Federal R&D Funding Out of Sync with Economy, MTC Finds

There is potential trouble ahead for R&D and those states with relatively low levels of federal support will be impacted most severely, according to the Massachusetts Technology Collaborative's Analysis of the Impact of FY 2000 Federal R&D Investment Scenarios on Economic Growth.

This report, the second conducted by MTC, looks at five funding scenarios currently under consideration by Congress and their effect on the economies of states receiving varying levels of federal R&D support.

Among the reports' conclusions are:

• The caps on discretionary spending mandated by the 1997 Balanced Budget Agreement continue to impose severe constraints on proposed R&D investments; without extra-ordinary actions (such as lifting the caps, raising revenues, or shifting funds from other accounts) the federal science programs will face substantial cuts in FY 2000.

• Federal support of R&D — measured as a percentage of Gross Domestic Product (GDP) — would resume a downward path in FY 2000 under the President's budget submission and under the budget resolutions approved by the House and Senate (absent an extraordinary effort to shift funds into R&D, away from other discretionary items.)

• Strong investment by industry in applied research and in development-related research is expected to keep the total level of investment in R&D at high levels.

• Funding for basic research, 55 percent of which is funded by the federal government, has fallen (as a percentage of GDP) and is projected to continue to fall unless a strong commitment is made to sustained expansion of the federal science portfolio.

• States that receive the least federal R&D funding, including the 18 EPSCoR states, have the greatest stake in the federal R&D debate because the impact of cuts will be felt more severely in their economies.

MTC's new report updates last year's analysis of the most important proposals on scientific research now before Congress and shows how each would affect the overall level of federal research funding that would flow to the states. (Analyses for all 50 states and the District of Columbia are available as a PDF file on the Collaborative's website at http://www.mtpc.org)

In addition, the report projects the impact of R&D funding scenarios on specific academic and non- profit institutions in New England and at the national level. The report addresses the impact of federal funding decisions on the total level of R&D conducted in the United States and on the mix of basic research, applied research, and development.

The analysis was based on five distinct scenarios that it was felt bracket the range of possible outcomes. Scenarios were chosen that allowed for the development of projections for the next five years and which define distinctly different strategies to federal investments in R&D.

These scenarios were:

1. President Clinton's FY 2000 Budget Submission (proposing initial decreases and level-funding through FY 2004, utilizing a balanced budget that includes tobacco tax offsets)

2. The FY 99 Proposal to Double the National Institutes of Health Budget by FY 2003

3. S. 296 B The Federal Research Investment Act (also known as Frist/Rockefeller, calling for Federal non-defense science budgets to be doubled over eleven years) [Editor's NOTE S. 296 passed the Senate unanimously last week and now moves to the House where its passage is seen as unlikely]

4. Frist-Rockefeller plus a 5% Department of Defense Science and Technology Increase (as recommended by the Defense Science Board)

5. President Clinton's FY 2000 Budget Submission minus Tobacco Tax Offsets (as required by Congressional 302(b) Allocations)

A copy of the MTC Analysis of the Impact of FY 2000 Federal R&D Investment Scenarios on Economic Growth can be obtained from the MTC website: http://www.mtpc.org