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2

An OMB Perspective on Federal Funding of Research

Michael HollandProgram Examiner

Office of Management & Budget

P

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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 OMBOMB 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)

National Security Council (NSC)

President’s Foreign Intelligence Advisory

Board (PFIAB)

Office of Policy Development

(OPD)

Council ofEconomic Advisors

(CEA)

Council ofEnvironmental Quality

(CEQ)

US Trade Representative

(USTR)

Office of Administration

(OA)

Office of National Drug Control Policy

(ONDCP)

Office of Science & Technology Policy

(OSTP)Mix of detailees, career, political

Political

Primarily career staff

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DIRECTORDeputy Director

Deputy Director for Management

Executive Associate Director

General CounselLegislative AffairsCommunicationsAdministrationEconomic Policy

Legislative ReferenceBudget Review

SUPPORT OFFICES

Office of Federal Financial Management (OFFM)

Office of Federal Procurement Policy (OFPP)

Office of Information & Regulatory Affairs (OIRA)

STATUTORY OFFICES

ENERGY, SCIENCE & WATEREnergyScience & SpaceWater & Power

NATURAL RESOURCESAgricultureEnvironmentInterior

INT’L AFFAIRSState/USAIEconomic Affairs

NATIONAL SECURITYC4 IntelligenceOps & SupportForce Structure & InvestmentVA

HEALTHHealth FinancingPublic HealthHHS Branch

EDUCATION & HREducationIncome MaintenanceLaborPersonnel Policy

TRANSPORTATION, COMMERCE, JUSTICE & SERVICESTransportationCommerceJustice/GSA

HOUSING, TREASURY & FINANCEFinancial InstitutionsTreasuryHousing

Resource Management Offices (RMOs)

Natural Resource Programs

National Security Programs

Human ResourcePrograms

General GovernmentPrograms

Office of Management & Budget

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DOE, NSFNASA, USDAUSGS, EPA

Smithsonian

DODVA

NIHEd

NISTNOAADOT

Resource Management Offices (RMOs)

Natural Resource Programs

National Security Programs

Human ResourcePrograms

General GovernmentPrograms

Office of Management & Budget SUPPORT OFFICES STATUTORY OFFICES

DIRECTOR

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Outline

• Who or What is OMB?

• The Federal Budget and US R&D: the “Big Picture”

• The Budget Process

• Future Issues

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Government Spending as a Share of GDP, 2000

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Composition of Federal Revenues

12

Non-Def.16%

Other Mandatory

13%

Social Security

23%

Net Interest

10%Defense

14%

Defense R&D2%

Medicare12%Medicaid

7%

Non-Def. R&D3%

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

Government

Industry

Other

0

50

100

150

200

2501

96

0

19

65

19

70

19

75

19

80

19

85

19

90

19

95

Bil

lio

ns

of

Co

ns

tan

t 1

99

2 $

14

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

(Cumulative “New Money,” 1993-1999)

Source: National Science Foundation

0

20

40

60

80

All R&D Basic Research Applied Research

Bil

lio

ns

of

No

min

al

Do

lla

rs

Non-Federal

Federal

94%

89%

64%

11% 36%

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Federal R&D in 2002

2001Estimate

2002Proposed

PercentChange:01 to 02

Basic Research 22,018 23,352 6%

Applied Research 20,734 21,553 4%

Development 42,594 45,954 8%

R&D Facilities and Equipment 4,664 4,394 -6%

Total 90,010 95,253 6%

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$48

$23

$9

$7

$3

$2

$1

$4

Defense HHS NASA Energy

NSF USDA Commerce Other

FY 2002 Proposed R&D Budget ($98 Billion BA*)

*Total includes additions resulting from Defense Budget Amendment

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R&D BalanceIn Addition to Life Sciences,

Some Other Disciplines Have Done Well

75

100

125

150

175

1992 1993 1994 1995 1996 1997 1998 1999

Fac

tors

of

Co

nst

ant

FY

199

2 D

oll

ars Mathematics and

Computer Sciences

Life Sciences

Environmental Sciences

Physical Sciences

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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

Ave

rag

e A

nn

ual

Incr

ease

s

Space

Energy

Health

DefenseAllOthers

AllOthers

AllOthers

AllOthers

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Earmarks to Universities & CollegesIncreasing and Undermining Competitive,

Merit-Based Efforts in Some Fields

Source: Chronicle of Higher Education

0

400

800

1,200

1996 1997 1998 1999 2000

Mil

lio

ns

of

No

min

al

Do

lla

rs

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Federal Science & Technology (F S&T) Budget

By Agency

21st C. Res. Fund

2001 Est.

FS&T 2001

Estimate

FS&T 2002

Proposed

National Institutes of Health 20,361 20,361 23,112NASA 5,523 6,957 7,038 1,434 21%Defense 4,981 4,981 5,086Energy 4,178 4,910 4,682 732 15%National Science Foundation 4,416 4,416 4,472Agriculture 1,690 1,831 1,759 141 8%Interior (USGS) 883 883 813Commerce 851 809 711 (42) -5%EPA 604 732 679 128 17%Transportation 621 621 631Education 363 363 368Veterans Affairs 350 350 360

TOTAL 44,821 47,214 49,711 2,393 5%

FY 2001 Delta 21CRF to FS&T

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Outline

• Who or What is OMB?

• The Federal Budget and US R&D: the “Big Picture”

• The Budget Process

• Future Issues

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The Budget Process

Department of Energy

ScienceFossil

EnergyNNSA

White House

OMB

Congress

House Senate

Approps Approps

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The Budget Process

Department of Energy

ScienceFossil

EnergyNNSA

White House

OMB

Guidance

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The Budget Process

Department of Energy

ScienceFossil

EnergyNNSA

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The Budget Process

Department of Energy

ScienceFossil

EnergyNNSA

White House

OMB

Budget Request

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The Budget Process

Department of Energy

ScienceFossil

EnergyNNSA

White House

OMB

Budget Request

Passback

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The Budget Process

Department of Energy

ScienceFossil

EnergyNNSA

White House

OMB

Budget Request

Appeal

Passback

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The Budget Process

Department of Energy

ScienceFossil

EnergyNNSA

White House

OMB

Congress

House Senate

Approps Approps

President’s

Budget Request

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The Budget Process

Department of Energy

ScienceFossil

EnergyNNSA

White House

OMB

Congress

House Senate

Approps Approps

•Budget Resolution

•302(b) Allocation

•Subcommittee Markup

•Committee Markup

•Floor Vote

•Conference

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The Budget Process

Department of Energy

ScienceFossil

EnergyNNSA

White House

OMB

Congress

House Senate

Approps Approps

•Budget Resolution

•302(b) Allocation

•Subcommittee Markup

•Committee Markup

•Floor Vote

•Conference

Hearings

SAPs

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The Budget Process

Department of Energy

ScienceFossil

EnergyNNSA

White House

OMB

Congress

House Senate

Approps Approps

Bills

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The Budget Process

Department of Energy

ScienceFossil

EnergyNNSA

White House

OMB

Congress

House Senate

Approps Approps

Apportionment

$

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The DOE/SC Budget CycleThe DOE/SC Budget Cycle

O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S

CURRENT YEAR(FY 1999)

Monthly AFP Changes

CURRENT YEAR + 1(FY 2000)

OMB Budget Preparation

Congressional Bud Prep

Budget Delivered to Congress

Congressional Hearings, ...

Congressional Appropriation

Initial AFP

Monthly AFP Changes

CURRENT YEAR + 2(FY 2001)

Issuance of Unicall

FTPs Received

CRB Preparation

OMB Budget Preparation

Congressional Bud Prep

Budget Delivered to Congress

Congressional Hearings, ...

Congressional Appropriation

Initial AFP

Monthly AFP Changes

FY 1999 FY 2000 FY 2001

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R&D as a Percentage of OMB PAD $

0%

20%

40%

60%

80%

100%

NRP HRP GGP NSP

% B

A, F

Y 2

001

F S&T Other R&D Non R&D

$111.8B $90.5B $340.6B$80.7BFY 2001 est. BA

per PAD

Note: F S&T + Other R&D = Total R&D

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R&D as % of Approp. Comm. $

0%

25%

50%

75%

100%

De

fen

se

La

bo

r / H

HS

VA

/ H

UD

CJ

S

E&

W

Inte

rio

r

Tra

ns

TP

O

AG

Fo

reig

n O

ps

MilC

on

Le

g

DC

% B

A

F S&T Other R&D Non R&D

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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)

Office of Policy Development

(OPD)

Council ofEconomic Advisors

(CEA)

Council ofEnvironmental Quality

(CEQ)

US Trade Representative

(USTR)

Office of Administration

(OA)

Office of National Drug Control Policy

(ONDCP)

Office of Science & Technology Policy

(OSTP)Mix of detailees, career, political

Political

Primarily career staff

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Outline

• Who or What is OMB?

• The Federal Budget and US R&D: the “Big Picture”

• The Budget Process

• Future Issues

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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?

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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

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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).

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Budget Issues

-400

-200

0

200

400

600

1960 1970 1980 1990 2000 2010

Unified Budget Surplus (incl. Social Security)On-Budget Surplus (excl. Social Security)

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

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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)

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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