Federal Research and Development: Budgeting and Priority-Setting Issues, 109th Congress
Released: 2006-12-29T00:00:00

Background and Analysis

This report summarizes current research and development priority-setting issues—in terms of spending priorities, topical or field-specific priorities, and organizational arrangements to determine priorities. Federal R&D funding priorities have shifted over time, reflecting presidential preferences, congressional appropriations, and national priorities. Defense R&D predominated in the 1980s but decreased to about 50% of total federal R&D in the 1990s, reflecting Clinton Administration policies. In non-defense R&D, space was important in the 1960s as the nation sought to compete with the Soviet Union in the space race; energy R&D joined space as a priority during the 1970s; and since the 1980s, health R&D funding has grown as the cohort of aged population increases and the promise of life sciences and biotechnology affects national expectations. Defense and counterterrorism R&D funding have been increased since the 9/11 terrorist attacks. Together, Department of Defense (DOD) and National Institutes of Health (NIH) funding total about 77% of the FY2007 R&D request. (See Figure 1 and the Appendix table.)

R&D Budgets

R&D budgets are developed over an 18-month period before a fiscal year begins. Often advisory committees, influenced by professional scientific groups, recommend R&D priorities to agencies, which use this information, internally generated information, and the White House's Office of Management and Budget (OMB) and Office of Science and Technology Policy (OSTP) guidance to determine priorities. Agencies and OMB negotiate funding request levels during the preparation of the budget before it is sent to Congress. After standing committees recommend budget levels for matters within their jurisdiction to the budget committees, Congress is to pass a budget resolution, which sets spending levels and recommends levels for each budget function that appropriations committees use in setting discretionary (302b) spending allocations for each appropriations subcommittee. The resolution also gives outyear projections based on budget and economic assumptions. Each of the appropriations subcommittees is to report approved funding levels for agencies within their jurisdiction; appropriations bills, which give agencies spending authority, are to be sent to the floor, usually beginning in the summer.

FY2005 Budget Action Summary

For FY2005, R&D appropriations totaled about $131.8 billion of budget authority, about 54% going to defense R&D. Non-defense R&D funding was increased about 0.2%. The largest increases went to R&D in NIH and DOD; smaller increases were made for R&D budget authority at the Department of Agriculture (USDA), the Department of Homeland Security (DHS), the Department of Transportation (DOT), the National Aeronautics and Space Administration (NASA), and NIH. FY2005 congressional action reduced the National Science Foundation's (NSF) budget by 0.3% below the FY2004 level. Congress appropriated less than the FY2004 level for R&D in the Department of Education and the Environmental Protection Agency (EPA). In the Department of Commerce (DOC), the President sought again to eliminate the Advanced Technology Program (ATP), whose R&D was funded at $134.0 million in FY2004. Congress increased R&D funding for the National Oceanic and Atmospheric Administration (NOAA) by 10%, and funded ATP R&D at $114.0 million, about 15% less than in FY2004. (See the Appendix table.)

FY2006 Budget Action Summary

For FY2006, Congress enacted R&D budget authority of about $134.8 billion, $2.2 billion more than in FY2005. More than 90% of the increase went to DOD research, development, testing, and evaluation (RDT&E), largely for weapons development, and the rest to NASA, largely for space exploration. DOT received a 14% increase for R&D. Other agencies' R&D budgets were reduced or flat if inflation is considered. Congress also enacted a 1% across-the-board cut for all discretionary R&D, in effect lowering enacted appropriations amounts. Of the major R&D support agencies, FY2006 appropriations action reduced R&D funding below the FY2005 level for NIH, USDA, and DOE. (See the Appendix table.)

FY2007 Budget Request

For FY2007, R&D was requested at almost $137 billion of budget authority, about 1.8% more than enacted in FY2006. The request sought to double funding over 10 years (for a total of about $50 billion) for three key federal agencies that support basic research in physical sciences and engineering, that is for NSF, the Department of Energy's (DOE) Office of Science (for advanced energy research), and for the NIST laboratories, as part of the American Competitiveness Initiative (ACI) introduced in the 2006 State of the Union address to enhance U.S. innovation. Also, funding for NASA R&D would have been increased by about 8% largely for a development program called Constellation Systems to develop human space vehicles to replace the Space Shuttle. Cuts would have been made in NASA research programs in aeronautics, life sciences, and other research activities. Continuing previous emphases, the budget would have slightly increased over FY2006 support in real dollar terms for defense development. NIH funding would have been flat and R&D funding for all other agencies would have been decreased from FY2006 enacted levels. Over the next five years, the Administration's budget projected reducing budget deficits by cutting discretionary spending, so that while NASA and the three ACI-emphasized agencies would have continued to receive increases, other R&D funding agencies would have been subject to real dollar cuts after adjusting for expected inflation rates. (See the Appendix table.) The ACI initiative would also have made the R&D tax credit permanent, and increased support for mathematics and science education teacher training and curricula.

For FY2007, two appropriations bills were signed before adjournment—for DOD and DHS. The rest of the government is operating on a continuing resolution through February 2007, but which incoming Appropriations Committee chairmen say they will seek to continue throughout FY2007, thereby funding all other R&D activities at FY2006 levels. FY2007 appropriations action increased support for defense development and decreased homeland security R&D funding. (See the Appendix table.)

Priority-Setting Issues

Current priority-setting debates focus on the functions and size of federal R&D funding as a part of national R&D and on how to balance priorities in the portfolio of federal non-defense R&D, especially between health and nonhealth R&D.

Trends in R&D Support Patterns

The NSF projects that national (public + private) R&D expenditures will total $312.1 billion for FY2004, the latest year for which data are available, and about 51% more than in 1990. Federal R&D expenditures as a part of the total have also risen, to $93.4 billion (mostly to fund work performed in non-governmental sectors), but have declined significantly as a part of the total from 46% in 1983 to about 30% in 2004. The United States performs over twice as much R&D as the second largest funding nation, Japan. However, in terms of the ratio of R&D expenditures to gross domestic product (GDP), the United States ranks sixth, at 2.7%, following Israel, Sweden, Finland, Japan, and Iceland. Funding patterns figure prominently in priority-setting debates.

Industry is the largest supporter and performer of the nation's R&D; universities and colleges are the second-largest performer. It is estimated that industry funded 64% of all U.S. R&D performed in 2004 and conducted 70%; industry funded about 89% of the R&D it conducted. The amount of R&D supported by various industries varies; most industrial R&D is for near-term applied work and product or prototype development. In 2004, industrial R&D expenditures supported 82% of the nation's development work and provided 36% of national research expenditures (exclusive of development), largely for applied research. Industry allocated 5% of its R&D expenditures to basic research, and supported 17% of the nation's total basic research. Federal support for development, which totaled about 34% of federal R&D, goes largely for defense R&D performed by industry. The federal government is the largest supporter of the nation's basic and applied research (i.e., research per se ), and supplied 49% of total national basic research expenditures in 2004. The federal government was the single largest supporter of the nation's basic research, funding 62% of national basic research expenditures, largely in universities, and, thus, is the largest supporter of the nation's scientific knowledge base. About 42% of total federal research dollars goes to universities and 22% to mission-oriented work in intramural federal agency laboratories, largely at DOD, NIH, and USDA.

Universities and colleges conducted 55% of nationally funded basic research; the federal government funded about 65% of this university-performed basic research. According to a recent NSF report, "The share of academic R&D support provided by industry peaked at 7.4% in 1999 and declined every year thereafter, reaching 4.9% in 2004." One of the major reasons for this shift, according to NSF, was that "...U.S. companies increasingly choose to work with foreign rather than U.S. universities, encouraged by the more favorable [intellectual property] IP rights that foreign universities offer and the strong incentives for joint industry-university research that foreign governments provide."

OMB's historical trend data indicate that in constant dollar terms, federal R&D funding declined from about 18% of total federal discretionary outlays in FY1965 to about 16% today. In part because of economic pressures and budgetary caps, during the years FY1991 to FY2002, federal R&D funding was below the previous constant-dollar high of FY1990. Subsequently, as a result of congressional action, constant-dollar R&D appropriations started to eclipse the FY1993 level beginning with FY2001. However, concerns that had been raised about the declines in federal R&D funding have not abated because of a return to deficit spending, and likely future reductions in discretionary R&D spending. As constrained federal R&D budgets focus more on defense, homeland security, and biomedical R&D, fewer resources may be available for other areas of R&D. National defense-related R&D outlays constituted 55% of federal R&D outlays in FY2000 and are requested at an amount which would constitute 59% in FY2007. (It should be noted that recommendations have been made to improve the types and quality of econometric and research and development data used in making science policies, especially the information developed by NSF. )

Observations on the Role of the Federal Government in Supporting R&D

As shown in the preceding funding data, federal government support for R&D serves primarily the objectives of defense and homeland security, biomedical research, basic research knowledge generation, and enhancement of academic research capacity (which some call the "seed corn" of future scientific and technological development). Only a small percentage of federal non-defense R&D spending supports industrial R&D and innovation directly. Some observers contend that federal research support should be funded at increasingly higher levels to generate knowledge as a public good. Some contend that other actions should be taken to enhance the U.S. ability to advance scientifically; to enhance the stature of U.S. academic institutions; to increase scientific literacy, the number of science and engineering personnel, and research capacity in an increasingly competitive global environment where countries like China, India, Korea, and Japan are challenging U.S. output in knowledge generation and innovative industrial production capabilities. For instance, these issues and proposals to deal with them were discussed in Rising Above the Gathering Storm: Energizing and Employing America for a Brighter Economic Future, a report released in 2005 by a National Academies committee in response to congressional requests by members of the Senate Committee on Energy and Natural Resources and the House Committee on Science; in an American Electronics Association report, Losing the Competitive Advantage? The Challenge for Science and Technology in the United States , 2005; and at the "The National Summit on Competitiveness: Investing in U.S. Innovation," December 6, 2005, a meeting of industrial, academic, and governmental leaders.

Although there is controversy about it, some observers theorize that innovation and technological development are as important or more important than labor and capital as macro-economic drivers of economic growth. Some contend that industrial R&D and innovation benefit indirectly from federal investments in basic research and academic science and that such funding should be increased. For example, President Bush's FY2002 budget supported the view that "More than half of the Nation's economic productivity growth in the last 50 years is attributable to technological innovation and the science that supported it" (p. 29). In 2006, the Commerce Department's Bureau of Economic Analysis (BEA), using data from NSF surveys, released calculations that "... suggest ... R&D accounted for a substantial share of the resurgence in U.S. economic growth in recent years...." That is, researchers said, "...the Bureau determined R&D contributed 6.5 percent to economic growth between 1995 and 2002." BEA will produce an R&D satellite account and likely will incorporate R&D into GDP estimates around 2013. The President's FY2006 budget reported "Basic research is the source of tomorrow's discoveries and new capabilities and this long-term research will fuel further gains in economic productivity, quality of life, and homeland and national security."

Some observers say that data are inadequate to support the notion that basic research knowledge leads to technological innovation as a crucial determinant of economic growth. Because of the lack of credible data and disagreement among experts, policymakers do not know exactly how much increased federal research support would enhance growth and which R&D fields or programs warrant funding in order to promote technological innovation. As a result, some say that federal policy for industrial innovation, and its likely byproduct, economic growth, should focus more on improving the climate for industrial R&D, such as by tax incentives, altered regulatory policies, and wider liability protections.

The benefits of federal R&D investments are likely to be discussed in the context of long-term economic projections of deficits, decreasing outyear federal R&D budgets, and reductions in domestic discretionary spending. There are other related issues. For instance, will federal, state, and industrial policies to increase support for academic research—but often for short-term applied studies—overwhelm traditional academic research which traditionally has tended toward the conduct of basic research studies? Could state-supported funding supplant federal funding in some areas, as evidenced by initiatives in California and other states to fund stem cell research and biotechnology R&D? Other issues of debate focus on diversifying priorities for fields of support. There are also issues of organizing the government to fund and generate research knowledge, modifying funding mechanisms, and enhancing accountability for federal R&D investments. For instance, a 2005 report of the Center for Strategic and International Studies, entitled Waiting for Sputnik: Basic Research and Strategic Competition , stressed the need to increase federal basic research funding and discussed options, such as redirecting funds from development and testing of defense technologies; dedicating at least a minimum percentage of R&D funding for basic research in physical sciences; making basic research funding an entitlement, not discretionary; increasing tax credits for increased industrial support of academic basic research; establishing independent consortia for basic research supported by both government and private resources; creating a special class of Treasury bonds dedicated to basic research; or creating a loan-guarantee program for third party bonds (issued by states, for example) to finance basic research (pp. 29-31).

Among the legislative responses in the first session of the 109 th Congress to the various expert reports and recommendations were: outlining of a "Democratic Innovation Agenda," by House Minority Leader Nancy Pelosi (to increase funding for NSF and physical sciences research, and to create research centers of excellence); introduction of the "National Innovation Act of 2005," S. 2109 , a bipartisan bill, which would have doubled NSF funding, created a Presidential Council on Innovation, and encouraged agencies to devote 3% of their R&D budgets to high-risk research (associated bill H.R. 4654 ); introduction of a package of several innovation enhancing bills, including Democratic leadership proposals, H.R. 4434 to increase the number of U.S. mathematics and science teachers; H.R. 4435 to create an energy-related Advanced Project Agency; and H.R. 4596 to increase basic research funding and support high-risk, high-payoff research.

Arguments have been made to give more attention to education. The U.S. Commission on National Security 21 st Century, in Road Map for National Security: Imperative for Change, The Phase III Report , 2001, concluded that threats to the nation's scientific and educational base endanger U.S. national security. It recommended doubling the federal R&D budget by 2010 and improving the competitiveness of less capable U.S. academic R&D institutions. A 2006 National Science Board report, America ' s Pressing Challenge-Building A Stronger Foundation , published by the NSF in conjunction with release of the NSF's Science and Engineering Indicators, 2006 , called for a series of "drastic changes within the Nation's science and mathematics classrooms," to avoid "... raising generations of students and citizens who do not know how to think critically and make informed decisions based on technical and scientific information." The Council on Competitiveness, in a December 2004 report, Innovate America, included proposals to increase to an average of 3% the amount of federal agency budgets for basic research, to improve the regulatory climate for corporations, to increase federal investment in selected areas of applied research, and to improve science and engineering education. A National Academy of Engineering report, Trends in Federal Support of Research and Graduate Education , 2001, recommended that the Administration and Congress should evaluate federal research funding by field, assess implications for knowledge generation and industrial growth, and increase budgets for underfunded disciplines. Similar recommendations were made in New Foundations for Growth: The U.S. Innovation System Today and Tomorrow , released by the National Science and Technology Council on January 10, 2001. A new report, "Measuring the Moment: Innovation, National Security, and Economic Competitiveness. Benchmarks of our Innovation Future II," was released in November 2006. It reviews risk factors for U.S. technological competitiveness.

During the second session of the 109 th Congress, the President's "American Competitiveness Initiative" (ACI) emphasized funding for basic physical sciences and engineering research at NSF, NIST, and DOE's Office of Science to enhance U.S. innovative capacity and ability to compete internationally. (This is described above in the section on the FY2007 budget.) ACI would also support additional training in mathematics and science education at the pre-college level and training for part-time science and math teachers. Several bills were introduced in the second session of the 109 th Congress to address these issues, including S. 3936 , the National Competitiveness Investment Act; the bipartisan-supported "Protecting America's Competitive Edge" (PACE) Acts; that is, S. 2197 , focusing on the DOE and creation of an Advanced Research Projects Agency-Energy (reported amended, ( S.Rept. 109-249 ) on April 24, 2006) from the Senate Committee on Energy and Natural Resources; S. 2198 , focusing on education, on which hearings were held; and S. 2199 (regarding an R&D tax credit for industry). S. 2398 , proposed an Advanced Research Projects Administration – Energy. The House Science Committee held hearings on March 9, 2006 regarding the energy advanced research projects agency. Democratic members of the House Science Committee have critiqued the President's proposals contending that additional programs warrant funding. On June 22, 2006, the House Science Committee reported H.R. 5358 , the Science and Mathematics Education for Competitiveness Act ( H.Rept. 109-524 ); H.R. 5356 , the Early Career Research Act ( H.Rept. 109-525 ); and H.R. 5357 , the Research for Competitiveness Act. H.R. 4734 and S. 3502 would have given urgency to initiating education programs similar to national defense education acts of the past, which focused on improving education to deal with space and defense challenges posed by the former Soviet Union.

Priorities Among Fields of Federally Funded Research

Important questions are what should be the balance among fields of federally supported research, and specifically, since health/life sciences research has in recent years received priority, should more non-defense R&D funding go to support other fields of science? Some critics are concerned that the emphasis on health R&D may presage a scarcity of knowledge in physical sciences, math, and engineering. They maintain that funding should be increased for all R&D fields, and others cite the need to allocate more federal funding to nonhealth R&D.

As shown in Figure 1 , health sciences R&D has grown as a priority for about the last 20 years. Over the period FY1995 to FY2007 as requested, R&D funding in constant dollars, will have increased at NIH by 103% compared to DOD, 65%; NSF, 48%; USDA, 6%; DOE, 11%; and NASA, 1%. R&D funding decreased in constant dollars for EPA and the Departments of the Interior, Transportation, and Commerce. For FY2007 as requested, it is estimated in terms of constant dollars that federally funded health-related R&D, primarily at NIH, would receive over 54% of the federal non-defense R&D budget. In terms of constant dollar funding by field, federal obligations for life sciences increased from $13.4 billion in FY1994 to an estimated $29.3 billion in FY2004, or about 119%, while at the same time, between those years funding for physical sciences increased 7%; mathematics and computer sciences, 83%; and engineering, 40%.

The issue of whether the National Science Foundation should support social and behavioral sciences research was addressed in the 1950s shortly after the agency was established and also again in the 1980s during the first Reagan Administration. Questions were raised about whether these fields were scientific and if support for these topics would detract from support for chemistry, physical sciences, life sciences and mathematics. NSF started to support the social sciences under its "permissive authority" to support "other sciences" and, in 1968, was given explicit authority to support these fields (P.L. 90-407), although some Members of Congress continued to question this function in NSF. In September 2005, Senator Kay Bailey Hutchison, chairman of the Senate Commerce Subcommittee on Science and Space that has authorizations jurisdiction for NSF, and a member of the Senate Appropriations Subcommittee on Commerce, Justice, Science, and Related Agencies that appropriates funds for NSF, again questioned the propriety of NSF's support for social sciences research and recommended that NSF "focus firmly" on "the hard sciences,"—biology, chemistry, and physics, and not direct additional resources to support social sciences research. She reiterated her concerns in 2006, specifically raising questions about the appropriateness of some specific NSF social sciences awards and about whether the social sciences should benefit from the doubling in NSF's research budget proposed in President Bush's ACI initiative or whether such doubling should be limited to the other fields of science NSF supports. According to news reports, a draft of S. 2802 would have limited NSF's budget increase to support physical sciences research but subsequently after amendment, a compromise was reached with language that would not restrict NSF funding for areas of research that the agency deems to be consistent with its mandate (Sec. 305 d.) The bill was reported on July 19, 2006.

Congressional Views About the Balance in Federal R&D Funding

There are various perspectives on the issue of balance, focusing on both types and fields of R&D supported. Funding for biomedical research has been a priority in recent years. In 1998, an amendment to S.Con.Res. 86 , the FY1999 Senate budget resolution, expressed the sense of the Senate that the NIH budget should double within the next five years, which occurred by FY2003, although the budget has started to decrease from FY2003 in terms of constant dollars. Critics allege that other fields of science have received inadequate federal attention as a result of the health science emphasis. Partially in reaction, P.L. 107-368 , the NSF authorization bill for FY2003, authorized increases for NSF (which supports all areas of research) that would double its budget by 2008. NSF funding has not been appropriated consistently at a rate to meet this target.

Professional Groups' Views About Balance

Some professional groups argue for increased federal health sciences funding and others contend that more balance or support for other fields is needed. For instance, 32 Nobel laureates and industrialists wrote to President Bush in April 2003, urging more balance and increased funding for physical sciences, mathematics, and engineering in the 2005 budget. In response to language in appropriations reports, in November 2004, the NIH and NSF held a conference on "Research at the Interface of the Life and Physical Sciences: Bridging the Sciences," to identify opportunities, challenges, and issues at the interface of the life and physical sciences that could result in major advances and to develop approaches for bridging the separate fields. The President's Council of Advisors on Science and Technology (PCAST) released Assessing the U.S. R&D Investment , January 2003, that recommended targeting physical sciences and engineering to bring "them collectively to parity with the life sciences over the next 4 budget cycles" in order to better balance budget allocations. The Alliance for Science and Technology Research in America supports increased R&D funding for all fields.

Legislative Proposals to Broaden Incentives for Private R&D

Legislation was enacted during the 109 th Congress to make permanent the Research and Experimentation (R&D) tax credit that had expired on December 31, 2005. It provides credits (and incentives) for industrially funded R&D support in industry and universities. The credit is intended to spur innovative research that companies might not pursue because of the lack of immediate market rewards. The Administration has sought to have the credit made permanent. There is analysis indicating that if the credit were extended for a year and expanded, the cost to the Treasury could be about $10 billion and that instead the credit should focus more on supporting basic and applied research and less on product development which is claimed by some companies under the credit. H.R. 4297 , a tax reconciliation measure passed by the House and amended and passed in the Senate, would have extended the credit through the end of 2007. Conferees did not include language dealing with the tax credit. H.R. 5970 , a tripartite tax bill which passed in the House, included the R&D tax credit. Final Senate action did not occur. In the final days of the Congress, both the House and Senate enacted H.R. 6111 , which extended the credit for two years and widened eligibility for the credit.

NSF Funding

NSF funds research across all disciplines and is the main federal source for most non-health related academic research. P.L. 107-368 , the NSF authorization bill for FY2003, authorized increases in NSF's budget by 15% for each of FY2003, FY2004, and FY2005, which according to the sponsors, would "put the NSF on the track to double its budget within five years" (FY2008), similar to the NIH doubling track. Another objective was to increase federal support for science fields which in recent years have not experienced the larger percentage increases which have gone to biomedical R&D. The law also required increased oversight of NSF facilities programs; a report was prepared by the National Science Board (NSB). Congress appropriated about $4.1 billion in budget authority for NSF's FY2004 R&D funding, almost 5% more than FY2003, and about $1.0 billion less than envisioned in the authorization act. For FY2005, congressional action reduced NSF's budget authority below the FY2004 level. The President requested an FY2006 R&D budget increase of almost 3% largely for facilities support. Appropriations action increased NSF's FY2006 R&D budget authority by about 1.6%, and up to the level enacted for FY2004. The FY2007 request would have increased NSF's R&D budget by 8.3% over the FY2006 level. Although final appropriations action was not completed for FY2007, both House floor action and Senate Appropriations Committee action would have increased NSF's budget over FY2006, with the House level slightly more than the Senate. See the Appendix table.

P.L. 107-368 also required the NSB, which governs NSF together with the Director, to report on how NSF's increased funding should be used. In a 2003 report, Fulfilling the Promise: A Report to Congress on the Budgetary and Programmatic Expansion of the National Science Foundation (NSB-2004-15), the Board recommended meeting unmet needs by funding NSF annually at $18.7 billion, including about $12.5 billion for R&D, and outlined priorities for support. Because the budget levels recommended in that report had not been attained, the National Science Board released a final report in January 2006, 2020 Vision for the National Science Foundation (NSB 05-142), which identified four main investment principles, attainment goals, and enabling strategies. Prominent among groups which in the past recommended increased funding for NSF is the Coalition for National Science Funding (CNSF), which represents many universities and professional science associations.

Homeland Security R&D Funding

Homeland security R&D funding has grown from about 2.5% of the FY2002 federal non-defense R&D budget to about 6.8% of the FY2007 request for non-defense R&D budget authority. See Table 1 for trends based on data compiled by the American Association for the Advancement of Science (AAAS). Homeland security R&D funding is becoming an increasingly significant issue in priority-setting discussions. OMB's term "combating terrorism" R&D includes homeland security R&D and overseas combating terrorism R&D. An appendix to OMB's FY2007 Analytical Perspectives budget request volume includes data on homeland security funding, but these data do not clearly identify R&D funding. The largest FY2007 programs are in NIH largely for bioterrorism R&D and for containment facilities. This is followed in size by the requests for DHS, DOD, NSF, USDA, EPA, NASA, DOE, and the DOC's NIST.

P.L. 107-296 , the Homeland Security Act of 2002, mandated DHS to coordinate federal agency homeland security R&D programs. The law also consolidated some federal homeland security R&D programs in DHS. DHS's R&D funding has almost quintupled since FY2002 but in FY2007 appropriations action, Congress reduced DHS R&D funding about 22% below the FY2006 amount (AAAS data, see the appendix table). DHS is emphasizing support of development over research, with the result that basic and applied research in DHS would be reduced by about 20% for FY2007.

Federal R&D Priority-Setting Structures

Some observers recommend more centralized R&D priority-setting in Congress and in the executive branch. Others say that congressional jurisdiction for R&D, split as it is among a number of committees and subcommittees, prevents examination of the R&D budget as a whole. This means that R&D funding can serve particular local or program interests, but may not be appropriate for a national R&D agenda. But opponents see value in a decentralized system in which budgets are developed, authorized, and appropriated separately by those most familiar with the needs of specific fields of R&D—the department or agency head and the authorizing and appropriations subcommittees with jurisdiction. Other issues center on interagency initiatives, R&D policy coordination, developing a technology assessment capacity, earmarking, and R&D funding accountability.

Unified Federal Science and Technology (FS&T) Budget

In a 1995 report, Allocating Federal Funds for Science and Technology , the National Academies recommended that Congress consider the R&D budget as a unified whole before its separate parts for each agency are considered by individual congressional committees. It recommended that R&D budget request data be reconfigured as an S&T budget, excluding defense development, testing and evaluation activities, to denote basic and applied R&D and the creation of new knowledge. Since the FY2002 budget request, OMB has used a modified version of this format and has identified a "Federal Science and Technology (FS&T) budget table," which, for FY2007, includes less than half of total federal R&D spending but also some non-R&D funding, such as education and dissemination of information. Table 5-2 of Analytical Perspectives projected a decrease in FS&T funding of about 1% from FY2006 to FY2007 as requested. Continued use of this alternative format may pave the way for congressional consideration of a realigned and unified S&T budget. S.Amdt. 2235 to the Senate budget resolution ( S.Con.Res. 86 ) for FY1999 expressed the sense of the Senate that for FY2000-2004, all federal civilian S&T spending should be classified under budget function 250. In 2004, Senator Jeff Bingaman said: "It would be valuable to have joint hearings across the relevant committees in the Senate on the overall shape of our S&T spending. It might be worth considering whether the functional nature of the budget itself should be revised to put the entire federal S&T budget in one place, so that there is much more transparency as to what the real trends are...."

Interagency R&D Initiatives

Executive Order 12881, issued by President Clinton, established the National Science and Technology Council (NSTC) with cabinet-level status. Located in the Executive Office of the President, it recommends agency R&D budgets to help accomplish national objectives, advises OMB on agency R&D budgets, and coordinates presidential interagency R&D initiatives. Beginning with the FY1996 budget request, NSTC identified interagency R&D budget priorities. The FY2007 budget presented agency funding for two interagency R&D initiatives whose reporting is required by statute, "Networking and Information Technology R&D," requested at $3.1 billion, a 2% decrease from the estimated FY2006 amount, and "Climate Change Science Program," requested at $1.7 billion, a level flat with the FY2006 estimate. Another priority interagency initiative was nanotechnology, requested at $1.3 billion, a 2% decrease from the FY2006 amount. Other FY2007 interagency R&D initiatives included combating terrorism R&D and hydrogen R&D.

In a joint OMB/OSTP annual memorandum, the Administration announced FY2008 interagency priorities that "should receive special focus in agency budget requests." These are: homeland security, energy security, advanced networking and high-end computing, national nanotechnology initiative, understanding complex biological systems, and environment. In addition the statement gave details on two "areas requiring special agency attention and focus though the NSTC," that is stewardship for federal scientific collections and developing a "'new science of science policy'" to understand the "linkages between R&D investments and economic and other variables that lead to innovation, competitiveness, and societal benefits."

Proposals to Coordinate Federal R&D

The 2001 National Science Board (NSB) report, Federal Research Resources: A Process for Setting Priorities (NSB 01-160) recommended a "continuing advisory mechanism" in Congress and the executive branch and strengthening the OMB/OSTP relationship to coordinate R&D priorities. It said that federal R&D funding should be viewed as a five-year planned portfolio, rather than as the sum of the requirements and programs of departments. AAAS President Mary Good, recommended creating a cabinet-level post for S&T to help achieve balance in R&D and coordinate federal R&D and handle research policy issues. The aforementioned Commission on National Security recommended empowering the President's science advisor to establish "functional budgeting," to identify non-defense R&D objectives that meet national needs, strengthen the OSTP, NSTC and PCAST, and improve coordination with OMB to enhance stewardship of national R&D. The congressional science policy report, Unlocking Our Future , 1998, spearheaded by Representative Vernon Ehlers, called for balance in the federal research portfolio and said that while OMB can fulfill the coordination function in the executive branch, "no such mechanism exists in the Congress. ... [I]n large, complex technical programs, ... committees should ... consider holding joint hearings and perhaps even writing joint authorization bills" (p. 7).

Legislation on Technology Assessment

The aforementioned NSB report also recommended that Congress develop "an appropriate mechanism to provide it with independent expert S&T review, evaluation, and advice" (p. 16). Some believe that this could pertain to reestablishing the Office of Technology Assessment (OTA), which was active between 1972 and 1995 as a congressional support agency. It prepared in-depth reports and discussed policy options about the consequences of applying technology. Sometimes congressional committees used these reports to set R&D priorities in authorizations and appropriations processes. OTA was eliminated as part of the reductions Congress made in a FY1996 appropriations bill. Proponents of "resurrecting" OTA or variants of it cite the need for better congressional support for S&T analysis. The OTA is still authorized, but funds would have to be appropriated for it. The pros and cons of reviving OTA or re-creating a similar body have been examined since its termination and several proposals were introduced during the 107 th Congress and 108 th Congresses to address this issue. Since 2002, at congressional direction, the Government Accountability Office (GAO) has conducted three pilot technology assessments, Technology Assessment: Using Biometrics for Border Security , GAO-03-174, 2002, Cybersecurity for Critical Infrastructure Protection , GAO-04-321, and Protecting Structures and Improving Communications During Wildland Fires , GAO-05-380, and has one underway on port security. During the 109 th Congress, the House Science Committee held a hearing on July 25, 2006 on S&T advice in Congress, which, in part, addressed the issue of re-creating an OTA-like agency. Issues under debate relating to restoring a technology assessment capability have included questions about the need for assessments, funding arrangements, the utility of GAO's assessment reports, and options for institutional arrangements, including conducting technology assessments simultaneously with conducting R&D.

Earmarking

There is controversy about congressional designation of R&D funding for specific projects, also called earmarking. When using this practice, Congress, in report language or law, directs that appropriated funds go to a specific performer or designates awards for certain types of performers or geographic locations. Typically an agency has not included these awards in its budget request and often such awards may be made without prior competitive peer review. The Administration seeks to discourage earmarking, saying that it distorts agency R&D priorities and seldom is an effective use of taxpayer funds. Supporters believe the practice helps to develop R&D capability in a wide variety of institutions, that it compensates for reduced federal programs for instrumentation and facilities, and that it generates R&D-generated industrial and economic growth in targeted regions.

OMB did not publish funding data on R&D earmarks in the FY2007 budget request, although it had done so in the past. It reported that AAAS-accumulated data show that $2.4 billion was appropriated for earmarked R&D for FY2006, an increase of 13% over the estimate for FY2005. This would constitute 1.7% of total federal R&D funding for FY2006. According to AAAS, FY2006 R&D earmarks were mainly for projects in DOD, DOE, USDA, NASA, DOC (NIST), and DOT, in that order. Although appropriations action is still not finished, AAAS estimates that FY2007 R&D earmarks will total about the same amount as in FY2006.

Although such action is controversial, attempts were made in the 109 th Congress to make "earmarking" more transparent. For instance, on September 26, 2006, President Bush signed S. 2590 , the Federal Funding Accountability and Transparency Act, into law ( P.L. 109-282 ). It requires OMB to create by January 1, 2008 a website containing information about federal awards, to be updated within 30 days after the award is made. Although one of the stated purposes of the legislation is to enable the public to use the on-line database to identify congressional "earmarks," it is unclear how the database will serve users, since the data systems that will be used to obtain information, called Federal Assistance Award Data System (FAADS) and Federal Procurement Data System (FPDS), do not collect data on earmarks. OMBWatch , a private group, also created its own website http://www.FedSpending.org , intended to provide the same kind of information. Some of the entries do identify whether the grant was congressionally directed.

On September 14, 2006 the House agreed to a rule change drafted by House Rules Committee Chairman David Dreier, H.Res. 1000 , which mandates disclosure of earmark sponsors in tax and spending legislation. Reportedly, the Senate is working on a similar rules change. Critics argue that this new requirement will not change the practice of earmarking and may not reveal all earmarks since it does not apply to all tax provisions, to manager's amendments offered on the floor, and to some earmarks inserted into conference reports.

In July 2006, Senator Tom Coburn sent a survey to 110 universities asking them whether they received research earmarks in the past six years, if they hired lobbyists to obtain the earmarks, and the impacts of the money on their campuses and on science. This has, reportedly, caused considerable concern among Members of Congress who support earmarks and among many universities who view earmarks as an acceptable way to obtain funding. Dr. Coburn's office released the 90 responses received as of October 10, 2006. His office said an analysis is forthcoming.

Government Performance and Results Act (GPRA) and Performance Assessment Rating Tool (PART)

The Government Performance and Results Act of 1993 (GPRA), P.L. 103-62 , is intended to produce greater efficiency, effectiveness, and accountability in federal spending and to ensure that an agency's programs and priorities meet its goals. It also requires agencies to use performance measures for management and, ultimately, for budgeting.

Recent actions have required agencies to identify more precisely R&D goals and measures of outcomes. As underscored in The President ' s Management Agenda, since FY2001 the Bush Administration has emphasized the importance of performance measurement, including for R&D. In a memorandum dated June 5, 2003, signed jointly by the directors of OSTP and OMB regarding planning for the FY2005 R&D budgets, the Administration announced it would expand its effort to base budget decisions on program performance (OMB M-03-15). OMB referred to this memorandum again in the FY2007 R&D budget guidance, which reiterated the importance of performance assessment for R&D programs (Joint OMB/OSTP M-05-18). According to Section 5 of Analytical Perspectives, FY2007 , agencies were required to use OMB criteria to measure research outcomes, focusing on three investment criteria—relevance, quality, and performance. R&D performed by industry is to meet additional criteria relating to the appropriateness of public investment and to identification of decision points to transition the activity to the private sector.

The Administration has assessed some R&D programs with the Program Assessment Rating Tool (PART), which uses the OMB/OSTP R&D investment criteria and other measures. PART results for 102 R&D programs evaluated over the past four years were used when making budget decisions. OMB's Analytical Perspectives volume reported that of these, at least 29 programs were effective and 41 were moderately effective. Commentators have pointed out that it is particularly difficult to define priorities for most research and to measure the results quantitatively, since research outcomes cannot be defined well in advance and often take a long time to demonstrate, possibly precluding use of performance measures to recommend budget levels for most R&D. Some observers say that many congressional staff are not yet comfortable with using performance measurement data to make budget decisions and prefer to use traditionally formatted budget information, which focuses on inputs, rather than outputs. Congress may increase attention to the use of R&D performance measures in authorization and appropriations actions especially as constraints grow on discretionary spending. In June 2005, OMB sent Congress draft legislation to authorize results commissions to evaluate programs and recommend restructuring or termination of those deemed ineffective.

The NAS's most recent report advising on use of performance measures for research is Implementing the Government Performance and Results Act for Research: A Status Report, 2001 . As for congressional interest, the House Science Committee's science policy report, Unlocking Our Future , 1998, commonly called the Ehlers report, recommended that a "portfolio" approach be used when applying GPRA to basic research. The House adopted a rule with the passage of H.Res. 5 (106 th Congress) requiring all "committee reports [to] include a statement of general performance goals and objectives, including outcome-related goals and objectives for which the measure authorizes funding."

Appendix. R&D in the Budget, by Agency, Based Largely on AAAS Data

(Budget authority in millions of dollars)