Overview of the President's FY15 Federal Budget Request

While President Obama’s FY15 budget request is unlikely to find much support in Congress this year, the document has traditionally served as a useful guide to the administration’s priorities and to federal programs related to research, regional economic development, manufacturing, entrepreneurship and STEM education.

This year, the administration is proposing the creation or expansion of several programs in these areas through the president’s $56 billion Opportunity, Growth and Security Initiative (OGSI).  Since the programs associated with OGSI represent the majority of significant changes within the budget request, many of the agency sections note if a particular program is part of the initiative.

Highlights of particular interest to Digest readers:

• Funding for EDA’s Regional Innovation Strategies program, a major SSTI legislative priority, would increase to $25 million.
• A second round of the Treasury Department’s State Small Business Credit Initiative (SSBCI) would award $1.5 billion to increase small business lending, pending legislative approval.
• The Small Business Administration (SBA) would receive $5 million for the growth accelerators initiative and $6 million for the Regional Innovation Clusters program.
• Funding would be available for five additional manufacturing institutes within the National Network for Manufacturing Innovation.
• NIST’s budget for the Hollings Manufacturing Extension Partnership would increase by 10.2 percent to $141 million.
• Overall, federal R&D would remain flat, with only 1.2 percent increase for FY15. Funding for advanced manufacturing R&D, however, would increase by 12 percent.

A Note on Comparisons

Each year, SSTI’s analysis of the president’s budget request includes comparisons between the proposed level of funding for agencies, offices, programs and initiatives, and past funding levels. This year’s Federal Budget Special Issue uses the FY14 enacted funding level as the default basis for comparisons, however this data is unavailable for many agencies and offices. When reading the issue, note that FY14 enacted funding levels are used except where indicated, either at the beginning of the section or on a case-by-case basis.

Entrepreneurship, Regional Innovation and Capital Access

The president’s FY15 budget request includes $248.2 million (0.7 percent increase) for the Economic Development Administration (EDA), including $210 million (0.2 percent increase) for the agency’s Economic Development Assistance Programs (EDAP). EDA’s Regional Innovation Strategies Program would receive a major increase in FY15, with $25 million (66.6 percent increase over FY14 estimated funding) to support economic development planning and projects that spur entrepreneurship and innovation at the regional level. Though details are not yet available, the budget language suggests that a number of reforms would be made to the EDA grant process, allowing the agency to offer more tailored grants to help address the specific economic needs of communities.

The administration is urging legislation that would enable a second round of funding for the Treasury Department’s State Small Business Credit Initiative (SSBCI), which supports state-sponsored, public-private partnerships that increase lending, investment and technical assistance to small businesses and manufacturers. The budget includes $1.5 billion for a second round of awards, including, $1 billion to be awarded on a competitive basis to states that target underserved groups and $500 million to be allocated to states according to a need-based formula.

Under the proposed budget, the Small Business Administration’s (SBA)  growth accelerators initiative would receive $5 million to help scale existing successful growth accelerators or provide funds via a competition to university and private sector accelerators to start a new accelerator program or entrepreneurship ecosystem based on successful models. Another $6 million is requested for SBA’s Regional Innovation Clusters program.

The president’s budget proposes the permanent extension of the New Market Tax Credit program, which allows Community Development Entities (CDEs) in low-income communities to apply to the CDFI Fund for tax credit investment authority in annual competitive rounds. Tax credits are awarded to private investors in return for equity investments in CDEs. The president’s proposal would allow up to $5 billion in qualifying investment each year starting in 2014. The proposed budget also would extend the CDFI Bond Guarantee Program by one year to provide long-term capital to CDFIs that support lending in underserved communities.

The budget also includes $2 billion in new tax credits for the proposed Manufacturing Communities Tax Credit Program, which would support qualified investments in communities affected by mass layoffs or military base closures.

Manufacturing

Manufacturing plays a major role in the administration’s slate of OGSI proposals. The budget would provide funding for five additional high-tech manufacturing institutes within the National Network for Manufacturing Innovation.  The National Institute for Standards and Technology (NIST) would be responsible for the management of the planned institutes, and would receive $5 million to coordinate their activities. Budgetary support for the institutes themselves would continue to derive from a variety of agencies including the Departments of Energy, Defense and Agriculture. The administration hopes to expand the network to encompass 45 institutes over the next 10 years.

NIST would receive $904.9 million under the proposed FY15 budget, a 5.7 percent increase over FY14 enacted levels. NIST Industrial Technology Services would receive $161 million (12.6 percent increase), including $141 million (10.2 percent increase) for the Hollings Manufacturing Extension Partnership (MEP) and $15 million (21.1 percent decrease) for the Advanced Manufacturing Technology Consortia (AMTech).

The budget also calls for a new SBA-managed public-private investment fund as part of the administration’s manufacturing initiative. The fund-of-funds would support transformative manufacturing technologies and offer funding to scale-up new advanced manufacturing firms into full-scale commercial production. Once fully deployed, the fund could eventually leverage up to $10 billion in total public-private investment.

The Department of Energy’s Advanced Manufacturing program would receive a major boost, with $305.1 million (69.1 percent increase) to support the Clean Energy Manufacturing Initiative deployment of at least one more Clean Energy Manufacturing Innovation Institute. In order to encourage investment in renewable energy technologies, the administration is proposing to make the renewable electricity tax credit permanent and refundable.

Science, Technology and Research

The Office of Science and Technology Policy (OSTP) estimates that the budget request includes $135.4 billion in federal R&D, an increase of 1.2 percent over FY14 as enacted. This figure includes $64.7 billion (0.7 percent increase) in basic and applied research investment.  

Both defense and non-defense R&D would slightly increase with non-defense R&D receiving $65.9 billion (0.7 percent increase) and defense R&D receiving $69.5 billion (1.7 percent increase). Advanced manufacturing R&D across all agencies would receive $2.2 billion (12 percent increase), according to OSTP.

The multi-agency Brain Research through Advancing Innovative Neurotechnologies (BRAIN) Initiative would have its funding doubled under the proposed budget, from $100 million in FY14 to $200 million in FY15. Half of the initiative’s funding would come through the National Institutes of Health (NIH), while the Defense Advanced Research Projects Agency (DARPA) and the National Science Foundation (NSF) would provide the remainder.

Federal research agency highlights include (comparisons are to enacted FY14 funding except where noted):

• National Institutes of Health — $30.2 billion (0.7 percent decrease)
• National Science Foundation — $7.3 billion (1.2 percent increase from estimated FY14)
• DOE Office of Science — $5.1 billion (0.9 percent increase)
• NASA Science — $4.9 billion (4 percent decrease)
• Defense Advance Research Projects Agency — $2.9 billion (4.9 percent increase)
• DHS Science and Technology Directorate — $1.1 billion (10 percent decrease)
• U.S. Geological Survey — $1.1 billion (4 percent increase)
• EPA Science and Technology — $763.8 million (0.6 percent increase)
• NASA Space Technology — $706 million (18 percent increase)
• NIST Intramural Laboratories — $680 million (4.5 percent increase)
• USDA Agriculture and Food Research Initiative — $325 million (2 percent increase)
• Advanced Research Projects Agency-Energy — $325 million (16.1 percent increase)

Funding for multi-agency research initiatives includes:

• Networking and Information Technology Research and Development Program — $3.8 billion (2.9 percent decrease)
• U.S. Global Change Research Program — $2.5 billion (0.5 percent increase)
• National Nanotechnology Initiative — $1.5 billion (no change)

To boost private sector investment in research, the administration is again proposing to expand, simplify and make permanent the Research and Experimentation tax credit.

STEM Education and Workforce Training

The administration is promoting the reorganization and expansion of STEM education programs within the Departments of Education and Defense, NASA and NSF as a key component of its innovation agenda. STEM efforts across the federal government would receive $2.9 billion (3.7 percent increase), according to OSTP estimates. This includes $170 million in new funding at the Department of Education for a new STEM education framework.

Funding for STEM efforts within the Department of Education include $110 million for STEM Innovation Networks, which provide competitive awards to connect school district to national STEM resources, $40 million to prepare STEM teachers and $20 million for a pilot STEM Master Teacher Corps. NSF would receive $118 million to improve undergraduate STEM education, with another $75 million to expand research opportunities for undergraduates.

The president’s budget also includes a significant boost in funding for workforce training, particularly apprenticeships in high-demand industries. As part of OGSI, the Department of Labor would manage a new $1.5 billion Community College Job-Driven Training Fund, which would replace the Trade Adjustment Assistance Community College and Career Training program. The new fund is envisioned as a four-year, $6 billion initiative, which would award grants to establish job training programs in high-demand industries. Of that amount, $500 million would be reserved for apprenticeship programs. A new $15 million Department of Labor Sector Strategies program would offer grants to states or regional partnerships to create employment and training strategies to support regional economies.