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1996 Budget - Chapter 7

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For two centuries, the Nation's leaders have agreed that investments in science and technology (S&T) increase productivity and raise living standards. Research and development, commonly known as R&D, is a major component and one of the traditional measures of S&T investment.

Industry R&D may have accounted for about a quarter of overall productivity growth in recent decades, providing rates of return of about 30 percent. Federal R&D has supplemented private R&D in areas where returns are too distant or uncertain for private firms to bear. While the rate of return from federally-financed R&D is much harder to estimate, it is probably substantial, with many economists believing it provides the highest return of any Federal investment. Simply put, S&T is good economic and public policy. This budget proposes $73 billion for all R&D in 1996 (including the category of Facilities), accounting for about 40 percent of our Nation's overall R&D investments.

During the Cold War, many of the Nation's S&T investments went to meet defense and space needs. Today, the Nation faces increasing challenges from global economic competition. We believe that we can significantly improve our competitiveness through a balanced mix of basic research, applied research, and technology development. Though they differ from one another, these three activities are profoundly inter-dependent; we must pursue them all.

To ensure that the Federal Government pursues proper S&T investments, the President created and chairs the National Science and Technology Council (NSTC). In the past year, the NSTC has ‘‘reinvented'' the way that the Federal government sets priorities among, and coordinates, S&T investments. By pooling the resources of participating agencies, the NSTC has become a ‘‘virtual agency,'' identifying areas where agency research can serve multiple functions. It has worked closely with businesses, universities, State and local governments, and other interested groups. And it has made new funding available to high priority projects by reducing duplication, streamlining management, and eliminating lower priority projects. Through the process, the Administration developed an ‘‘investment strategy'' to achieve certain S&T goals:

  • A healthy, educated public;
  • Job creation and economic growth;
  • World leadership in science, mathematics, and engineering;
  • Improved environmental quality;
  • Harnessed information technology; and
  • Enhanced national security.

This strategy also includes a set of principles that S&T investments should reflect, such as peer review, cost-shared partnerships, human resource development, international cooperation, and environmental objectives. The Administration views S&T programs that address these goals and principles as higher priorities than others. The President's reports, Technology for America's Economic Growth: A New Direction to Build Economic Strength (February 1993) and Science in the National Interest (August 1994), describe the strategy and S&T policies in more detail.

In addition, the Administration continues to reshape the Federal R&D budget to maintain balanced investments in basic and applied research, and to ensure that the civilian share of Federal R&D continues to approach 50 percent. Table 7-1 summarizes the Administration's 1996 proposed R&D investments by agency, theme, and share.

While the budget proposes to maintain overall R&D funding at roughly the 1995 level, it proposes about $1 billion more for a balanced portfolio of civilian basic research, applied research, and development activities.Under this proposal, the civilian share of R&D should exceed 50 percent by 1996 if the estimates account for so-called ‘‘dual-use'' defense R&D, and 48 percent if they do not. Table 7-2 highlights some of the Administration's key S&T initiatives.

Agency Specific Initiatives

NASA Reusable Launch Vehicle Technology Program: The President's National Space Transportation Policy directed NASA to begin fundamental research on a next generation launch vehicle designed to significantly cut the costs of access to space. NASA's budget proposes $159 million to initiate a program in preparation for a White House decision in 1996. Discrete criteria, validated by an external panel, will provide the basis on whether to develop a subscale test vehicle to demonstrate the concept of single stage to orbit. These efforts, in cooperation with the private sector, are the first step to providing inexpensive access to space, and will help reposition U.S. industry atop the global commercial space launch market.

International Space Station: The budget proposes $2.1 billion for the international Space Station, a U.S.-led collaborative effort with the European Space Agency, Canada, Japan, and Russia. The Space Station will be an orbital research facility to study life sciences, materials sciences, engineering research, and advanced technology development. Prior to its assembly in 1997 2002, NASA will conduct at least seven Space Shuttle flights to the Russian Mir space station three in 1996 to make assembly and operation of the Space Station easier and safer.

NASA Aeronautics Initiative: The aeronautics industry generates about $100 billion a year in revenues, employs roughly 1,000,000 people in high-quality jobs, and generates a larger positive balance of trade than any other U.S. manufacturing industry. NASA develops aeronautical technologies, pursues basic research, and operates national aeronautical facilities for Government and industry. The budget proposes $434 million for the highest priority NASA aeronautics programs High Speed Research (HSR) and Ad-vanced Subsonic Technology (AST) an $87 million, or 25 percent, increase over 1995. The budget proposes no additional funding for a national wind tunnel complex. Instead, NASA will use prior year funds to refine design options and develop financing arrangements with industry to explore a possible 1997 request for funds. As a result, the Administration proposes to reverse an item in a 1995 appropriations bill that rescinds $400 million for the wind tunnels.

NASA New Millennum Initiative (NMI): The NMI is promoting a new class of technology- intensive, smaller, faster, and cheaper space missions. These programs should dramatically reduce costs, increase flight opportunities, and improve mission performance compared to current NASA programs. Each program will have innovative procurement and management approaches and firm performance criteria fixed to a cost cap. These programs will include microsatellite missions to other planets and the next generation of micro-spacecraft and small rocket technologies. The budget proposes $495 million for the NMI, a $103 million increase over 1995.

Commerce Department's National Institute of Standards and Technology (NIST): Core NIST activities are the Advanced Technology Program (ATP), Manufacturing Extension Partnerships (MEP), and in- house research on measurements, standards, data verification, and test methods. ATP provides costshared awards to industry to develop high-risk, enabling technologies to the pre-product development stage. The budget proposes $491 million in 1996 for ATP, $60 million, or 14 percent, more than the 1995 level. This amount will fund 50 new projects and continue 280 existing projects. MEP helps small and medium-sized manufacturers tap into information on the use of modern manufacturing and production technologies. The budget proposes $147 million in 1996 for MEP, a $56 million increase over 1995. It will support 90 MEP centers (75 funded by NIST and 15 funded by the Defense Technology Reinvestment Project, described below). The budget proposes to increase in-house research to $300 million in 1996 $41 million, or 16 percent, more than the 1995 level.

Advanced Research Project Agency/Technology Reinvestment Project (ARPA/TRP): The Technology Reinvestment Project (TRP) implements the Defense Department's strategy of dual-use technologies to cut procurement costs and rapidly insert new technologies into defense systems. ARPA, in the Defense Department, awards TRP funds competitively, on a cost-shared basis, to industry-led projects designed to create new dual-use technologies. TRP projects develop emerging dual-use technologies, such as flat-panel displays and high-density data storage devices, that are critical to national security. At the same time, the projects promote defense technology transfer to commercial applications, to make the technology more widely used and more affordable and accessible to the military. The budget proposes $500 million for TRP in 1996, a $57 million or 13-percent increase over 1995.

EPA Environmental Technology Initiative (ETI): The ETI is a Federal-private partnership to promote R&D and the use of cost-effective environmental technology and pollution prevention approaches. The budget proposed $192 million in 1996, a $53 million or 38-percent increase over 1995.

Biomedical Research (NIH): The budget strengthens the Administration's commitment to biomedical and behavioral research to secure the long-term health of Americans. The proposed $11.8 billion for the National Institutes of Health (NIH) is a $468 million or four-percent increase over 1995 and represents a balanced investment in research directed to areas of high need and promise, and in basic biomedical research that sows the seeds for future progress against disease. The budget proposes targeted increases for HIV/AIDS-related research, breast cancer, and other women's health research; minority health initiatives; high performance computing; prevention research; brain disorders research; environmental cancer research; and gene therapy. NIH's highest priority will remain the funding of research through investigator- initiated research project grants.

Department of Energy (DOE) Basic Research Facilities Initiative: The budget proposes adding $100 million above the 1995 level to significantly enhance the usage of major DOE-operated basic research facilities. These leading-edge facilities serve the university, Government, and industry research community. The budget proposal will facilitate a more efficient use of the facilities, boost the number of users by several thousand over 1995, and improve the quality of service. A fifth of the funds will go directly to users through competitive grants.

DOE Fusion Energy Program: DOE also supports R&D to demonstrate the technical feasibility of fusion energy. The budget includes funds for U.S. participation in the design phase of the International Thermo-nuclear Experimental Reactor (ITER), analysis of Tokamak Fusion Test Reactor data, and construction of the Tokamak Physics Experiment (TPX). TPX is an experimental device that will improve tokamak machine performance and contribute to the ITER effort. The President's Committee of Advisors on Science and Technology and the Office of Science and Technology Policy are conducting a review of the fusion program. The review will include the ITER and TPX and is scheduled for completion in the summer of 1995. Based on this study, the President will decide upon a fusion energy research strategy. The construction of the TPX will await this decision.

National Science Foundation (NSF): The NSF's charter is to promote scientific progress by awarding competitive grants to institutions for research and education. The budget proposes $2.5 billion for NSF's R&D activities, a $90 million or four-percent increase over 1995 (see Table 7-1). Including NSF's non-R& D education and other activities, the NSF budget would be $3.4 billion. In 1995, the Congress proposed additional funds for a new interagency academic infrastructure modernization program. In the current budget environment, the Administration proposes to rescind the funds.

National Science and Technology Council Initiatives Expanded Partnership and Technology Transfer: Partnerships with the private sector ensure that federally-sponsored research is relevant for the marketplace. Federal agencies, such as the Defense, Energy, and Agriculture Departments, enter partnerships with industry and the university community, including cooperative research and development agreements (CRADAs). The budget proposes to fund 6,816 CRADAs in 1996, 723 more than in 1995, with a public and private value (in cash and non-cash contributions) of nearly $6 billion. The agencies also propose to invest $1.8 billion in 1996 in technology transfer activities, an increase of $157 million or 10 percent over 1995.

Academic Research: The budget proposes $12.5 billion in 1996 for university-based research, an increase of $863 million or seven percent over the 1995 level. University-based research continues to create knowledge, spur technological innovation, and train the next generation of scientists and engineers. (The Administration's proposed reforms to university overhead are discussed below.) Merit Reviewed Research and Performance Measurement: One of the Administration's R&D principles is peer evaluation and the competitive selection of Federal research projects (i.e., merit review). The budget proposes $29 billion of merit-reviewed research, an increase of $890 million, or 3 percent, over 1995. Merit reviewed research, now covering nearly 40 percent of the R&D budget, will improve quality and performance.

NSTC Technology and Learning Challenge (TLC): The TLC is a partnership with industrial, educational, and training institutions to use computers, new communication systems, and other advanced technologies to improve the quality, accessibility, and productivity of learning experiences for all Americans. The budget proposes four major focus areas (innovative technologies and demonstration projects, learning tools, evaluation techniques, and cognitive process research). For 1996, nine agencies are proposing $335 million for this effort. An Interagency Technology Office, to be established within the Department of Education, will carry out the initiative.

Partnership for a New Generation of Vehicles (PNGV): The PNGV or ‘‘Clean Car'' initiative is a partnership with U.S. industry to ensure the global competitiveness of the U.S. automobile industry and its suppliers and improve environmental quality. It is structured around two near-term goals better manufacturing technologies and better emissions control of conventional engines and a major long-term goal developing an attractive, affordable car with three times the fuel efficiency of today's vehicles.The budget proposes investments in 14 technologies, targeting most Government funding to the third, long-term goal. Eight agencies participate in the initiative: the Departments of Commerce, Defense, Energy, the Interior and Transportation, and EPA, NASA, and NSF. Their combined budget proposal is $333 million in 1996, an increase of $87 million or 35 percent above 1995.

NSTC Construction and Building (C&B): A partnership with U.S. industry, C&B is designed to improve the productivity and safety of building construction practices and the affordability, quality, and environmental characteristics of buildings. C&B has set goals and priorities in three broad areas: technology improvements, such as information and decision technologies; non-technical barriers to improvements, such as regulatory barriers; and the deployment of technology, including training and demonstration projects. Seven agencies are proposing $169 million in 1996, an increase of $28 million (20 percent) over the 1995 level.

NSTC Physical Infrastructure for Transportation: This partnership with industry is designed to improve the quality and lower the cost of building and maintaining highways, bridges, ports, rail lines, airports, and other parts of the Nation's physical transportation infrastructure. The budget provides funds to expand programs associated primarily with accelerating R&D on new materials and with the methods of assessing infrastructure conditions. For 1996, five agencies are proposing $321 million, an increase of $74 million, or 30 percent, over the 1995 level. R&D activities include airport security and pavement technology, and research and technology in highway materials, pavements, and structures.

NSTC Environment and Natural Resources (ENR): The ENR initiative focuses on R&D programs associated with global change, biodiversity and ecosystems, air quality, natural resources and management, water resources, coastal and marine resources, toxic substances, hazardous and solid wastes, and natural disaster reduction. Twelve agencies propose $5.5 billion in 1996, an increase of $197 million or four percent over 1995. The total for ENR includes $2.2 billion for the U.S. Global Change Research Program (USGCRP). As required by law, Table 7 2 lists the agency contributions to the USGCRP which focuses on issues such as natural climate change, global warming, and ozone depletion.

NSTC High Performance Computing and Communications (HPCC): The HPCC program involves nine agencies and is designed to ensure U.S. leadership in information and communications technologies and help lay the technological foundation for the National Information Infrastructure initiative. It supports research on computer science and engineering, and the development of applications of information technology in commerce, manufacturing, education, public safety, health care, and other fields. The budget proposes $1.1 billion for HPCC in 1996, an increase of $63 million or six percent over 1995. As required by law, Table 7-2 lists the agency contributions to HPCC.

Improving the Payment System for
Federally Sponsored Research

The Federal Government spends $12 billion a year on research at the Nation's colleges and universities $9 billion to support specific research projects and $3 billion to support research facilities and administration. In this budget, the Administration announces several important changes in how the Government pays for research.

These changes will simplify administrative and accounting procedures; promote predictability, stability, equity, and consistency in Federal payments for research; and make the Federal investment in research more understandable to Congress and the public. In the long run, they also will generate cost savings. At this point, however, the Administration proposes to reinvest any initial savings into high priority research.

Most of the proposed changes address the facilities component of research costs. Facilities account for almost all growth in allocated overhead rates over the last decade and explain much of the variation in rates among schools. These changes will be implemented through proposed revisions to OMB Circular A 21, which the Federal Register will announce at the time the budget is transmitted. The proposed changes include:

  • Establishing limited review of facility construction costs exceeding benchmarks set by Federal and university experts;

  • Limiting the current practice of special utility studies, and developing standard benchmarks for utility costs;

  • Ensuring that Federal financing policies keep pace with the changing useful-life pattern of scientific equipment, and providing consistent facility cost recovery policies;

  • Proposing criteria to appropriately reimburse interest costs;

  • Asking the Federal Demonstration Project to develop a model for, and test, direct charging of space costs;

  • Increasing the incentives for grantees to maintain lower overhead rates by asking all Federal science funding agencies to review total grant costs in the competitive award process; and

  • Eliminating dependent tuition as an allowable benefit, consistent with the Federal Acquisition Regulation.

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The Clinton Administration's FY96 R&D Budget

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1996 Budget - Chapter 7