The Federal R&D Budget: Process and Perspectives

Matt Hourihan June 23, 2015

For the Washington Internships for Students of Engineering (WISE)

AAAS R&D Budget and Policy Program

http://www.aaas.org/program/rd-budget-and-policy-program

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

  Every dollar in the budget has its claimants!

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

Broad Qualities of the System

 Decentralization  “Embeddedness”  Incrementalism

Composition of the Proposed FY 2016 Budget

Total Outlays = $4.0 trillion

outlays in billions of dollars

Net Interest $283 Defense Discretionary $528 [Defense R&D] $77 Other Mandatory $670 Nondefense Discretionary $495 Medicaid $351 [Nondefense R&D] $69 Medicare $583 Social Security $938

Source: Budget of the United States Government FY 2016. Projected deficit is $474 billion. © 2015 AAAS

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

Federal R&D in the Budget and the Economy

Outlays as share of total, 1962 - 2016

14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% R&D as a Share of the Federal Budget (Left Scale) R&D as a Share of GDP (Right Scale)

Source: Budget of the United States Government, FY 2016. FY 2016 is the President's request. © 2015 AAAS

Composition of the Federal Budget

Outlays as share of total budget, 1962 - 2016

30% 20% 10% 0% 80% 70% 60% 50% 40% Payments to Individuals All Other Defense (non-R&D) Investments (research, edu, infrastructure)

Source: Budget of the United States Government, FY 2016. "Investments" include outlays for R&D, education and training, direct nondefense infrastructure, and other grants, primarily for transportation. "Payments to Individuals" are primarily entitlement programs like Medicare, Medicaid, and Social Security, but also include many other public assistance programs. © 2015 AAAS

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 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)

Agency Budgeting

Coordination (?) and Top-Down Guidance White House S&T priorities (OSTP, NSTC) OMB fiscal directives Congressional Directives and Agreements

One Agency’s R&D Budget

Decentralized planning and scientific input Agency heads and staff Strategic Plans Advisory Panels and Review Committees External Panels (i.e. NAS) and broader science community Last Year's Budget

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

Total R&D by Agency, FY 2016

budget authority in billions of dollars

Commerce, $2.1

USDA, $2.9

All Other, $6.2

NSF, $6.3

Total R&D = $145.3 billion NASA, $12.2

DOE, $12.5

DOD, $71.9

HHS (NIH), $31.0

Source: OMB R&D data, agency budget justifications, and other agency documents and data. R&D includes conduct of R&D and R&D facilities. © 2015 AAAS

Major Funding Priorities for FY16

        Advanced Manufacturing Low-carbon energy Climate research and earth observation Agricultural R&D Infrastructure R&D Antibiotic Resistance* Precision Medicine* Discovery Science:   Life sciences and neuroscience Advanced computing  COMPETES Agencies R&D: $12.1 billion, +6.6%  *New for FY16

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?) Reconciliation instructions?

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, broader fiscal context Reactive; incrementalism?

The “Annual Miracle”

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)

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:    FY15 in progress FY16: Approps underway FY17: Agencies ramping up

Looking ahead…

 Democratic roadblocks  Size and composition of the discretionary budget? Can R&D stay ahead of the curve?

 Deficits have fallen, but big-picture fiscal challenges remain largely unchanged  Debt limit, entitlement growth

Limits on Discretionary Spending Since FY 2010

billions of constant 2015 dollars

$1,200 $1,150 $1,100 $1,050 $1,000 $950 $900 Actual Base Budget Authority

Based on past budget resolutions, the Budget Control Act, and subsequent legislation. Adjusted for inflation using deflators from the FY16 budget request. © AAAS 2015

Limits on Discretionary Spending Since FY 2010

billions of constant 2015 dollars

$1,200 $1,150 $1,100 $1,050 $1,000 $950 $900 Actual Base Budget Authority BCA: Original Baseline BCA: Sequester Baseline

Based on past budget resolutions, the Budget Control Act, and subsequent legislation. Adjusted for inflation using deflators from the FY16 budget request. © AAAS 2015

Limits on Discretionary Spending Since FY 2010

billions of constant 2015 dollars

$1,200 $1,150 $1,100 $1,050 $1,000 $950 $900 Actual Base Budget Authority BCA: Original Baseline BCA: Sequester Baseline Current Law

Based on past budget resolutions, the Budget Control Act, and subsequent legislation. Adjusted for inflation using deflators from the FY16 budget request. © AAAS 2015

Limits on Discretionary Spending Since FY 2010

billions of constant 2015 dollars

$1,200 $1,150 $1,100 $1,050 $1,000 $950 $900 Actual Base Budget Authority BCA: Sequester Baseline BCA: Original Baseline Current Law President's FY 2016 Budget

Based on past budget resolutions, the Budget Control Act, and subsequent legislation. Adjusted for inflation using deflators from the FY16 budget request. © AAAS 2015

FY16 R&D in the Base Budget by Function

percent change from FY 2015, nominal dollars

Commerce (includes NIST) Applied Energy Programs Agriculture 23.3% Transportation Environment Agencies Defense Activities General Science (NSF, DOE SC) 12.6% 8.1% 20.5% 17.8% 5.0% Health (includes NIH) Space Justice (DHS) -35.5% 2.2% 0.9% TOTAL 6.4% -40% -20% 0% 20%

Source: OMB R&D data, agency budget justifications, and agency budget documents. © 2015 AAAS

40% 44.8% 60%

Federal Spending Since FY 2010

Percent change from FY10 levels, constant dollars

5% 0% -5% -10% -15% -20% -25% 2010 2011 2012 2013

*Excludes ARPA-E. Based on AAAS analyses of historical OMB and appropriations data. © 2015 AAAS

2014 2015 Actual Discretionary Authority NSF DOE Science DOE Applied Programs* NIH NASA USDA R&D

Trends in Federal R&D, FY 1977-2016

in billions of constant FY 2015 dollars

$200 $180 $160 $140 $120 $100 $80 $60 $40 $20 $0 Total R&D Defense Nondefense ARRA Total ARRA Defense ARRA Nondefense

Source: AAAS analyses of historical budget and appropriations data. Pre-1994 figures are NSF obligations data from the Federal Funds survey. FY 2016 is the President's request. R&D includes conduct and facilities. © 2015 AAAS

Composition of the Federal Budget

Outlays as share of total budget, 1962 - 2016

30% 20% 10% 0% 80% 70% 60% 50% 40% Payments to Individuals All Other Defense (non-R&D) Investments (research, edu, infrastructure)

Source: Budget of the United States Government, FY 2016. "Investments" include outlays for R&D, education and training, direct nondefense infrastructure, and other grants, primarily for transportation. "Payments to Individuals" are primarily entitlement programs like Medicare, Medicaid, and Social Security, but also include many other public assistance programs. © 2015 AAAS

R&D as a Share of GDP by Funder 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Total Federal Industry

Source: National Science Foundation, National Patterns of R&D Resources series. © 2015 AAAS

Other

Research as a Share of GDP by Funder 1.2% 1.0% 0.8% 0.6% 0.4% 0.2% 0.0% Total Research Federal Research Industry Research

Source: National Science Foundation, National Patterns of R&D Resources series. © 2015 AAAS

Other

For more info… [email protected]

202-326-6607 http://www.aaas.org/program/rd -budget-and-policy-program