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Four ways the White House reorganization plan could affect American innovation

June 28, 2018
By: Jason Rittenberg

The White House Office of Management and Budget released Delivering Government Solutions in the 21st Century, a plan for reorganizing federal agencies. On topics related to innovation, the wide-ranging plan would make changes to education, workforce, economic development, small business and more. Some of the suggestions could advance with administrative actions only, while many will require congressional support. As with previous initial proposals from the administration, this document does not provide many of the details necessary to evaluate the real intention and opportunity of each proposal. The actual effects of implementation for many suggestions could range from reduced administrative overhead to funding reductions totaling billions of dollars, for example depending on the interpretation of “consolidate.” These four ideas from OMB have the greatest potential to impact support for innovation economies.

Creating the Bureau of Economic Growth

Numerous Government Accountability Office reports have noted the wide range of agencies and programs supporting economic development. OMB’s suggestion of combining these programs into one office is not surprising. Some of the initiatives specifically cited for inclusion are HUD’s Community Development Block Grant program, EDA’s Economic Development Assistance programs, USDA rural business and community facilities programs, and three of the regional commissions. However, the limited details make the interpretation of “consolidating” these programs unclear, particularly in light of administration budgets that have targeted elimination of some of these activities.

The proposal would establish three offices within the bureau: planning, grant-making and technical assistance. The planning office would “leverage [state and local] internal planning capabilities” and grants would be available only as a next step. The technical assistance office would work with nonprofits to disseminate best practices, providing funding to these organizations and not building technical capacity within the bureau.

Establishing the Department of Education and Workforce

OMB proposes combining the departments of education and labor into a single entity. From a federal perspective, GAO has also targeted workforce programs for consolidation, and many states have acted in the last few years to try to improve the connections between higher education and employment outcomes. In this context, the proposed change has a clear logic.

The practical suggestions behind the proposal seem difficult to implement. The new department would comprise four offices: one focused on K-12 education, one focused on enforcement actions, one for research and evaluation, and one for all workforce and higher education activity. The higher education initiatives would largely focus on improving education, offering credentials, and facilitating financial aid. The workforce piece would consolidate numerous workforce programs into less than ten (the text mentions four but a graphical display of the change seems to include nine). The administration has provided numerous indications of its strong support for apprenticeship programs, yet this stated preference does not seem reflected in the proposal. The only details given on apprenticeships in the plan are that the workforce office “will also maintain” these activities.

Restructuring R&D at Energy, NASA and NIH

The plan contains several proposals related to R&D administration. The Department of Energy would create an Office of Energy Innovation to focus on applied science. The office would have a “fuel source-agnostic” program to support potential innovations across the existing funding streams for renewable, nuclear and traditional energy. The Office of Science would also be restructured.

NASA would determine the opportunity for converting research labs into federally-funded R&D centers, often referred to as “government-owned, contractor operated” or GOCOs. As part of this transition, parts of labs could be operated as GOCOs, with a particular potential for research related to new mission items.

The Department of Health and Human Services would see the vast majority of currently separate health research programs move into NIH. Meanwhile, the NIH would be restructured to “break down administrative silos.”

Consolidating small business support

OMB proposes to bring small business capital and contracting programs to SBA. The proposal does acknowledge that capital access is difficult for many entrepreneurs and particularly for minority business owners — going so far as to call these “market failures.” However, the plan does not clarify whether the consolidation of programs would lead to more overall support. While the exact programs that may be moved or eliminated are not named, the section references USDA, which provides business loans and grants, and Treasury, which houses the CDFI Fund, among the departments with duplicative efforts.

Additional initiatives

In addition to the four proposals mentioned above, the plan contains other changes relating to innovation economies:

  • Dept. of Commerce — combine Census Bureau, Bureau of Economic Analysis and Bureau of Labor Statistics into one office;
  • Dept. of Education — create “Next Gen” student aid;
  • Dept. of Homeland Security — improve recruitment and retention of cybersecurity workforce;
  • GEAR Center — establish new office to innovate government; and,
  • NSF — launch two “convergence accelerators” and receive control of all federal graduate fellowships.
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