Part 1: The President's FY2003 Budget for Research and Development - an analysis by the House Science Committee Minority Staff


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I. INTRODUCTION

Notes on this Analysis

Unless indicated otherwise, all amounts refer to budget authority. This analysis focuses primarily on research and development funding for Federal departments and agencies under the jurisdiction of the Science Committee, including:

  • National Aeronautics and Space Administration(NASA)
  • National Science Foundation(NSF)
  • National Institute of Standards and Technology(NIST)
  • National Oceanic and Atmospheric Administration (NOAA)
  • Environmental Protection Agency(EPA)
  • Federal Emergency Management Agency(FEMA)
  • Department of Transportation(DOT)

Other R&D-performing agencies, such as the National Institutes of Health (NIH), the Department of the Interior (DOI), and the Department of Agriculture, are also covered in brief.

The Overall FY03 Budget

The President's overall budget submission calls for $2,128 billion in outlays and $2,048 billion in receipts for a projected FY03 unified budget deficit of $80 billion. Of the $766.9 billion requested for discretionary budget authority, $111.8 billion is for research and development (R&D). The comparable outlay figures are $789.0 billion and $111.7 billion. Thus, R&D outlays as a percentage of discretionary outlays will be 14%, an increase over the 10% to 12% level that has persisted over the past 20 years.

The FY03 R&D Budget

The budget proposes to invest $111.8 billion for R&D, including facilities, in FY03, an increase of $8.574 billion (8%) above FY02. Civilian R&D would increase by $3.872 billion (8%), defense R&D by $4.702 billion (8%). Of the civilian increase, $3.745 billion is allocated for the Department of Health and Human Services. Funding for other civilian, non-health R&D would increase by $127 million, or one-half of one percent. (See table at end of document for agency-by-agency breakdowns)

The Main Story Line in the FY03 R&D Budget:
Business-as-Usual but Watch Those Metrics!

The FY03 R&D budget request can be described in one sentence: defense increases eight percent, NIH increases 17 percent, and all other civilian R&D is collectively frozen.

In fact, there is a business-as-usual quality to the overall civilian R&D portfolio. As has been the case stretching back through last year's budget and into the Clinton years, NIH is slated to receive most if not all of the civilian R&D increases. But the sense of continuity - perhaps inertia is a better word - extends beyond this persistent trend. Even the multi-agency R&D priorities highlighted in this budget are essentially holdovers from the Clinton budgets: anti-terrorism R&D, networking and information technology R&D, nanotechnology R&D, and climate change R&D. Politically unpopular cuts in renewable energy and energy efficiency, so prominent in last year's submission, have disappeared. Even the Clean Coal R&D Program, a Bush campaign promise, is paid for by other cuts in the coal R&D portfolio. At the macro level, this is very much a steady-as-it-goes budget submission.

This is not to say, however, that storm clouds are not lurking. Much of the civilian R&D portfolio, the budget warns, will be subject to impending programmatic or management reviews, or both. So, on a large scale, NASA finds much of its science and human space flight accounts dependent upon further rumination and consideration and the dollars requested in this budget imply few commitments by the Administration to the continuation of the Space Station, Mission to Planet Earth, or the Outer Planetary Program. On a smaller scale, the Smithsonian may or may not see some of its science portfolio transferred to NSF after further study.

And a large amount of ink is spilled in the President's budget asserting that management metrics were applied in making budget allocations and promising that performance metrics, still being developed, will be used to guide decisions in the next budget cycle. The budget actually awards grades (red light, yellow light, green light) for performance across five management measures. The Department of Defense, which receives a more than 12% increase, also receives five "red lights" for its management. Obviously we cannot shortchange national defense in a time of national crisis so the disconnect between performance and dollars is explicable.

But how do we explain NIH, housed at Health and Human Services, staying on its doubling path when HHS has five red lights? Yet that management score seems to have had no impact on NIH's $3.9 billion budget increase. And how do we explain NASA's lone yellow light in a sea of red - for financial management - when its inept financial management is cited as the reason for putting the agency's flagship program - the International Space Station - on life support?

Then there is NSF. NSF received one green light and one yellow light as well as three red lights. NSF's score was better than every single Cabinet-level agency. Mitch Daniels, the head of OMB, held NSF up as a model agency at a November 28, 2001 appearance at the National Press Club. He described it as one of the "true centers of excellence in this government" for its low overhead costs and efficient use of tax dollars.[note 1] And what is the reward reaped for this status? After backing out programs transferred to NSF from USGS and NOAA, the core R&D accounts at NSF appear to have grown by approximately $53 million - or 1.5%. That increase is less than inflation.

In short, despite assertions that management scores mattered, it appears to us that the management scores had little or no effect on what happened to a particular agency's budget. We wonder whether the new and still developing performance metrics will have any greater impact. It is worth noting that in the years since the Government Performance and Results Act was implemented it has become a great tool for justifying what you would do anyway. If a program out of favor receives a bad score, it should be cut-back, terminated or moved to another agency. If a program in favor receives a bad score, it is simply proof that we need to spend more to achieve our important goal. If a disfavored program were to receive good scores, it would be proof that they could get by with less, and a favored program with good performance could see more money as a "reward" for their performance.

Metrics have become a cloak behind which politics, both Presidential and Congressional, can carry on as before with a new patina of impartiality. We will track the evolution and application of the new R&D metrics with great care, and we hope that the science and educational communities become more alert to the renewed push by this Administration to take a "business-like" approach to science.

In summary, the theme for this year's budget submission is incremental change, but with many major programmatic changes lurking, changes that will be justified with as-yet sketchy and opaque management criteria.

[note 1.] This quote and line are from an NSF press release of December 4, 2001.

Other Themes in the FY03 R&D Budget

Last year's staff analysis noted four major themes in the FY02 budget submission:

  • The request reversed the trend toward parity (actually achieved in FY01) between defense and non-defense R&D.
  • The imbalance between biomedical R&D and R&D in the physical sciences was further exacerbated.
  • The budget submission stopped in its tracks a growing consensus that the NSF budget should grow at least at the same rate as the NIH budget.
  • Cooperative Federal-industry R&D programs fare poorly in the budget submission.

Each of these statements is probably as true for the FY03 submission as it was last year.

First, in this year's submission, defense R&D would constitute 52 percent of total R&D, only the second budget (last year's was the first) to reverse a 15-year trend toward a greater civilian share. The combined defense/homeland security R&D budget is even higher - approximately 55 percent. In a time of changing national priorities, these trends may be appropriate. But they are worth noting and debating.

Second, the trend toward HHS dominance of the civilian R&D budget continues to grow. This is the first budget submission in which the HHS R&D request ($27.683 billion) exceeds the R&D request of all other Federal civilian R&D ($26.046 billion). HHS would dole out over 60 percent of all civilian funding for basic research in FY03. The budget submission dismissed this imbalance as follows:

"The Administration believes the focus should not be on how much we are spending, but rather on what we are getting for our investment and how well it is being managed."

This may be true, but it also remains a fact that none of the tough management criteria being applied to many civilian R&D programs seem to apply to NIH. Doubling the NIH budget was a campaign promise and a Congressional priority, so it will happen. Meanwhile the trend continues, unabated and unexamined.

Third, the five-year doubling path for NSF, started in FY01, is officially off the rails. NSF's R&D budget would grow from $3.571 billion to $3.700 billion in FY03. However, $76 million of this growth is transfer of R&D programs from other agencies, so the actual increase is $53 million, or 1.5 percent. This is a net loss for NSF, after inflation. The story with DOE's programs in the physical sciences is the same.

Finally, last year's report noted the targeting of several R&D collaborations involving academic, industry, and government as wasteful examples of corporate welfare. Some of last year's targets (PNGV, cooperative renewable energy programs) are now off the radar screen, but several remain (ATP, MEP, aviation R&D). The Administration has yet to explain why some cooperative industry programs are good and some are bad. ATP and MEP, for example, have received near-unanimous positive outside reviews for effectiveness and for management, but they apparently fail to satisfy some unstated Administration management criteria. The management mantras scattered throughout the budget request are useful only to the extent that they are transparent, and in the case of these programs they are not.

There is one nearly foolproof way to predict which cooperative programs will be "good" - that is, not engendering corporate welfare. If the program can be seen as a substitute for regulatory action on a controversial environmental issue, it is "good." This probably explains the continuing popularity, in the Administration's request, of the Clean Coal Program, the Climate Change Science and Technology Initiatives, and the Freedom Car Program. All of these research programs suggest that more research is needed (and in each case there is a 10-20 year program to produce research results) before any regulatory change or mitigative action is warranted.

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