April 13, 2001 -- SSTI Weekly Digest

Special Federal Budget Issue — April 13, 2001:

Each year, SSTI dedicates an issue of the SSTI Weekly Digest to the President's budget request. Because of length considerations, the issue is not intended to be exhaustive. Instead we highlight selected S&T programs and initiatives that we believe are of interest to our readers. The President's budget request and supporting documents can be found at: http://www.whitehouse.gov/omb/budget/
Contents

Overview

Agriculture

Commerce

Defense

Education

Energy

Environment

Health

HUD

NASA

National Science Foundation

Small Business Administration

Transportation

Copyright State Science & Technology Institute 2002. Information in this issue of the SSTI Weekly Digest was prepared under a cooperative agreement with the U.S. Department of Commerce, Economic Development Administration. Redistribution to all others interested in tech-based economic development is strongly encouraged — please cite the State Science & Technology Institute whenever portions are reproduced or redirected. Any opinions expressed in the Digest do not necessarily reflect the official position of the U.S. Department of Commerce.

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President’s 2002 Budget Request: An Overview for Tech-Based ED
The Bush Administration's first budget request offers a mixed bag for state, local, and non-profit practitioners and policymakers in tech-based economic development. In research categories, the budget reflects the Administration's research emphasis in defense, biotechnology, and life sciences. The budget also reorganizes the nation's energy research priorities. Most other research categories were held at FY 2001 funding levels or received modest increases or cuts. Most notable exceptions are the Department of Commerce's Advanced Technology Program (ATP) which is slated for a two-year hiatus from funding new projects while the program is reviewed, and the industrial research programs in the Department of Energy's Office of Industrial Technologies. Some discussion of these shifts are presented below.

For economic development programs, the Administration's first budget presents a philosophical change with significant implications. Nearly every program that provides direct support to the private sector, either as loans or grants, experiences potential elimination or large reductions. The most notable examples are in the rural business programs of the Department of Agriculture and the loan and venture capital programs of the Small Business Administration. Much of the deep cut in the Economic Development Administration's Public Works grant program appears to be related more to maintaining progams within their authorization levels than a philosophical issue with the program's value.

The budget includes provisions to make the federal research and development tax credit permanent.

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US Department of Agriculture (USDA)
Research funding levels, with the exception of $150 million in Congressional earmarks, remain relatively flat between FY 2001 appropriations and the President's FY 2002 request. Economic development and Digital Divide programs, on the other hand, take several hits. Selected agency program highlights include:

Distance Learning & Telemedicine (DLT) Loans and Grants – continuation funding levels from FY 2001 of $25 million in grants and $300 million in loans to support access to advanced telecommunications services for improved education and health care in rural areas. (See Broadband below though for earmark)

Broadband Telecom Services in Rural America – $100 million in direct loans and $2 million in loan/grant combinations taken from the DLT pool (FY 2001 $100 million, pilot program) to support broadband transmission and local dial-up Internet services in rural areas.

Fund for Rural America – Authorization to use the $30 million balance of funds provided in FY 2000 is requested. Funds would be split evenly between rural development activities and research, education and extension grants. An additional $60 million in new FY 2002 appropriations would be blocked from use until FY 2003.

Empowerment Zones & Enterprise Community Program – continuation funding of $15 million to support Round II EZ/EC Zones

Business and Industry Guaranteed Loans – $1 billion (decrease of $556 million from FY 2001); guarantee fees charged to applicant businesses would increase from 2 percent to 3.25 percent. The related Business and Industry Guaranteed Disaster/Emergency Assistance Loans program would be eliminated in FY 2002 (FY 2001 $1.16 billion) as are the Business and Industry Direct Loans (FY 2001 $50 million)

Rural Economic Development Grants – undetermined funding level (FY 2001 $8 million). Historically the program provides funds for rural economic development and job creation projects including funding for project feasibility studies, start-up costs, incubator projects, and other expenses for the purposes of fostering rural development. Program funds are derived from the interest differential on Rural Utilities Service borrower's cushion of credit accounts funding. The President's budget request proposes to use the same funds for other programs, "therefore very little if any funds derived from the interest on the cushion of credit payments will be available for the grant program in 2002."

Rural Business Enterprise Grants – $41 million (decrease of $6 million from FY 2001) to fund non-profit and public efforts to support small and emerging businesses outside urbanized areas.

Rural Business Opportunity Grants – $4 million (decrease of $1 million from FY 2001) to support technical assistance and planning activities within non-profit and public organizations to improve economic conditions in rural areas.

Research, Education, and Economics – $2.14 billion (a reduction of $173 million from FY 2001 – eliminates $150 million from 300 Congressional earmarks)

Agricultural Research Service – $960 million (increase of $19 million over FY 2001 appropriation) – $12 million new funding for exotic pest/plant prevention and control, $7.5 million for ag-related biotech, and $5 million for research into mad cow disease. A portion is also redirected for Administration priority areas, such as $15 million for bio-based products, bioenergy research, and new uses for agricultural products.

Cooperative State Research, Education and Extension Service

National Research Initiative – $106 million (no change from FY 2001 level) for competitive research grants into agricultural genomics, food safety, environment and natural resource management, and competitiveness and profitability of agriculture.

Initiative for Future Agriculture & Food Systems – $120 million (no change from FY 2001 level) for competitive grants for research, extension and education to address critical issues related to food production, environmental quality, natural resources and enhanced economic viability of smaller-scale farmers.

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Department of Commerce
The total agency budget request is $4.8 billion, $300 million less than the FY 2001 appropriation level. The majority of the reduction is absorbed by elimination of new project funding for the Advanced Technology Program, a 67 percent cut or $30 million for the Technology Opportunities Program, and a $77 million cut in Economic Development Administration programs. Selected Commerce program highlights include:

Technology Administration, including the National Institute for Standards & Technology (NIST) – $495.7 million ($109.4 million less than the FY 2001 appropriation level)

Under Secretary for Technology/Office of Technology Policy, including the Office of Space Commercialization – $8.2 million (increase of $176,000 over FY 2001 after rescissions)

Experimental Program to Stimulate Competitive Technology (EPSCoT) – no funding requested.

Advanced Technology Program (ATP) – $13 million in additional funding and all $145.4 million of FY 2001 funds would support outstanding commitments (no new awards would be made in FY 2001 or FY 2002)

Manufacturing Extension Partnership (MEP) – $106.3 million (increase of $1.3 million over FY 2001) including continuation of the existing network of MEP centers and emphasis area for e-commerce.

National Quality Program – $5.4 million ($223,000 increase over FY 2001) to continue administration and selection of the Malcolm Baldrige National Quality Award.

Critical Infrastructure Protection Grant Program – $4.992 million ($3,000 increase over FY 2001) for computer network and Internet security issues.

Economic Development Administration – $335 million appropriation for assistance programs (reduction of $77 million from FY 2001.) Specific program funding changes are:

Trade Adjustment Assistance – $10.5 million ($23,000 increase over FY 2001)

Planning – $24 million ($53,000 increase over FY 2001)

Technical Assistance – $9.1 million ($20,000 increase over FY 2001)

Research – $500,000 ($1,000 increase over FY 2001)

Economic Adjustment – $41 million ($8.62 million reduction from FY 2001 level)

Defense Economic Conversion/Adjustment – funding eliminated ($31.38 million reduction from FY 2001)

Public Works – $250 million ($36.069 million reduction from FY 2001)

Bureau of Economic Analysis – $8.5 million increase ($1.3 million more than FY 2001)

Minority Business Development Agency – $28 million ($1 million increase from FY 2001 appropriation)

Technology Opportunities Program – $16 million (decrease of $30 million from FY 2001 appropriation) to facilitate the development of a national telecommunication network and information infrastructure by enhancing the delivery of social services, education, health care, and public safety in under served and rural areas.

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Department of Defense
The Administration budget request calls for a $2.6 billion increase for missile defense alternatives and new technology development. The President plans to increase military research by $20 billion over the next five years. Research, Development, Testing & Evaluation (6.1, 6.2, and 6.3 spending categories) would grow by only two percent in FY 2002, however. The American Institute of Physics reports the final Defense budget request will be released on May 15.

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Department of Education
The Administration has requested a 5.9 percent increase in funding over FY 2001 for an FY 2002 total of $44.5 billion. Many smaller programs are replaced by broader, more flexible block grant programs. Among those programs eliminated that are of interest to the tech-based economic development community because of their role in digital divide and math/science education include:

Community Technology Centers – funded at $65 million in FY 2001.

Technology Leadership Activities – $2 million in FY 2001.

Eisenhower Regional Math & Science Education Consortia – $15 million in FY 2001.

A separate proposal would expand loan forgiveness for math and science teachers serving low-income communities from $5,000 to a maximum of $17,500.

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Department of Energy
The agency's total FY 2002 budget request of $19.2 billion reflects a drop of 2.3 percent. The DOE science budget would increase to $3.16 billion, representing an increase of one-tenth of one percent. Shifts within the R&D budget reflect the President's priorities in fossil fuel research: $150 million in new matching federal funds will support the Clean Coal Power Initiative. Funding for Biological and Environmental Research, on the other hand, falls by more than eight percent. Energy Conservation research drops 46.3 percent over FY 2001 and funding for Renewable Energy Resources would drop by 36.4 percent, although the Administration has committed to introduce a budget amendment adding $39 million for hydrogen related research and restoring 9 percent of the FY 2001 energy conservation research funding level. An additional $1.2 billion in FY 2004 funding for alternative energy development is promised contingent on royalties from oil and gas drilling in the Artic National Wildlife Refuge.

Compared to the FY 2001 appropriation, the Administration has requested 41 percent less funding for the Industry sector of the Energy Conservation office, which houses the Office of Industrial Technologies. Specific programs affected include:

Industries of the Future -- Specific Industries: $46.4 million (cut of $26 million from FY 2001), the cut would be absorbed by all but the Forest Products and Agriculture programs. The Petroleum and Supporting Industries elements of the Industries of the Future, which accounted for $4.4 million in FY 2001, would be eliminated altogether.

Industries of the Future -- Crosscutting $ 31.9 million (cut of $29.8 million from FY 2001) -- eliminating new project funding. This includes $5.1 million combined for the Inventions and Innovations Program or NICE3 programs (the programs received $6 million in FY 2001).

Cooperative Programs with States -- eliminated ($2.0 million in FY 2001)

Energy Efficiency Science Initiative -- eliminated ($3.9 million in FY 2001)

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Environmental Protection Agency
The Administration's FY 2002 budget request of $7.3 billion is $56 million, or 0.08 percent, higher than the FY 2001 appropriation. Funding for EPA science programs would be cut by $27 million or nine percent. Highlights of specific programs within the science budget include:

Human Health Research -- $50.81 million (decrease of 0.3 percent from FY 2001)

Environmental Monitoring and Assessment Program -- $32.99 million (increase of 12 percent over FY 2001)

Pollution Prevention Tools and Technologies -- $21.89 million (cut of 11 percent from FY 2001)

Regional Science and Technology -- $3.59 million (47.5 percent cut from FY 2001 levels)

Environmental Technology Verification -- $3.62 million (42.5 percent cut from FY 2001)

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National Institutes of Health
The Administration’s budget request includes a 13.8 percent increase of $2.8 billion in biomedical research within the National Institutes of Health. Not to be outdone, the Senate has already passed a budget resolution calling for an additional $700 million in NIH funding for FY 2002.

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Department of Housing and Urban Development
Total funding for the Community Development Block Grant (CDBG) program is reduced by $9.7 million or 0.3 percent over FY 2001 levels. A new $80 million Community Technology Centers initiative within the CDBG program budget will provide competitive grants to support the development and expansion of technology centers in high poverty urban areas. The budget request says the new centers will enhance the Dept. of Education's Community Technology Centers program and will build off of the 680+ Neighborhood Networks, a community-based HUD program that encourages the development of resource and computer learning centers in privately owned HUD-assisted and/or -insured housing.

Budget language has been deleted that required $44 million of CDBG funding go toward initiatives to stimulate investment and encourage economic diversification and community revitalization in distressed neighborhoods.

The Administration's FY 2002 budget request includes $150 million for Round II Urban Empowerment Zones.

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NASA
The Administration's $14.5 billion request for NASA reflects an increase of just under two percent over the FY 2001 appropriations. While funding for the Science, Aeronautics and Technology unit of the budget would grow from $7.067 billion in FY 2001 to $7.192 billion in FY 2002, the distribution of funding across areas within the unit shifts:

Space Science -- $2.786 billion (6.16 percent increase over FY 2001)

Biological & Physical Research -- $360.9 million (4.73 percent decrease from FY 2001)

Earth Science -- $1.515 billion (11.72 percent decrease from FY 2001)

Aerospace Technology -- $2.3776 billion (7.28 percent increase over FY 2001)

Academic Programs -- $153.7 million (15.83 percent increase over FY 2001)

Commercial Technology Programs within the Science, Aeronautics and Technology includes Commercial Programs, Technology Transfer Agents, and the Small Business Innovation Research program. Requested funding for the unit in FY 2002 total $146.9 million, a decrease of $15.5 million over FY 2001.

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National Science Foundation
NSF would receive $4.47 billion dollars in FY2002, up $56.1 million (or 1.3 percent) from FY2001 under the President’s budget request. S&T highlights are:

Math and Science Partnerships Initiative - $200 million new initiative, part of the President’s No Child Left Behind plan to strengthen and reform K-12 education. Partnerships between state and local school districts and institutions of higher education will provide students with enhanced opportunities to perform to high standards in math and science.

Nanoscale Science and Engineering - $174 million (up 16 percent from last year) to explore phenomena at molecular and atomic scales and new techniques to facilitate a broad range of applications.

Experimental Program to Stimulate Competitive Research (EPSCoR) - $100 million same as FY 01 level.

Science and Technology Centers - $26 million to initiate a new group of centers in topics across the range of disciplines supported by NSF.

Centers and Networks of Excellence - $29.39 million to support four new research and education centers, a multidisciplinary, multi-sectoral network for modeling and simulation at the nanoscale.

Innovation Partnerships - eliminated ($10 million in FY 2001).

Interdisciplinary Mathematics - $20 million in new funding - to study the role of mathematics in advancing interdisciplinary science focusing on management of large data sets, modeling uncertainty, and prediction of complex non-linear systems.

Biocomplexity in the Environment - $58 million (5.9 percent increase over FY 2001) to investigate interactions among ecological, social and physical earth systems.

Information Technology Research - $273 million (a 5 percent increase over FY 01) to deepen research on software, networking, scalability, and communications to improve ways to gather, store, analyze, share and display information. Special emphasis on interface of IT and biological research to evoke new cyber-information infrastructure.

Learning for the 21st Century - $126 million (3 percent over FY 2001) to explore the potential of information technology to facilitate and enhance learning. Seeks to transfer new knowledge about learning to materials, courses and curricula (for ex., digital libraries).

Plant Genome Research Program -$65 million (maintained at FY 01 level) to support ongoing research on genomics of plants of major economic importance in order to understand the structure, organization and function of plant genomes important to agriculture, the environment, energy, and health.

2010 Project - $20 million (33 percent increase over FY 2001) completion of the genome of the mode plant Arabidopsis enabled researchers to begin a systematic effort to determine the functions of the 20,000 to 25,000 genes of this flowering plant and increase understanding the basic biological processes in all flowering plants and in creating better products for society.

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Small Business Administration
The Administration's budget request eliminates the New Markets Venture Capital Program, the New Markets and the Venture Capital Technical Assistance Grants. The programs are designed to increase access to equity capital and technical assistance to women, minorities and to businesses located in low- and moderate-income rural areas and inner cities. The SBA budget also eliminates BusinessLINC, a New Markets initiative linking large and small businesses in mentoring and direct technical assistance relationships.

Other potentially technology-relevant highlights include:

Continuation funding of $3.5 million and $1.5 million respectively for the Federal and State Technology Partnership (FAST) and the Rural Outreach Programs, both of which support state efforts to encourage small business technology development and commercialization

$88 million for Small Business Development Centers, while also requiring the SBDCs charge fees for services

The Small Business Investment Company (SBIC) program is to become self-financing through increased fees (reduction in cost to federal government of $141 million over FY 2001)

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Department of Transportation
The FY 2002 budget for Transportation proposes $59.5 billion, the highest funding level in the Department’s history. A summary of research and technology related programs follows:

Federal Aviation Administration - $188 million including $53 million for continued research in aircraft structures and materials and $50 million for explosive detection and other security research. The remaining $85 million would be used in weather information, resolution of environmental issues, human factors, safety issues and support of FAA laboratories.

Federal Highway Administration - $253.2 million for Intelligent Transportation Systems (ITS) (32 percent above FY 2001); $135 million for ITS to accelerate rural, regional, and commercial motor vehicle deployment; and $118.2 million for ITS standards, research, operational tests, and development.

National Highway Traffic and Safety Administration - $57 million for research and analysis activities such as the National Transportation Biomechanics Research Center, crash avoidance research, and other statistics tracking and safety research programs. Another $75 million is recommended to maintain the existing workforce and to hire, train, and develop safety professionals; maintain critical information systems; and design, print and distribute safety-related literature.

Federal Transit Administration, the Research and Technology Program - $49 million (four percent increase over FY 2001) focusing on accessibility for the disabled, air quality, traffic congestion, fuel cells, and propulsion systems. The FTA’s University Transportation Centers are to maintain their funding level of $6 million to provide support for research, education, and technology transfer activities which address regional and national transportation matters.

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