The Federal R&D Budget: Process and Perspectives Matt Hourihan November 17, 2014

For the AAAS S&T Policy Leadership Seminar AAAS R&D Budget and Policy Program http://www.aaas.org/spp/rd

The Federal Budget is Kind Of a Big Deal

  “Politics is who gets what, when, and how.” - Harold Lasswell “Budgeting is about values, and it’s about choices.” – Rep.

Rosa DeLauro

  Put another way: budgeting is a manifestation of politics Negotiation between competing interests (and their proxies) in a decentralized system  Major impact for R&D and innovation: most basic research, and most university research, is federally funded

Two Spending Categories: Discretionary vs. Mandatory

  Mandatory Spending (aka Direct Spending)   Mostly entitlements, mostly on “autopilot” Potential for high political sensitivity = “third rail” Discretionary Spending:    Adjusted annually Easy (nondefense) targets?

 i.e. Sequestration Vast majority of federal R&D is discretionary

A Typical Federal Budget Process: Three Years, Four Phases

Phase 1: Planning within Agency w/ OMB and OSTP oversight Phase 2: OMB Review Phase 3: Congressional budget and appropriations

Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep

Phase 4: Execute the fiscal year’s budget (not shown)

Arranged by fiscal year (October to September)

The Federal Budget Cycle

Phase 1: Planning within Agency w/ OMB and OSTP oversight Phase 2: OMB Review Phase 3: Congressional budget and appropriations

Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep    Phase 1: Internal agency discussions and planning  Strategic plans, staff retreats, program assessments  More bottom-up than top down OMB is present throughout  Early spring: guidance memo  Science & Tech: Joint guidance memo from OMB / OSTP (midsummer) Agencies deliver budget justifications to OMB (early fall)

What Drives Presidential R&D Budget Formulation?

      Top-down and bottom-up priorities and politics  OMB oversight and OSTP input Technical and political judgment Expert and community input Congressional legislation Big (fiscal) picture Incrementalism

One Example

 The Human Genome Project    Science community takes early interest in sequencing Senior DOE Science personnel conceive plan, work their way up the hierarchy:  Elicit support from DOE superiors, OMB  Endorsements, guidance from advisory panels, other outside experts  Appropriators and authorizers on board Separately and slightly behind, NIH sets up its own program  Interagency rivalry evolves to collaboration

The Federal Budget Cycle

Phase 1: Planning within Agency w/ OMB and OSTP oversight Phase 2: OMB Review Phase 3: Congressional budget and appropriations

Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep    Phase 2: OMB performs multi-stage review, responds to agencies (“passbacks”)  Agencies and agency heads can and do negotiate Budget proposals are finalized in January President presents the proposed budget to Congress early February

Administration R&D Priorities

       Department of Energy: NNSA, renewables and efficiency, ARPA-E Neuroscience NASA: industry partnerships Transportation: highways and high-performance rail Extramural ag research Advanced Manufacturing Environmental research?

   COMPETES Agencies: $11 billion for R&D (+1% from FY14) Treading water Research budget hit?

 (not really)

The Federal Budget Cycle

Phase 1: Planning within Agency w/ OMB and OSTP oversight Phase 2: OMB Review Phase 3: Congressional budget and appropriations

Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep    Phase 3: Congress gets involved Receives and reacts to President’s budget, holds hearings IN THEORY: Approves budget resolution (simple majority)  302(b) allocations to the 12 appropriations subcommittees

The Budget Resolution

 Overall spending framework  Discretionary spending figure is divvied up by appropriations committees  Budget resolution is a political document  (which is why they can’t seem to pass one?)

The Federal Budget Cycle

Phase 1: Planning within Agency w/ OMB and OSTP oversight Phase 2: OMB Review Phase 3: Congressional budget and appropriations

Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep   Approps committees write/approve 12 appropriations bills  Bills have to pass both chambers  Differences are resolved in conference committee  Can be filibustered “President proposes, Congress disposes”

Congressional Budget Decisions

      “All politics is local” Distributed responsibility:   Nine subcommittees responsible for at least $1 billion of R&D No concerted assessment of full R&D portfolio Limited avenues for formal S&T advice Concerns over balance, duplication, competitiveness, role of government Reactive; incrementalism?

The “Annual Miracle”

More examples…

 Dept of Agriculture research grants    USDA research regular source for earmarks Outside calls for increased competitive grants (versus formula funds) over 30+ years Competitive programs phased in slowly  Health Research and Congress   DOD health program: breast cancer advocacy NIH doubling was a Congress-led initiative

Authorizations vs. Appropriations

      Authorization    Creates and modifies programs Sets funding ceilings Under the jurisdiction of the topical legislative committees Appropriations Permits funding (power to incur obligations) Under jurisdiction of Approps Committees Can be multiyear or advance appropriations (i.e. Veterans) >$250 million in unauthorized appropriations in 2012 (per CBO)

Budget Cmte Energy + Commerce Cmte Natural Resources Cmte

House Senate

Approps Cmte Budget Cmte Subc on Energy + Water Subc on Interior + Env Env and Pub Works Cmte Energy and Nat Res Cmte Approps Cmte Subc on Energy + Water Subc on Interior + Env

The Federal Budget Cycle

Phase 4: Spend the Fiscal Year Budget FY 2015 FY 2016 Phase 2: OMB Review Phase 3: Congressional budget and appropriations Phase 4: Spend the Fiscal Year Budget FY 2017 Phase 1: Planning within Agency w/ OMB and OSTP oversight Phase 2: OMB Review Phase 3: Congressional budget and appropriations

Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep  Gov’t is working on 3 budgets at any given time. Right now:    FY 15 “started” FY 16: OMB passbacks should arrive soon…?

Some starting to think about FY 17? (though focus is on FY 15-16)

Looking ahead…

  Omnibus negotiations underway Discretionary spending in FY 2015 has already been agreed    21% of sequester reductions rolled back But 302(b)s to be determined Beyond FY 2015: back to sequester levels; debt limit   Big-picture fiscal challenges remain largely unchanged Can R&D stay ahead of the curve?

FY 2015 R&D Appropriations by Select Spending Bill

Estimated funding as a percent of FY 2012, in constant dollars

120% 110% 100% 90% 80% 70% 60% Dept. of Defense S&T 2012 Commerce, Justice, Science 2013 2014 Energy & Water Agriculture 2015 Request Interior and Environment 2015 House Labor, HHS, Education* 2015 Senate

*Not yet introduced in House. Source: AAAS analyses of agency budget documents and appropriations bills and reports. FY 2014 figures are current estimates. R&D includes conduct of R&D and R&D facilities. © 2014 AAAS

Federal S&T Spending Under Various Scenarios

billions of constant 2014 dollars

$110 $105 $100 $95 $90 $85 $80 $75 $70 Actual Spending (BA) Post-Sequestration President's Request Actuals Minus Recovery Act Ryan/Murray Deal Changes Original BCA/ATRA Caps Constant as a Share of GDP

*2014 figures are current estimates.

"Federal S&T" here includes nondefense R&D; Department of Defense S&T spending ,including health research; and NNSA R&D. Source: AAAS R&D reports and analyses of agency and legislative budget documents. GDP figures and deflators are from the FY 2015 request. R&D includes conduct of R&D and R&D facilities. © AAAS | October 2014

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