The Federal R&D Budget: Process and Perspectives Matt Hourihan June 18, 2013 For the Washington Internship for Students of Engineering (WISE) Program AAAS.

The Federal R&D Budget: Process and Perspectives

Matt HourihanJune 18, 2013For the Washington Internship for Students of Engineering (WISE) Program

AAAS R&D Budget and Policy Programhttp://www.aaas.org/spp/rd

U.S. R&D INVESTMENT

Income Taxes$1,383

Corporate Taxes$288

Social Insurance and Retirement (Payroll

Taxes)$951

Other Taxes (excise, gas, estate, etc.)

$412

Borrowing$744

FY 2014 Budget by Source of FundsTotal Outlays = $3.8 trillion

Total Receipts (without borrowing) = $3.0 trillion

Source: Budget of the United States Government FY 2014.© 2013 AAAS

U.S. R&D INVESTMENT

-2000

-1800

-1600

-1400

-1200

-1000

-800

-600

-400

-200

0

200

40019

60

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

2015

Federal Budget Deficit (or Surplus)in billions of constant FY 2013 dollars

Unified budget (including Social Security)

Source: Budget of the United States Government, FY 2014.FY 2013 data are estimates. FY 2014-2018 data are budget projections.© 2013 AAAS

U.S. R&D INVESTMENT

Defense Discretionary

$544[Defense R&D]

$74

Nondefense Discretionary

$554

[Nondefense R&D]$70

Social Security$860

Medicare$524

Medicaid$304

Other Mandatory$621

Net Interest$223

Composition of the Proposed FY 2014 BudgetTotal Outlays = $3.8 trillion

outlays in billions of dollars

Source: Budget of the United States Government FY 2014.Projected unified deficit is $744 billion.© 2013 AAAS

U.S. R&D INVESTMENT

Two Spending Categories: Discretionary vs. Mandatory

Mandatory Spending (aka Direct Spending) Mostly entitlements

Potential for high political sensitivity = “third rail”

Changed only by act of Congress: essentially “on autopilot”

Discretionary Spending: Adjusted annually

Easy targets?

i.e. Sequestration

Vast majority of federal R&D is discretionary

U.S. R&D INVESTMENT

The Federal R&D Budget: The Basics

About $144 billion in FY 2014 Down ~16% between 2010 and 2013 About half = DOD About half = Basic + applied research

Fragmented More than two dozen departments and agencies But “top heavy” (DOD and NIH)

Funds ~60% of university R&D Declining share of economy Declining share of national R&D investment (vs. industry)

U.S. R&D INVESTMENT

Federal Industry Other$0

$50

$100

$150

$200

$250

$300

Character of R&D By Funder, 2009Expenditures in billions of dollars

Development

Applied Research

Basic Research

Source: NSF, National Patterns of R&D ResourcesFigures are preliminary.© 2012 AAAS

U.S. R&D INVESTMENT

Recent R&D Budget History Historically large cuts in FY 13

Recent gains: Energy

General Science

Manufacturing

Recent stagnation / declines Health

Agriculture

Environment

Space

U.S. R&D INVESTMENT

Q: How Did We Get Here?A: A convoluted, complicated, old and evolving process…

FY 2013

FY 2014

Bud

get

Rel

ease

FY 2015

Bud

get

Rel

ease

Oct Nov Dec J an Feb Mar Apr May J un J ul Aug Sep Oct Nov Dec J an Feb Mar Apr May J un J ul Aug Sep

• Budget Resolution

• 302(a) and (b)• Hearings

Write, pass, and conference twelve appropriation bills

Planning within Agency

----- Spend Fiscal Year Budget -----

Negotiate and finalize budget

proposal with OMB via passbacks





Agencies submit budget

proposals

Agencies receive strategic guidance from OMB

Negotiate and finalize budget proposal with OMB via passbacks

U.S. R&D INVESTMENT

The Federal Budget Cycle

Internal agency discussions

Joint guidance memorandum from OMB / OSTP Defines focus areas, methods, strategy for boosts or cuts

Agencies deliver budget justifications to OMB

Budg

et

Rele

ase









proposals


U.S. R&D INVESTMENT

What Drives Presidential R&D Budget Formulation? Incrementalism

Administration priorities

Program priorities & politics

Expert and community input

OMB oversight, OSTP input

Also big (fiscal) picture

U.S. R&D INVESTMENT


Agencies negotiate with OMB (“passbacks”)

Budget proposals are finalized in January

President presents the proposed budget to Congress early February

Budg

et

Rele

ase









proposals


U.S. R&D INVESTMENT

DOD, $69.5

HHS (NIH), $32.0

DOE, $12.7

NASA, $11.6

NSF, $6.2

USDA, $2.5

Commerce, $2.7All Other, $6.7

Total R&D by Agency, FY 2014budget authority in billions of dollars

Source: OMB R&D data, agency budget justifications, and other agency documents.R&D includes conduct of R&D and R&D facilities.© 2013 AAAS

Total R&D = $144.1 billion

U.S. R&D INVESTMENT

-5.5%

0.8%

2.7%

3.3%

8.0%

8.8%

13.4%

46.6%

164.9%

181.8%

-50% 0% 50% 100% 150% 200%

Defense

Transportation

Space

Health

General Science

Agriculture

Environment

Energy

Justice

Commerce

FY 2014 R&D Budget Request by Functionpercent change from FY 2013

Source: OMB R&D data, agency budget justifications, and agency budget documents. Environment includes natural resources R&D.© 2013 AAAS

U.S. R&D INVESTMENT


Congress holds budget hearings…

IN THEORY - Approves budget resolution (simple majority)

302(b) allocations to the 12 appropriations subcommittees

Budg

et

Rele

ase









proposals


U.S. R&D INVESTMENT

U.S. R&D INVESTMENT


Approps committees write/approve 12 appropriations bills

Bills have to pass both chambers (can be filibustered); Differences are conferenced

Continuing resolutions? Omnibus? Reconciliation? Supplemental appropriations?

Budg

et

Rele

ase









proposals


U.S. R&D INVESTMENT

U.S. R&D INVESTMENT

Authorizations vs. Appropriations Authorization

Creates and modifies programs.

Includes funding ceilings BUT NOT actual funding.

Under the jurisdiction of the topical legislative committees.

i.e. America COMPETES and ARPA-E

Appropriations Permits funding (specifically, incur obligations)

Under the jurisdiction of the Appropriations Committees (each with 12 subcommittees – one for each spending bill)

Defense, Energy + Water, Interior, Labor/HHS/Eduction, Agriculture, etc…

U.S. R&D INVESTMENT

What Drives Congressional Budget Decisions?

Incrementalism

Local politics

Concerns over effectiveness, balance, duplication

Role of government

STEM workforce issues

Topical vs. substantial

The Big Fiscal Context “Annual Miracle”

U.S. R&D INVESTMENT


Agencies are working on 3 budgets at any given time. Right now:

Spending FY 13 Congress dealing with FY14 Agencies planning for FY15

FY 2013

FY 2014

Bud

get

Rel

ease

FY 2015

Bud

get

Rel

ease














proposals


Negotiate and finalize budget proposal with OMB via passbacks

U.S. R&D INVESTMENT

The Budget Control Act / Sequestration

1. Established Discretionary Spending Caps

2. Established automatic budget enforcement procedures (sequestration) $1.2 trillion cuts through

2021

~8% cuts to R&D over the next five years

U.S. R&D INVESTMENT

-9.5%-6.8%-6.6%-6.6%-6.4%-5.2%-5.0%-4.6%-4.5%-4.5%-4.2%-4.0%-3.8%-2.5%

5.5%60.8%

-6.5%

-20% 0% 20% 40% 60% 80%

Other DODTransportation

NASAAgriculture

EPANIH

DOE ScienceDOD S&T

US Geological SurveyDOE Energy Programs

Other HHSNSF

DOE AtomicsVA

NISTDHS

TOTAL

Estimated FY 2013 R&D: Appropriations and Sequester Outcomes

percent change from FY 2012

Source: AAAS estimates based on agency R&D data and budget documents, appropriations documents, and OMB sequester analyses.© 2013 AAAS

DOD "S&T" = DOD R&D in "6.1" through "6.3" categories

U.S. R&D INVESTMENT

Current State of Play President’s FY14 budget now out

How does one fit a $1057 billion budget into a $966 billion hole?

The BIG issues remain: deficits, taxes v. spending, growth in entitlements, tax burden Support for science funding seems to continue, BUT…

House remains committed to cutting nondefense discretionary

Veto threat?

Sequestration remains in place for now…. Research community reeling

Sequester Part 2?

…also debt ceiling

U.S. R&D INVESTMENT

For more info…

[email protected]

202-326-6607

www.aaas.org/spp/rd/

The Federal R&D Budget: Process and Perspectives Matt Hourihan June 18, 2013 For the Washington Internship for Students of Engineering (WISE) Program AAAS.

Documents

rd investment slide

federal rd budget

discretionary slide

omb slide

rd investment authorizations

rd investment q

env slide

industry slide