An OMB Perspective on Federal Funding of Research

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

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

4. “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

5. 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

6. 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

7. SUPPORT OFFICES STATUTORY OFFICES General Counsel Legislative Affairs Communications Administration Economic Policy Legislative Reference Budget Review Office of Federal Financial Management (OFFM) Office of Federal Procurement Policy (OFPP) Office of Information & Regulatory Affairs (OIRA) Office of Management & Budget 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

8. SUPPORT OFFICES STATUTORY OFFICES Office of Management & Budget 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

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

10. Government Spending as a Share of GDP, 2000

11. Composition of Federal Revenues

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

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

14. 80 60 89% Non-Federal 40 Billions of Nominal Dollars Federal 20 64% 94% 11% 36% 0 All R&D Basic Research Applied Research Source: National Science Foundation Increased U.S. R&D Spending Is Due Mostly to Private Sector(Cumulative “New Money,” 1993-1999)

15. Federal R&D in 2002

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

17. 175 Mathematics and Computer Sciences 150 Environmental Sciences Factors of Constant FY 1992 Dollars 125 Life Sciences 100 Physical Sciences 75 1992 1993 1994 1995 1996 1997 1998 1999 R&D BalanceIn Addition to Life Sciences, Some Other Disciplines Have Done Well

18. 30% Energy 25% Space 20% 15% Average Annual Increases All 10% Defense Others Health 5% All All All Others Others Others 0% -5% 1962 - 1968 1973 - 1979 1979 - 1985 1995 - 2001 Source: National Science Foundation Historical R&D Priorities(obligations, in 1996 constant dollars)

19. 1,200 800 Millions of Nominal Dollars 400 0 1996 1997 1998 1999 2000 Source: Chronicle of Higher Education Earmarks to Universities & CollegesIncreasing and Undermining Competitive, Merit-Based Efforts in Some Fields

20. Federal Science & Technology (F S&T) Budget

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

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

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

24. Department of Energy Science Fossil Energy NNSA The Budget Process

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

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

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

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

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

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

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

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

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

34. 100% 80% 60% % BA, FY 2001 40% 20% 0% NRP HRP GGP NSP FY 2001 est. BA per PAD $80.7B $111.8B $90.5B $340.6B F S&T Other R&D Non R&D R&D as a Percentage of OMB PAD $ Note: F S&T + Other R&D = Total R&D

35. R&D as % of Approp. Comm. $

36. 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

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

38. 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?

39. 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

40. 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).

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

43. 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)

44. 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