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R&D Funding in the FY 2018 Request Matt Hourihan May 26, 2017 For the House Research & Development Caucus AAAS R&D Budget and Policy Program https://www.aaas.org/rd

What Do We Know About Interactions Between R&D and the Economy? Technology and R&D: major drivers of growth and productivity Most direct association is with business R&D, and university R&D BUT – also evidence of private R&D underinvestment “Our results indicate that the willingness of large firms to invest in scientific capability has declined.” (Arora, Belenzon, and Patacconi 2015) What about public research specifically? Some studies show variously positive returns Most federal R&D is mission-oriented (i.e. defense, health), which complicates things… Basic science may have a lag before payoff of 20-30 years, which further complicates things… Good evidence that industry draws on academic research (~60% publicly funded), especially in high-tech sectors “Part of the effect of public research on productivity is indirect, flowing through the use of its discoveries by the business sector” (Guellec and van Pottelsberghe 2001) Key question: Does government crowd out industry? Increasingly, it seems the answer is “no” “[T]he general conclusion from the post-2000 empirical evidence must be that [direct] public R&D subsidies succeed in significantly stimulating private R&D investment.” (Becker 2015) And don’t forget tools and talent Some other sources: Cohen, Nelson, Walsh, Management Science, Vol. 48, No. 1, Jan. 2002; Salter and Martin, Research Policy, Vol. 30, No. 3, March 2001; Toole, Research Policy, Vol. 41, No 1, Feb. 2012; Blume-Kohout, Journal of Policy Analysis and Mgmt, Vol 31, No. 3, Summer 2012

FY18 R&D Budget in a Nutshell The shift from nondefense to defense spending would mean severe fiscal impacts for most science agencies and programs In the aggregate, these proposed reductions are unprecedented in the post-Apollo era Particular emphasis on reducing and/or eliminating select technology activities and climate-related activities Even so, fundamental science (including Defense basic research) would see, in some cases, major reductions below omnibus levels Some agencies and activities fair a bit better: DARPA, NASA, exascale computing, likely others

R&D in the FY 2018 Budget FY 2016 FY 2017 FY 2018 Change FY 17-18 (budget authority in millions of dollars)   FY 2016 FY 2017 FY 2018 Change FY 17-18 Actual Estimate* Budget Amount Percent Total R&D 148,302 156,586 151,244 -5,342 -3.4% Basic Research 32,913 34,887 28,936 -5,951 -17.1% Applied Research 37,047 40,161 33,485 -6,676 -16.6% Development** 75,760 78,939 86,741 7,802 9.9% Facilities & Equipment 2,582 2,650 2,082 -568 -21.4% Defense R&D 79,263 83,689 92,473 8,783 10.5% Nondefense R&D 69,039 72,897 58,771 -14,126 -19.4% *AAAS estimates based on the FY 2017 omnibus. Other years based on OMB data. **Using old definition, continuing to count DOD 6.7 as R&D. 5/24/2017 | AAAS

Agency Notes: DOE Science Total Office: -17.1% from omnibus Would bring budget topline back to pre-COMPETES levels (2006) Exascale Computing (ASCR): +19.9% ITER boosted to $63 million (+26%) Energy Innovation Hubs eliminated: Artificial photosynthesis (Cal Tech and other CA universities) and energy storage (Argonne and 19 other multi-state partners) EPSCoR funding terminated Energy Frontier Research Centers scaled back 11.4% below FY16 levels User facilities cut back -19.3% below FY16 levels Domestic fusion research: -25.2% Steep and general cuts for Nuclear Physics, High Energy Physics, other areas

Agency Notes: DOE Technology Offices ARPA-E termination in FY 2019 Fossil Energy R&D: -49.8% Cutbacks include most technology areas: advanced combustion systems, fuel cells, coal-to-liquid, CCS pilot projects Nuclear Energy: -30.8% Cutbacks include most technology areas: LWR sustainability, advanced reactor technologies, fuel cycle R&D Energy Innovation Hub on modeling and simulation eliminated (10 partners) Wide-ranging reductions for EERE Energy hubs on advanced materials and desalination eliminated Manufacturing innovation institutes zeroed out

What Do We Know About NIH Impacts? Patenting and Citations NBER 2015: every $10 million increase in NIH funding for a particular disease area leads to 3.26 additional patents produced by biotech/pharma. Li, Azoulay, Sampat 2017 (published in Science!): 30.8% of all NIH grants cited in a patent for drug, device, or other med tech Follow-on Funding Toole 2007: “a $1.00 increase in public basic research generated an $8.38 increase in private pharmaceutical R&D investment after 8 years.” New Drugs Toole 2012: “a 1% increase in the stock of public basic research associated with a 1.8% increase in industry new molecular entity (NME) applications after a substantial lag.” Biotech Firm Creation Kolympiris et al 2014: a $1 million increase in the average amount of federal R&D funding is associated with an increase of anywhere from 5–58 percent in new biotech firms after a lag

Agency Notes: Commerce NIST: -23.8% topline; reverts to pre-COMPETES levels by several years NIST labs: -13% Program reductions or eliminations: Nanomaterial safety and other materials science; marine environment program; Extramural Fire Grants; biometrics; quantum science; communications systems Hollings Manufacturing Extension Partnership eliminated NOAA: -31.9% reduction to Office of Oceanic and Atmospheric Research 25.4% Reduction to Weather and Air Chemistry Research to terminate: Air Resources Laboratory Joint Technology Transfer Initiative Unmanned Aircraft Systems (UAS) Program Office Vortex-Southeast Climate Research reduced by 19.0%, mostly via research grants National Sea Grant College Program eliminated Polar Follow-On cut Census concerns?

Agency Notes: NSF Topline: -11% below omnibus Returned to pre-COMPETES levels (2002) Six research directorates relatively evenly reduced (~10% each) Most divisions cut in the 5-15% range Integrative Activities reduced by 26% below FY16 EPSCoR reduced by 37.5% Graduate Research Fellowship program reduced by 25.7% Research Vessels: request supports two (rather than the three in the omnibus) Education and Human Resources cut by 14.0% below FY16 Larger cuts for graduate education programs Multiple cross-agency initiatives (i.e. neuroscience, I-Corps, advanced materials and smart systems) would be reduced But not INCLUDES

Other Notes DOD: Science & Tech reduced by 4.9% below omnibus Including -2.1% to basic science Army particularly hard hit DARPA: +9.7 NASA: Few surprises (-2.9%) Increases for Planetary Science (Europa) Five Earth Science missions, RESTORE-L targeted for elimination Reductions to exploration programs, Aeronautics; NASA Education Program slated for elimination USDA: Ag Research Service -37.8%; substantial facilities budget authority rescinded NIFA: -8.1%; AFRI (competitive grants) -6.8% Economic Research Service: -11.6%; NASS: +8.6% US Geological Survey: -14.9% below omnibus Volcano & earthquake early warning systems eliminated EPA S&T: Climate research and many other programs terminated; funding cut by ~45% overall

mhouriha@aaas.org 202-326-6607 https://www.aaas.org/rd For more info… mhouriha@aaas.org 202-326-6607 https://www.aaas.org/rd