatic cuts to the House budget could yield around 12 percent reductions to R&D (16 percent in nondefense) below the President’s budget in FY 2013, and around 10 percent reductions over the next decade. This works out to around $17 billion less in FY 2013, and about $132 billion less over the decade.

Alternative Sequestration. The alternative sequestration opens the door to shifting all of these automatic spending cuts onto nondefense programs over the long term, allowing the defense budget to continue to grow steadily. It would also roll back the first year of the sequestration. It should be noted again that this alternative is unlikely to pass the Senate. Applying this unlikely alternative sequestration to the House budget would produce a much better result than the current-law sequester in FY 2013: R&D would only be cut by 3 percent (nondefense by 8 percent), since there would actually be no automatic cuts to apply next year. The long-term outlook could be similar: 10 percent reductions to total R&D over the decade. There is one very important difference, however: nondefense R&D could be cut severely, by 27 percent or $161 billion over the decade. Conversely, defense R&D would rise slightly, by about 3 percent. The graphs on this page show the differences in defense, nondefense, and total R&D under the different scenarios through 2017 (click to enlarge).

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