Overview of the President's FY17 Federal Budget Request

Earlier this week, President Obama released his final budget proposal, outlining $4.1 trillion in spending for federal agencies. Total spending would increase 4.9 percent over the current fiscal year, but with a less than 1 percent increase in discretionary spending in accordance with the spending caps set last year.  The fiscal year 2017 budget request includes funding and legislative proposals supporting the lineup of initiatives announced by the White House over the past few weeks including the Computer Science for All initiative, the National Cancer Moonshot, the 21st Century Clean Transportation System initiative, the Mission Innovation global climate initiative, a major investment in cybersecurity and a water innovation plan.

Each year, SSTI reviews the president’s federal budget request for programs and spending related to entrepreneurship, regional innovation, economic development, manufacturing, research and development, technology commercialization, and STEM education and workforce training. This year’s Federal Budget Special Issue provides an overview of tech-based economic development spending, as well as an agency-by-agency analysis of related programmatic spending.

Use the index in the left-hand column to view FY 2017 budget highlights by agency.

The FY 2017 presidential budget request includes many proposals that have appeared in past budgets, but have not translated into signed legislation and final appropriations. However, the presidential budget provides a valuable look at administration priorities, a starting point for policy discussions and a guide to current federal support for tech-based economic development.

Highlights of particular interest to SSTI Digest readers include:

• Funding for the Economic Development Administration’s (EDA) Regional Innovation Strategies (RIS) program would grow to $20 million from $15 million in FY 2016. The additional funding would support the fourth annual RIS competition and expand on new programs it is currently developing. RIS continues to be a key legislative priority of SSTI.
• Funding for Small Business Administration’s (SBA) Regional Innovation Clusters program would remain level at $6 million, while the Growth Accelerators program would increase its budget from $1 million to $5 million.
• The administration is proposing $1.9 billion to help launch an additional 27 institutes under the National Network for Manufacturing Innovation over the next 10 years. In addition, the Department of Commerce would receive $47 million to launch two new institutes in FY 2017 and support current institutes. Funding is recommended for two new Department of Defense institutes and one new Department of Energy institute.
• The Hollings Manufacturing Extension Partnership (MEP) would be allocated $142 million, a 9.5 percent increase.
• A new authorization of $1.5 billion for a second round of the State Small Business Credit Initiative (SSBCI) is proposed in the budget. Of that amount, $1 billion would be awarded on a competitive basis to states best able to target local market needs, promote inclusion, attract private capital for startup and scale-up businesses, strengthen regional entrepreneurial ecosystems and evaluate results. The remaining $500 million would be awarded by formula, based on economic factors such as job losses and the pace of economic recovery.
• A new $50 million EDA Lab-to-Market grant program is proposed to support regional collaborations to commercialize federal laboratory technology.
• A legislative proposal is included for a $10 billion SBA Scale-Up Manufacturing Investment Fund. If authorized, the federal government would invest $5 billion over five years to be matched by federal funds to help provide financing for small, advanced manufacturing startups.

A Note on Funding 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 FY16 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 FY16 enacted funding levels are used except where indicated, either at the beginning of the section or on a case-by-case basis. Some discrepancies in the FY16 enacted funding levels are due to the use of continuing resolutions to fund the federal government before the passage of the omnibus spending bill in December 2015.

Readers will note that mandatory funding plays a greater role in this year’s budget analysis. Due to the discretionary spending caps set by the Bipartisan Budget Act, the administration has made use of mandatory funding to invest in new and existing programs. This approach allows the administration to abide by the statutory caps while increasing spending in many areas, but would require initial legislative authorization to do so. SSTI has distinguished between mandatory and discretionary funds in many places in the issue, since the source of funding would play a role in the fate of proposals. Also note that other news sources may report combined mandatory and discretionary spending, leading to discrepancies between their figures and those that appear here.

Entrepreneurship, Regional Innovation and Capital Access
Under the proposed FY17 budget, EDA would be funded at $258.5 million, a marginal decrease from FY16. Funding for EDA Economic Development Assistance Programs (EDAP) would decrease a bit more (3.2 percent), though support for salaries and expenses would grow to enable EDA to connect more communities to federal resources. The administration is again proposing an increase for the Regional Innovation Strategies program to $20 million from $15 million in FY16. Support would increase for most other EDAP programs including Economic Adjustment Assistance (4.3 percent increase), Partnership Planning (9.4 percent increase), Technical Assistance (23.1 percent increase) and Research and Evaluation (100 percent increase).

The proposed EDA Lab-to-Market program would, pending legislative approval, receive $50 million in mandatory funds to build regional partnerships to commercialize federal lab technologies. Competitive grants would be awarded to connect labs, academic institutions and regional economic development organizations.

SBA would also receive a small increase in its budget with $719 million, excluding disaster funds. Overall funding would remain level for both SBA’s entrepreneurial assistance program and its loan programs. The Regional Innovation Clusters program would continue at $6 million, while the Growth Accelerators program would quadruple its funding from $1 million to $5 million.

The Department of Treasury budget includes a legislative proposal for a new authorization of $1.5 billion for a second round of the State Small Business Credit Initiative. If approved, $1 billion of these mandatory funds would be awarded on a competitive basis, while $500 million would be awarded by formula.

Manufacturing
The National Institute of Standards and Technology (NIST) would receive $1 billion in discretionary funds under the proposed budget, including $142 million (9.5 percent increase) for the Hollings Manufacturing Extension Partnership. NIST will work in FY17 to reduce variation in funding across the MEP network and devote more funds to very small (1-19 employees), rural and startup firms. Funding for the NIST Lab-to-Market program is proposed at $8 million.

The FY17 budget request includes a major proposal to move the NNMI toward its goal of launching 45 Manufacturing Innovation Institutes over the next 10 years. The NIST budget includes $2 billion in mandatory spending to create 27 more institutes. This investment is in addition to the $250 million in discretionary funds allocated to the Departments of Commerce, Defense and Energy to support the 13 existing institutes and launch five more in FY17. Commerce and Defense would each receive funds to launch two new institutes and Energy would launch one.

The budget request again includes a legislative proposal for an SBA Scale-Up Manufacturing Investment Company (SUMIC) with $1.3 billion in mandatory subsidy budget authority. The initiative would invest $5 billion in federal funds over five years, along with a matching amount of private funds, to bridge the financing gap for small, advanced manufacturing startups. No subsidy outlays are assumed in FY17, but, if authorized, they would begin in FY18.

The Department of Energy’s (DOE) Energy Efficiency and Renewable Energy Office budget includes $43 million (14.2 percent increase) for advanced manufacturing. The National Science Foundation (NSF) investment in advanced manufacturing totals $176 million across its offices.

Science, Technology and Research
The Office of Science and Technology Policy (OSTP) estimates that the proposed FY17 budget would provide $152.3 billion for R&D across all agencies, a 4.2 percent increase over FY16 enacted levels. Of that amount, about $73 billion (6 percent increase) would support basic and applied research. The White House cites R&D as an area in which legislative proposals and mandatory spending are particularly necessary to keep the U.S. competitive despite discretionary spending caps. Mandatory proposals make up about $4 billion of the overall $152 billion R&D investment.

The budget would build on the recentlyenacted legislation simplifying and making permanent the R&D tax credit by further simplifying it. Under the current legislation, businesses use a complicated formula to be eligible for a 20 percent credit or use a simple one to receive a 14 percent credit. The administration is proposing a single, simple formula for an 18 percent credit.

Major cross-agency, R&D-focused initiatives include the 21st Century Clean Transportation System initiative, the global Mission Innovation clean energy initiative, the Moonshot to Cure Cancer and an administration water innovation initiative.

The 21st Century Clean Transportation System initiative is an administration plan to boost American investments in clean transportation infrastructure, funded by a new $10-per-barrel fee on oil companies. Under the plan, $320 billion would be made available over 10 years. Investments would be made through the Department of Transportation (DOT), NASA and the Department of Energy (DOE). FY17 efforts include $200 million at DOT for autonomous vehicle safety research and $100 million at NASA R&D for low-carbon-emission aircraft.

Mission Innovation is a result of the November 2015 talks in Paris, in which 20 countries, including the U.S., pledge to double their government’s R&D investment in clean energy over five years. The U.S.’ contribution is woven into the FY17 budget proposal, with 80 percent of related investments covered in the DOE budget. In FY17, the DOE Energy Efficiency and Renewable Energy office would receive $2.9 billion, with another $804 million for DOE nuclear energy and $500 million for ARPA-E under the initiative. If pursued, the plan would ramp up federal clean energy investment from $6.4 billion in FY16 to $12.8 billion in FY21. About $7.7 billion is included in the FY17 budget. The plan would require a 15 percent increase each year.

The Moonshot to Cure Cancer is a pledge to invest $1 billion in cancer research beginning in FY16. In FY17, the initiative would encompass a $680 million investment to accelerate cancer programs at the National Institutes of Health, $75 million at the Food and Drug Administration and additional efforts at the Departments of Defense, Veterans Affairs and others.

In the weeks leading up to the budget release, the White House announced it would include new funding to support $300 million in water-related research. The plan is a two-part strategy to boost water sustainability and reduce the price and energy use of water supply technology. The Department of Interior’s budget includes $98.6 million for an associated WaterSMART program, along with investments under the Bureau of Reclamation and the U.S. Geological Survey. The National Science Foundation and the Departments of Energy and Agriculture also have water initiative-related spending included in their budgets.

The request also includes $700 million for research grants at the Department of Agriculture’s (USDA) Agriculture and Food Research Initiative (AFRI) and $309 million for the Precision Medicine Initiative under the Department of Health and Human Services (HHS).

Federal research agency highlights include (total of discretionary and mandatory funding):

• National Institutes of Health –  $33.1 billion
• DOD Science and Technology - $12.5 billion (4.1 percent decrease)
• National Science Foundation - $8 billion
• DOE Office of Science – $5.7 billion (6.1 percent increase)
• NASA Science –  $5.6 billion (0.2 percent increase)
• Defense Advanced Research Projects Agency - $3 billion (3.7 percent increase)
• U.S. Geological Survey – $1.2 billion (10.1 percent increase)
• DHS Science and Technology Directorate –  $758.7 million (3.6 percent decrease)
• EPA Science and Technology – $754.2 billion (2.7 percent increase)
• NASA Space Technology – $826.7 million (20.4 percent increase)
• NIST Intramural Laboratories - $730.5 million (5.9 percent increase, totals $825.5 million with funds for construction of new facilities)
• USDA Agriculture and Food Research Initiative – $700 million (100 percent increase)
• Advanced Research Projects Agency-Energy – $500 million (71.8 percent increase)

Budget-wide support for the U.S. Global Change Research Program total $2.8 billion, while Brain Research through Advancing Innovative Neurotechnologies (BRAIN) Initiative funding would total $450 million. Figures are not yet available for the National Nanotechnologies Initiative (NNI).

STEM Education and Workforce
OSTP estimates that the FY17 budget request includes $3 billion for science, technology, engineering and mathematics (STEM) education. A key priority within this funding for FY17 is the administration’s Computer Science for All initiative, which would invest $100 million in discretionary funds in districts to expand K-12 access to computer science by training teachers and building regional partnerships. Another $4 billion in mandatory funding over three years is proposed to provide funding through states to support similar efforts. In addition, more than $135 million would be invested over the next five years through NSF and the Corporation for National and Community Service to support and train computer science teachers. 

The FY17 request also includes $125 million for a new Department of Education (DOEd) Teacher and Principal Pathways program to support teaching in high-need subjects, particularly STEM. DOEd will release a STEM 2025 report this spring to outline key policy priorities over the next decade.

The administration’s proposal would provide $60.8 billion in mandatory funds over the next 10 years to the America’s College Promise effort to make two years of community college free for responsible students. To expand the effort, a tax credit would be introduced to incentivize corporate investment in the program, by making businesses that invest in community colleges eligible for a $5,000 credit for each graduate they hire.

The American Technical Training Fund, a new joint effort between the Department of Labor (DOL) and DOEd, would receive $75 million in FY17 to support tuition-free job training in high-demand fields, including manufacturing and IT through competitive grants.

The new DOL America’s Talent Compact initiative would receive $3 billion in mandatory funds over five years to create more than 50 talent hotspots around the country by building regional partnerships to recruit and train one-halfmillion skilled workers.

The budget would sustain DOL’s $90 million in grants for apprenticeship training in FY16, and proposes a $2 billion mandatory fund to double the number of participating apprentices.

The administration’s recently announced Young American’s First Job Initiative is proposed under the budget. DOL would receive $5.5 billion over four years to give out-of-school youth access to employment, skills and networks.

The cross-agency Partnerships for Opportunity and Workforce and Economic Revitalization Plus (POWER+) Plan introduced in FY15 would continue to fund EDA, DOL, USDA and Appalachian Regional Commission (ARC) efforts to assist coal-oriented communities. EDA would invest $75 million for targeted economic and workforce development strategies, while ARC would deploy $120 million to develop entrepreneurial ecosystems, infrastructure and capital access.

A new Workforce Data Science and Innovation Fund would operate as a partnership between DOL, DOEd and DOC to build robust, open-source workforce databases with $500 million in total mandatory funds.