Overview

Introduction
Agency Total Funding Shares
R&D Growth in the 1990s
Development Funding
Basic Research Funding
Performers of Basic Research

Introduction

Federal agencies expected their funding for research and development (R&D) and R&D plant to decrease 1 percent (4-percent decrease in inflation-adjusted 1992 dollars) to $70 billion in fiscal year (FY) 1997, according to survey reports received during the period May through August 1996. Development accounts for the entire R&D decrease, declining by 4 percent (a 6-percent decrease in constant 1992 dollars) from estimated FY 1996 levels (to $39 billion). Research spending (including basic and applied research) will increase 2 percent (to $29 billion). But after adjusting for inflation, Federal obligations for research will decline slightly by 0.4 percent. Research would account for 42 percent of the FY 1997 R&D money. Also, R&D plant will increase 6 percent (a 3-percent increase in constant 1992 dollars) to $2 billion. The estimated obligations provided in this report are subject to change as Federal agencies' budgets are updated to reflect approved programs.

Agency Total Funding Shares

Seven Federal agencies, out of the 33 that report to the R&D survey, account for 97 percent ($67 billion) of total projected Federal funding for R&D and R&D plant in FY 1997 (Chart 1). The Department of Defense (DOD) will still comprise the largest share (47 percent), even though its funding will decrease 4 percent from FYs 1996-97. Contributing to DOD's drop in overall R&D funding are Navy (14 percent decrease), combined Defense agencies (12 percent decrease), and the Army (its military functions component) (10-percent decrease). Within the Defense agencies, the Washington Headquarters Services (WHS) (down 23 percent), Special Operations Command (down 20 percent), and Ballistic Missile Defense Organization (BMDO) (down 13 percent) report the largest percentage decreases in proposed R&D funding.

Funding from the Department of Health and Human Services (HHS) will comprise the second largest share of Federal agencies' R&D funding (18 percent), increasing by 3 percent from the FY 1996 level. Most (94 percent) of the HHS amount is from its National Institutes of Health (NIH) for support of the life sciences. The other top funding agencies are the National Aeronautics and Space Administration (NASA) (14 percent of the FY 1997 Federal R&D and R&D plant total), the Department of Energy (DOE) (10 percent), the National Science Foundation (NSF) (4 percent), the Department of Agriculture (USDA) (2 percent), and the Department of Commerce (DOC) (nearly 2 percent). Almost all (99 percent) of DOC's funding is from its National Institute of Standards and Technology (NIST) and National Oceanic and Atmospheric Administration (NOAA). NASA, DOC, and USDA each project that combined R&D and R&D plant funding will decline in FY 1997, whereas such funding from DOE and NSF is slated to increase.

R&D Growth in the 1990s

Of the seven major R&D funding agencies, DOC reports the largest estimated R&D and R&D plant funding annual growth rate for the FYs 1990-97 period (15 percent, 12 percent in constant 1992 dollars) (Table 1). DOC's growth reflects the rapid increases in funding at NIST. Even though reporting a projected 9-percent decrease in overall R&D funding in FY 1997, NIST increased its obligations from $131 million ($141 million in constant dollars) in FY 1990 to $647 million ($573 million in constant dollars) in FY 1997. However, the FY 1997 NIST R&D funding level is nearly back to what it was in FY 1995. HHS follows DOC with a 6-percent growth rate (3 percent in constant dollars during the same period). NSF expects its R&D and R&D plant funding to average 5-percent growth per year (2 percent in constant dollars) from FYs 1990-97. DOD's obligations will drop on average 2 percent annually. In constant dollars, its funding will decrease at an estimated annualized rate of 5 percent over this seven-year period.

Development Funding

As in the past, the Federal Government obligates the largest portion of its R&D dollars for development, which accounts for approximately 55 percent of the FY 1997 preliminary total R&D and R&D plant obligations. However, the development share has been decreasing throughout the 1990's, having declined from its peak 64-percent share in FY 1990 (Chart 2). Agencies project development funds to drop 4 percent (down 6 percent in constant 1992 dollars) from their FY 1996 level, to $39 billion ($34 billion in constant 1992 dollars) in FY 1997.

Six agencies account for 99 percent of estimated Federal development obligations in FY 1997 (Table 2). These agencies are DOD (more than three-fourths from the three service agencies—Army, Navy, and Air Force), NASA, DOE, HHS (almost entirely from NIH), Department of Transportation (DOT) (more than 90 percent from the Federal Aviation Administration and Federal Highway Administration), and DOC (more than three-fourths from NIST). However, after adjusting for inflation, all six of these agencies report an expected decrease in development funding for FY 1997: DOC (down 19 percent), NASA (down 9 percent), DOD (down 6 percent), DOE (down 5 percent), DOT (down 1 percent), and HHS (down under 1 percent).

To better understand the component pieces of Federal R&D funding and to allow a closer look at the funding activity of DOD agencies that report to the Federal Funds Survey, NSF collects data on DOD development dollars in two categories: advanced technology development and major systems development. Advanced technology includes development for military and nondefense applications. Major systems include testing and evaluation of mostly defense-related systems. This Federal Funds volume is the second to include such statistics on development funding.

DOD expects to provide $25 billion (86 percent of its total development obligations) toward major systems development, which represents a projected 2-percent drop in FY 1997 (down 4 percent in constant 1992 dollars) (Table 3). Combined, the Air Force, Navy, Army (its Military Functions component), and BMDO expect to account for $23 billion (94 percent) of the estimated major systems development obligations. However, three of these four funders expect decreases in major systems development from FYs 1996-97—Army and Navy expect to decline by 5.5 percent and 15 percent, respectively, and BMDO is slated to drop by 11 percent. Air Force will increase its funding more than $1 billion (12 percent), three times the increase from FYs 1995-96.

DOD projects that advanced technology development funding will decrease $0.7 billion (15 percent to $4 billion) in FY 1997. Six DOD agencies account for nearly all (97 percent) of the estimated advanced technology development funding. They are the Defense Advanced Research Projects Agency (DARPA) ($1 billion for advanced technology development), WHS ($0.7 billion), BMDO ($0.6 billion), and the three service agencies, each with $0.5 billion. However, each of these agencies reports an expected decrease in funding for advanced technology development from FYs 1996-97—Army down by $300 million, WHS down by $181 million, BMDO down by $125 million, and DARPA down by $103 million.

Basic Research Funding

Basic research support will reach almost $15 billion dollars, according to the preliminary FY 1997 estimates. By comparison, Federal agencies report applied research funding will total just slightly more than $14 billion. In constant 1992 dollars, basic research will decrease nearly 1 percent, and applied research will remain flat.

The basic research share of Federal R&D obligations has increased slowly since FY 1992. In FY 1992, basic research comprised 18 percent of the total R&D. That percentage increased slightly each year and reaches 21 percent in FY 1997, according to preliminary estimates. Overall, Federal agencies report a 4-percent average annual rate of growth (1 percent in constant 1992 dollars) from FYs 1990-97. When adjusted for inflation, basic research funding has held steady at about $13 billion since FY 1993.

Six agencies provide 97 percent of the estimated Federal basic research total in FY 1997 (Chart 3). They are HHS (almost entirely from NIH), NSF, DOE, NASA, DOD, and USDA. Of these six agencies, only NASA reports an expected decrease in basic research funding for FY 1997, dropping 6 percent (down $124 million). Each of the other five agencies expects strong to modest increases in basic research funding: NSF (6 percent); DOE (4 percent); USDA (4 percent); HHS (2 percent); and the DOD (1 percent).

After adjusting for inflation, HHS expects its obligations for basic research to average 2-percent annual growth from FYs 1990-97. DOE would increase basic research funding second fastest, with just under 2-percent real-dollar growth during the same time period. NSF reports a basic research funding growth rate of 1 percent, and DOD reveals a flat rate. In real dollars, USDA and NASA expect slightly less funding for basic research in FY 1997 than was available in FY 1990.

Performers of Basic Research

Universities and colleges, receiving 50 percent of the Federal basic research funds in FY 1997, might expect a 4.5-percent decrease in such obligations to $7.4 billion in that year (Chart 3). Intramural performers of basic research, which covers Federal in-house performance and costs associated with the planning and administration of both internal and external basic research programs by Federal personnel, are slated to receive 18 percent of all Federal basic research funds. This represents a 10.5-percent increase over FY 1996 funding, reversing the 11-percent drop from FYs 1995-96. The largest Federal intramural basic research performers in FY 1997 include HHS, $1.1 billion (nearly all performed by NIH); NASA, $0.5 billion; USDA, $0.4 billion (91 percent from the Agricultural Research Service), and DOD, $0.3 billion (mostly from the three service agencies: Army, Navy, and Air Force) (Table 4). Federally Funded Research and Development Centers (such as Jet Propulsion Laboratory, Sandia National Laboratories, and Lincoln Laboratory) will receive 13 percent of the total basic research funds, or $2 billion. Industrial firms can expect to receive 9 percent of the basic research, an increase of 4 percent over the FY 1996 funding level. Non-academic nonprofit organizations might expect to receive nearly 9 percent of the basic research funds, increasing more than $0.2 billion (an increase of nearly 20 percent) over the FY 1996 funding level. State and local governments, which as a group will receive less than one percent of all Federal basic research funds, and foreign performers which will receive under a half percent of basic research funds, are projected to receive large percentage increases for FY 1997, 31 percent and 13 percent, respectively.