An OMB Perspective on Federal Funding of Research Michael Holland Program Examiner Office of Management & Budget

Outline Who or What is OMB? The Federal Budget and US R&D: the “Big Picture” The Budget Process Future Issues

“One of the interesting things about OMB is that it is unexplainable to everyone who lives outside of the Beltway and misunderstood by nearly everyone who lives inside the Beltway.” Paul O'Neill, Former Deputy Director, OMB Current Secretary of Treasury

The Mission of OMB OMB serves the Presidency as the primary agency for leading the coordination of policy development in the Executive Branch and for ensuring consistency, efficiency, and effectiveness in policy implementation. OMB prepares the President’s Budget OMB provides oversight of financial management, procurement, and information technology policies OMB reviews and clears proposed legislation, regulations, and executive orders OMB ensures continuity of these functions during the transition to new Presidential Administrations

Executive Office of the President (EXOP) White House Office Office of Management & Budget (OMB) Office of the Vice President (OVP) National Security Council (NSC) President’s Foreign Intelligence Advisory Board (PFIAB) Policy Development (OPD) Council of Economic Advisors (CEA) Environmental Quality (CEQ) US Trade Representative (USTR) Administration (OA) Office of National Drug Control Policy (ONDCP) Office of Science & Technology Policy (OSTP) Mix of detailees, career, political Political Primarily career staff

Office of Management & Budget General Counsel Legislative Affairs Communications Administration Economic Policy Legislative Reference Budget Review SUPPORT OFFICES Office of Federal Financial Management (OFFM) Office of Federal Procurement Policy (OFPP) Office of Information & Regulatory Affairs (OIRA) STATUTORY OFFICES DIRECTOR Deputy Director Deputy Director for Management Executive Associate Director Resource Management Offices (RMOs) Natural Resource Programs National Security Programs Human Resource Programs General Government Programs ENERGY, SCIENCE & WATER Energy Science & Space Water & Power NATURAL RESOURCES Agriculture Environment Interior INT’L AFFAIRS State/USAI Economic Affairs NATIONAL SECURITY C4 Intelligence Ops & Support Force Structure & Investment VA HEALTH Health Financing Public Health HHS Branch EDUCATION & HR Education Income Maintenance Labor Personnel Policy TRANSPORTATION, COMMERCE, JUSTICE & SERVICES Transportation Commerce Justice/GSA HOUSING, TREASURY & FINANCE Financial Institutions Treasury Housing

Office of Management & Budget SUPPORT OFFICES STATUTORY OFFICES DIRECTOR Resource Management Offices (RMOs) Natural Resource Programs National Security Programs Human Resource Programs General Government Programs DOE, NSF NASA, USDA USGS, EPA Smithsonian DOD VA NIH Ed NIST NOAA DOT

Outline Who or What is OMB? The Federal Budget and US R&D: the “Big Picture” The Budget Process Future Issues

Government Spending as a Share of GDP, 2000

Composition of Federal Revenues

FY 2002 Proposed Budget ($2.0 Trillion OL) R&D = 14% of discretionary spending

U.S. R&D Spending Growth Is Due Mostly to Private Sector

Increased U.S. R&D Spending Is Due Mostly to Private Sector (Cumulative “New Money,” 1993-1999) Source: National Science Foundation 20 40 60 80 All R&D Basic Research Applied Research Billions of Nominal Dollars Non-Federal Federal 94% 89% 64% 11% 36%

Federal R&D in 2002

FY 2002 Proposed R&D Budget ($98 Billion BA*) *Total includes additions resulting from Defense Budget Amendment

R&D Balance In Addition to Life Sciences, Some Other Disciplines Have Done Well 75 100 125 150 175 1992 1993 1994 1995 1996 1997 1998 1999 Factors of Constant FY 1992 Dollars Mathematics and Computer Sciences Life Sciences Environmental Sciences Physical Sciences

Historical R&D Priorities (obligations, in 1996 constant dollars) Source: National Science Foundation -5% 0% 5% 10% 15% 20% 25% 30% 1962 - 1968 1973 - 1979 1979 - 1985 1995 - 2001 Average Annual Increases Space Energy Health Defense All Others

Earmarks to Universities & Colleges Increasing and Undermining Competitive, Merit-Based Efforts in Some Fields Source: Chronicle of Higher Education 400 800 1,200 1996 1997 1998 1999 2000 Millions of Nominal Dollars

Federal Science & Technology (F S&T) Budget

Outline Who or What is OMB? The Federal Budget and US R&D: the “Big Picture” The Budget Process Future Issues

The Budget Process Department of Energy White House Congress House Science Fossil Energy NNSA White House OMB Congress House Senate Approps

The Budget Process Department of Energy White House OMB Guidance Science Fossil Energy NNSA White House OMB Guidance

The Budget Process Department of Energy Science Fossil Energy NNSA

The Budget Process Department of Energy White House OMB Budget Request Science Fossil Energy NNSA White House OMB Budget Request

The Budget Process Department of Energy White House OMB Passback Science Fossil Energy NNSA White House OMB Passback Budget Request

The Budget Process Department of Energy White House OMB Appeal Science Fossil Energy NNSA White House OMB Appeal Passback Budget Request

The Budget Process Department of Energy White House Congress House Science Fossil Energy NNSA White House OMB Congress House Senate Approps President’s Budget Request

The Budget Process Department of Energy White House Congress House Science Fossil Energy NNSA White House OMB Congress House Senate Approps Budget Resolution 302(b) Allocation Subcommittee Markup Committee Markup Floor Vote Conference

The Budget Process Department of Energy White House Congress House Science Fossil Energy NNSA White House OMB SAPs Congress House Senate Approps Hearings Budget Resolution 302(b) Allocation Subcommittee Markup Committee Markup Floor Vote Conference

The Budget Process Department of Energy White House Congress House Science Fossil Energy NNSA White House OMB Bills Congress House Senate Approps

The Budget Process $ Department of Energy White House Congress House Science Fossil Energy NNSA White House OMB Apportionment $ Congress House Senate Approps

The DOE/SC Budget Cycle FY 1999 FY 2000 FY 2001

R&D as a Percentage of OMB PAD $ 0% 20% 40% 60% 80% 100% NRP HRP GGP NSP % BA, FY 2001 F S&T Other R&D Non R&D $111.8B $90.5B $340.6B $80.7B FY 2001 est. BA per PAD Note: F S&T + Other R&D = Total R&D

R&D as % of Approp. Comm. $

Executive Office of the President (EXOP) White House Office Office of Management & Budget (OMB) Office of the Vice President (OVP) President’s Foreign Intelligence Advisory Board (PFIAB) US Trade Representative (USTR) Office of Policy Development (OPD) National Security Council (NSC) Office of Administration (OA) Council of Economic Advisors (CEA) Office of National Drug Control Policy (ONDCP) Primarily career staff Council of Environmental Quality (CEQ) Office of Science & Technology Policy (OSTP) Political Mix of detailees, career, political

Outline Who or What is OMB? The Federal Budget and US R&D: the “Big Picture” The Budget Process Future Issues

R&D Policy Issues for FY 2003 and Beyond The President’s Management Agenda includes government-wide and agency-specific management and performance initiatives. The R&D initiative stems from our concern that current methods used to set Federal R&D spending are inconsistent or otherwise insufficient. Without agreed-upon investment criteria, research funding decisions are often set based upon anecdotes and last year’s funding level. Can we make more informed decisions about research investments? Can we devise a set of rules for applied (and later basic) research programs?

Draft Criteria for Applied R&D at DOE Projects support work where the private sector cannot capture the benefits of developing the technology due to market failure, and in which there is a clear public interest Projects present the best means to support the Federal policy goals, compared to other policies Projects are subject to a competitive merit-based process, with external review when practical Project proposals are comprehensive, complete and include performance indicators and “off ramps,” and a clear termination point

Further Information OMB website www.whitehouse.gov/omb President’s budget w3.access.gpo.gov/usbudget AAAS Science & Policy Programs www.aaas.org/spp/ DOE’s Office of Science www.er.doe.gov NSF Science Resources Studies www.nsf.gov/sbe/srs/fedfunds/start.htm Shelley Lyne Tomkin, Inside OMB, ME Sharpe (1998).

Federal Budget Deficit/Surplus, FY 1960-2011 in billions of dollars Budget Issues Federal Budget Deficit/Surplus, FY 1960-2011 in billions of dollars

2002 Discretionary Spending ($ in billions) Additions Campaign initiatives +15.3 Pay & programmatic +19.0 National Emergency Reserve +5.6 Technical adjustments +5.6 Offsets Non-repetition earmarked funding -4.3 Non-repetition one-time funding -4.1 Program decreases -11.5 Net Increase +25.7 (4.0% increase) (further details in A Blueprint for New Beginnings)

FY 2002 R&D Budget Summary Spurs Private R&D investments -- R&E Tax Credit ($1.7 billion FY 2002; $9.9 billion FY 2002-2006) Sets Federal R&D as Priority -- 6% growth (vs. 4% discretionary growth) Establishes commitment to health research -- Doubles NIH by FY 2003 Addresses Math/Science Education Needs -- at least $1 Billion over five years