The Federal R&D Budget: Process and Perspectives

Matt HourihanNovember 17, 2014For the AAAS S&T Policy Leadership Seminar

AAAS R&D Budget and Policy Programhttp://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 4: Execute the fiscal year’s budget (not shown)

Arranged by fiscal year (October to September)B

udge

t R

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se

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

Phase 1: Planning within Agency w/ OMB and OSTP oversight

Phase 2: OMB Review

Phase 3: Congressional budget and appropriations

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

Phase 1: Planning within Agency w/ OMB and OSTP oversight

Phase 2: OMB Review

Phase 3: Congressional budget and appropriations

The Federal Budget Cycle

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, OMBEndorsements, guidance from advisory panels,

other outside expertsAppropriators and authorizers on board

Separately and slightly behind, NIH sets up its own program Interagency rivalry evolves to collaboration

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

Phase 1: Planning within Agency w/ OMB and OSTP oversight

Phase 2: OMB Review

Phase 3: Congressional budget and appropriations

The Federal Budget Cycle

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)

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

Phase 1: Planning within Agency w/ OMB and OSTP oversight

Phase 2: OMB Review

Phase 3: Congressional budget and appropriations

The Federal Budget Cycle

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?)

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

Phase 1: Planning within Agency w/ OMB and OSTP oversight

Phase 2: OMB Review

Phase 3: Congressional budget and appropriations

The Federal Budget Cycle

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)

House

BudgetCmte

Senate

The Federal Budget Cycle

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)

FY 2015

FY 2016

Bud

get

Rel

ease

FY 2017

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

Phase 4: Spend the Fiscal Year Budget

Phase 2: OMB Review

Phase 3: Congressional budget and appropriations

Phase 1: Planning within Agency w/ OMB and OSTP oversight

Phase 4: Spend the Fiscal Year Budget

Phase 2: OMB Review

Phase 3: Congressional budget and appropriations

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?

60%

70%

80%

90%

100%

110%

120%

Dept. ofDefense S&T

Commerce,Justice,Science

Energy &Water

Agriculture Interior andEnvironment

Labor, HHS,Education*

FY 2015 R&D Appropriations by Select Spending BillEstimated funding as a percent of FY 2012, in constant dollars

2012 2013 2014 2015 Request 2015 House 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

$70

$75

$80

$85

$90

$95

$100

$105

$110

Federal S&T Spending Under Various Scenariosbillions of constant 2014 dollars

Actual Spending (BA) Actuals Minus Recovery Act Original BCA/ATRA CapsPost-Sequestration Ryan/Murray Deal Changes Constant as a Share of GDPPresident's Request

*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

For more info…

mhouriha@aaas.org

202-326-6607

www.aaas.org/spp/rd/