Special Federal Budget Issue — February 7, 2003

Copyright State Science & Technology Institute 2003. 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.

Subscription to the SSTI Weekly Digest is free. If you are reading a forwarded copy of this issue and would like to receive your own copy each week directly, please subscribe at http://www.ssti.org/Digest/digform.htm. Requests to unsubscribe also may be completed at http://www.ssti.org/Digest/digform.htm.

President's FY04 Budget Has TBED, S&T Winners and Losers
Each year SSTI provides a brief review of the President's budget request for selected programs and research areas of interest to many in the technology-based economic development community, highlighting the changes over the previous year's appropriation levels. The Bush Administration's FY 2004 budget request offers a mixed bag — there's some good news and some bad news.

For FY04, the Administration has requested record levels of spending on research and development, with priority areas such as R&D for fighting bioterrorism, nanotechnology, fuel cells, and networking and information technology receiving sizable increases. The biotech community, however, is sent notice that five years of the Bush and Clinton Administrations recommending double-digit increases for the National Institutes of Health (NIH) have ended. NIH is looking at only a 1.8 percent growth overall. Supporters of doubling the National Science Foundation (NSF) budget over the next five years see the 8.9 percent increase slated for the agency in FY04 will make the goal fairly difficult to reach.

It's a very mixed budget, however, for programs that support many of the priorities for the programs and client companies of state, local and university technology-based economic development efforts. For instance, the Department of Commerce's Economic Development Administration is funded at $365 million while the Advanced Technology Program and the Manufacturing Extension Program are both slated for elimination. New USDA rural investment programs and enterprise zones would be defunded while funding for loans for rural broadband access would be 2.5 times greater than the FY 2003 request. Two better known Digital Divide programs, the Department of Education's Community Technology Centers and the National Telecommunications and Information Administration's Technology Opportunities Program, are both eliminated.

EPSCoR and EPSCoR-like programs see mixed messages as well. Cuts are recommended in the Defense budget, flatlined in NSF and increased by 10 percent in NIH.

In other agencies, other popular TBED programs take the ax. DOE's Industries of the Future - Specific grants is cut in half, and NASA's Commercial Technology Programs is to be eliminated.

The Fiscal Year That Almost Isn't
Comparing the FY04 request to "previous levels" is a bit misleading this year, making any analysis a risky venture. For those following Congressional progress, or lack thereof, on the FY 2003 budget, it comes as no surprise when we say FY03 appropriations do not exist for any federal agency, with the exception of the Department of Defense and military construction.

The latest news on the FY03 budget battle is not particularly encouraging either. The House passed another Continuing Resolution this week keeping the federal government running until February 20. Senator Ted Stevens (R-AK), chair of the Senate Appropriations Committee is threatening that if the budget isn't done by February 14, then he supports a continuing resolution for the remainder of the fiscal year, which ends September 30. The chief effect of such a resolution setting FY03 spending at FY02 levels is agencies and programs slated for increases in FY03 would be hurt, including NIH and NSF.

As a result, we're left to compare the Administration's FY04 request to the Administration's FY03 request for all agencies but Defense, and occasionally to the FY02 appropriation when the changes are dramatic. We've commented when the intent of Congress suggests FY03 funding will be significantly different than the Administration's FY04 request, if the omnibus appropriations bill passes. Relative changes with the FY03 budget request levels are given in parentheses, unless noted.

Because of its length, this year's synopsis is presented between two email messages. The complete review also is available on SSTI's website at: http://www.ssti.org/Digest/2003/020703.htm

return to the top of this page

Multi-Agency and Government-wide Initiatives
The White House Office of Science and Technology Policy (OSTP) has highlighted several of the research and technology themes within the President's FY 2004 Budget Request, and select initiatives are highlighted below. In addition, the Administration is calling for the Federal Research and Experimentation Tax Credit to be made permanent.

Promoting Innovation
The Administration's budget provides a $123 billion total investment in research and development (R&D), up 7 percent from FY 2003. Included within this amount are the following:

Climate Change
The proposed FY 2004 budget includes an increase of 355 percent, to $182 million, for the Climate Change Research Initiative (CCRI). Investment will be used to develop resources to assist policymaking, supply computer resources for climate modeling, and improve observations and data management for a climate observing system. The CCRI and the US Global Change Research Program combine to form the Climate Change Science Program (CCSP). The $1.75 billion FY04 budget request for the CCSP remains approximately the same as it was in FY03.

K-12 Mathematics and Science Education R&D Initiatives

return to the top of this page

U.S. Department of Agriculture (USDA)
The Administration's $74 billion FY 2004 budget request for USDA is 2 percent higher than FY 2003. Discretionary spending, however, would decrease by $311 million.

The 2002 Farm Bill authorized a number of new programs including a value-added grants program, a loan and grant program for renewable energy and energy efficiency, and two additional business lending programs — a rural business investment program and a rural strategic investment program. The Administration's 2004 budget request proposes blocking some of the mandatory funding the 2002 Farm Bill provided for these programs. It also includes discretionary funding instead of mandatory funding for the value-added and renewable energy programs.

New funding requests also are made in the following programs under the Rural Utilities Service (RUS) and Rural Business-Cooperative Service:

USDA research activities are coordinated by the Research, Education and Economics (REE) agencies, which oversee the discovery, application and dissemination of information and technologies spanning the biological, physical and social sciences. This is accomplished through agricultural research, education, and extension activities and economic and statistical analysis. REE's total FY 2004 funding of $2.37 billion ($10 million increase) is distributed among four areas:

return to the top of this page

Department of Commerce
The Administration's FY 2004 $5.407 billion budget request for the Department of Commerce reflects a $73.89 million increase over the FY 2003 request. Several programs of interest to the tech-based economic development community experience significant changes to their funding levels.

Commerce's Economic Development Administration (EDA) provides grants to states, regions and communities to help create wealth and minimize poverty by promoting a favorable business environment to attract private capital investments and high skill, high wage jobs. The FY04 request for EDA is $364.4 million, $33.4 million of which is for administration ($2.7 million more than FY03). Funding request levels are included for the following individual grant programs:

The Technology Administration (TA) works with U.S. industry to maximize technology's contribution to U.S. economic growth. Led by the Under Secretary for Technology, TA fulfills its broad responsibilities through its component organizations: the Office of Technology Policy (OTP), the National Institute of Standards and Technology (NIST) and the National Technical Information Service (NTIS) with its National Telecommunications and Information Administration (NTIA).

The Minority Business Development Agency (MBDA) would receive $29.487 million in FY04, an increase of $0.581 million over the FY03 request. MBDA provides a variety of direct and indirect business assistance services through public-private sector partnerships, including funding for Business Development Centers (BDCs), Native American Business Development Centers (NABDCs), and Minority Business Opportunity Committees.

The National Oceanic and Atmospheric Administration (NOAA) would receive $3.326 billion in FY04, or $190 million more than FY03. NOAA components supporting significant research activity include:

The U.S. Patent and Trademark Office (USPTO) would receive $1.404 billion in FY04, a $70 million increase from the FY03 request. USPTO examines patent applications, grants patent protection for qualified inventions and disseminates technological information disclosed in patents. The office also examines trademark applications and provides registration to owners of qualified trademarks.

The Bureau of Economic Analysis (BEA) would receive $84.76 million in FY04, or $11.54 million more than FY03. BEA seeks to strengthen the understanding of the U.S. economy and its competitive position by providing the most relevant and accurate GDP and economic accounts data in a timely and cost-effective manner.

return to the top of this page

Department of Defense (DoD)
The Administration's FY 2004 budget request for DoD is $379.9 billion, a $15.3 billion increase over the FY 2003 appropriations — DoD is the only department to have a passed spending bill this year. Overall funding for defense science and technology research, which is defined as basic research, applied research, and advanced technology development, drops by $160 million in the FY04 request. The breakdown is as follows:

Basic Research — $1.315 billion (1.8 percent decrease)

Applied Research — $3.735 billion (10 percent decrease)

Advanced Technology Development — $5.367 billion ($278 million increase)

Other DoD programs of interest include:

The following two programs would not receive funding under the Administration's FY04 budget request:

return to the top of this page

Department of Education (ED)
At $53.1 billion, the Administration's FY 2004 budget request for ED shows a 5.6 percent increase ($2.8 billion) over the FY 2003 spending plan. The new budget request includes $2.85 billion (no change) for Improving Teacher Quality State Grants, which give states and local educational agencies resources to select and implement research-based strategies for developing a high-quality teaching force and improving student achievement. The request also continues funding at the 2003 level, $12.5 million, for Mathematics and Science Partnerships, a program for improving academic achievement in math and science. The majority of funding for this multi-agency initiative is under the National Science Foundation.

The Administration's FY03 and FY04 requests identify 45 ED programs for termination, including the Community Technology Centers ($32.5 million FY02 appropriation). The ED budget summary explains the program "supports centers that offer disadvantaged residents of economically distressed areas access to computers and training. Program has limited impact and funding for similar activities is available through other Federal agencies."

Also slated for termination is the Projects With Industry program ($22.1 million FY02 appropriation) that helps individuals with disabilities obtain employment and advance their careers in the competitive labor market.

Additional requests for programs include:

return to the top of this page

Department of Energy (DOE)
The Administration's FY 2004 budget request for DOE is $23.4 billion — 5.9 percent or $1.311 billion more than the FY 2003 request. Part of that increase, 11.7 percent, would go to the National Nuclear Security Administration. Another part, 4.6 percent, would go to the Environment budget, which is $8.030 billion in FY04. The Science budget would see only a $47.1 million increase (1.4 percent), and the $2.45 billion Energy budget is roughly $9 million higher in FY04 (0.4 percent increase).

Among major DOE programs receiving FY04 funding, the Coal Research Initiative would receive $321 million between its two components, the Clean Coal Power Initiative ($130 million) and the current coal R&D program ($190.5 million). The $130 million will be used for the second round of competition to select industry-proposed clean coal power projects.

Also included in the FY04 budget request is $197 million for nanoscience research, a $64 million increase over FY03 program funding. Within this amount, DOE will design and construct five new nanoscience research centers. Other Office of Science initiatives are shown with respective increased or decreased levels by percent from the FY03 budget request:

The total request for Energy Efficiency and Renewable Energy (EE), $1.32 billion, remains essentially flat compared to the FY03 level. However, due to reorganization in 2002 that resulted in 11 program offices and a centralized administration office, EE funded activities will receive $37.2 million more in FY04 (9.1 percent increase) than they did in FY03. This additional funding is reflected in EE's Energy Supply account. Funding for Energy Conservation programs is down 3.9 percent from a year ago.

Funding for all of EE's fuel cell activities will support the new FreedomFuel Initiative and FreedomCAR. The Administration has requested $181 million for FreedomFuel, an R&D initiative focused on hydrogen fuel production, storage and distribution. The new initiative is expected to complement FreedomCAR, which would receive $169 million in FY04 to support technologies that enable the mass production of hydrogen powered fuel cell vehicles. Additionally, $5 million is provided for another new initiative, Solid State Lighting, to develop illumination technologies that could achieve energy efficiencies as high as 70 percent. Other Office of Energy programs of interest to receive FY04 funding include:

return to the top of this page

Department of Health and Human Services (HHS)/ National Institutes of Health (NIH)
The vast majority of the research functions of HHS reside within the NIH, which, over the past five years, has seen two-digit increases each year as a result of a concerted effort to double the NIH budget by FY 2003. Spending through the 27 NIH institutes and centers now accounts for roughly 40 percent of the HHS budget annually.

For the FY 2004 NIH budget, the Administration requested a more modest $27.893 billion, only 1.8 percent higher than the FY03 request. When adjusted for one-time facilities costs in FY03, the total available for NIH non-biodefense research programs increases by 4.3 percent. The FY04 budget supports NIH’s request of $1.625 billion for biodefense research.

With a concerted and directed effort, state and local tech-based economic development entities and their partners could become effective collaborators as NIH directs even more grant and funding resources in FY04 toward multidisciplinary research teams spanning university departments, geographical barriers and public-private sectors. The NIH FY04 budget summary contends "the NIH will need to address the role of government in facilitating culture change and work with the private sector, universities, professional societies, and researchers to implement such change."

Other NIH programs of note:

The Institutes' biodefense research budget more than doubles (+117 percent) from the FY03 Amended President's Budget. The National Institute of Allergy and Infectious Diseases (NIAID) will take the leadership role for NIH on biodefense. NIAID plans to create four Regional Centers of Excellence for Biodefense and Emerging Infectious Diseases to provide and maintain the R&D capacity necessary for identifying and responding to emerging diseases and bioterrorism events. NIAID also plans to expand the number of candidate drugs and vaccines under research. NIH will increase its interactions with collaborative partners in industry to foster translational research and increase the number of clinical research projects underway in the area.

Elsewhere within HHS, the FY04 request for the Agency for Healthcare Research and Quality (AHRQ) is $211 million, $27 million greater than the FY03 request, but $37 million less than the FY02 actual appropriation. AHRQ is responsible for supporting, conducting and disseminating research that improves the outcomes and quality of health care, reduces costs, improves patient safety and broadens access to services. Funding is divided among two categories:

return to the top of this page

Department of Homeland Security (DHS)
The Administration has requested a total budget of $36.2 billion for the Department of Homeland Security, reflecting a $22.1 billion increase over FY 2002 funding levels for functions formerly in other agencies and now consolidated within the Department. The majority of the R&D activities fall under the Science and Technology Directorate, which would receive $803 million in FY 2004 — an increase of $242 million, or 43 percent, over FY03 requested funding levels.

Within the Directorate, $350 million is requested for the Homeland Security Advanced Research Projects Agency (HSARPA). DHS will look to partner with the private sector and others in the deployment of innovative, high-payoff capabilities through HSARPA. Funding will target high-priority operational requirements including those for chemical, biological, radiological and nuclear counter measures; critical infrastructure protection; and conventional missions. Other priorities within the S&T directorate include evaluating and prototyping commercially available technologies and developing programs and facilities in the homeland security complex.

Additional Budget Highlights in the Science and Technology Directorate:

Another DHS budget request of potential interest is the Information Analysis and Infrastructure Protection Program, which would receive $299 million to work with states and industry to identify and prioritize protective measures to mitigate risks identified through threat-vulnerability-consequence mapping. These efforts will focus on the principal threats and wisely utilize scarce resources. This funding will also support training assistance, response planning and exercises, and technology transfer.

return to the top of this page

Department of Housing and Urban Development (HUD)
For FY 2004, the Administration has requested $31.3 billion for HUD. This represents a $399 million increase over the FY 2003 request. HUD would fund Community Development Block Grants (CDBG) at $4.436 billion, which is equal to the FY03 level. Funding for numerous other programs of interest, however, would be eliminated in HUD under the FY04 budget request, including:

return to the top of this page

Department of Labor
As a result of the Workforce Investment Act expiring in FY 2004, the Administration proposes to eliminate and consolidate a number of programs, including three adult training and employment programs – the WIA adult program, dislocated worker program, and Employment Service state grants – into a single $3.1 billion grant program. The goal is to increase state administrative flexibility and to decrease duplicative functions. As a result, the DOL budget request for FY04 is $58.477 billion, or more than $15 billion less than the FY 2003 request.

The Administration has included its economic stimulus plan a $3.6 billion proposal to allow states to create Re-employment Accounts for unemployed individuals. The Re-employment Accounts will provide up to $3,000 to certain job seekers to allow them to purchase the training, re-employment or support services they need to get back to work. In addition to the services they select, individuals will still be able to receive free-of-charge, basic re-employment services (such as resume drafting) from states and One Stop Career Centers. If workers land a job within 13 weeks after starting unemployment insurance benefits, they may keep the money remaining in their account as a re-employment bonus. The FY04 cost of the proposal is $2 billion.

The Administration also proposes eliminating the $44.5 million Youth Opportunity Grants and replacing the $1 billion Youth Activities account with a new Youth Grants program to focus on providing young people with a strong, core academic foundation in conjunction with appropriate supplemental vocational skills and training leading to post-secondary degree and certification options. The budget summary states the change will minimize overlap with Department of Education programs.

The H-1B Training and Administration is slated to receive $129 million in FY04, a decrease of $74 million from the FY03 request of $203 million. Legislation authorizing the H-1B skill training program funded by fees imposed on employers applying for foreign workers expires at the end of FY03. Fees are expected to total $98 million in FY03.

return to the top of this page

Department of Transportation (DOT)
The FY 2004 budget includes $54.3 billion for DOT, an overall increase of $2.9 billion or 6 percent when compared to last year's $51.4 billion request. This year, the U.S. Coast Guard and the Transportation Security Administration are being transferred to the new Department of Homeland Security.

Federal Aviation Administration — $100 million for Research, Engineering, and Development (19 percent decrease).

Federal Highway Administration — $121 million for Intelligent Transportation Systems (ITS) research, operational tests, and deployment to further increase the number of integrated ITS locations. In FY03, $82 million was requested for ITS standards, research and development, and $91 million was requested for ITS deployment.

National Highway Traffic and Safety Administration — $68 million for research and analysis to provide leadership in the area of crash causation and crash prevention research, including developing studies and programs to determine the effects that crashes have on the human body. (11.5 percent increase)

Federal Transit Administration — $49.8 million ($800,000 increase) is requested for National Research.

return to the top of this page

Environmental Protection Agency (EPA)
The Administration's EPA budget request for FY 2004 is $7.627 billion, an increase of one-tenth of one percent from the FY 2003 budget request. Funding for science programs, however, increases to $357.1 million, up 8.9 percent from FY03. Funding for three areas within the EPA that will be involved intimately with Homeland Security experience dramatic changes in the FY04 request: Communication and Information, up to $3.82 million from $477,000 in FY03; Critical Infrastructure Program, up 49.4 percent to $38.5 million; and Preparedness, Response, and Recovery, down 31 percent, from $87.6 million to $60.3 million.

Other EPA programs of interest are:

return to the top of this page

NASA
NASA’s FY 2004 budget request is $15.469 billion, up 3.1 percent from the $15 billion level in FY 2003. The request includes $337 million in new initiatives, including:

Funding for the Science, Aeronautics and Exploration unit is proposed at $7.661 billion, a 13 percent decrease from the $8.8 billion in FY03. Funding across technology areas within the unit is as follows:

return to the top of this page

National Science Foundation (NSF)
The Administration's FY 2004 request for NSF is $5.48 billion, an 8.1 percent increase over the FY 2003 request and more than 13 percent over the FY 2002 appropriation. Congress, however, is poised to provide NSF with more than the Administration requested in FY03. Congress also passed a measure last year that the President signed to double NSF's budget over five years beginning in FY04, similar to a previously successful commitment for the National Institutes of Health. To meet that goal for NSF, the FY04 budget request would have needed to reflect a double-digit increase.

Several new initiatives are outlined in the foundation's FY04 request, including:

For the National Nanotechnology Initiative, $248.99 million is requested in FY04 (11.8 percent increase) to advance fundamental research of nanoscale phenomena. The request includes $46 million for the Centers and Networks of Excellence (21.2 percent increase) to fund research and education centers within the Nanoscale priority area.

Funding requests for additional programs of interest include:

The request for selected environmental and biological sciences programs include:

Information Technology Research — $302.61 million ($17 million increase) to deepen fundamental research between fields and disciplines and explore new applications to advance research across all fields. Additionally, NSF's budget for Networking Information Technology Research and Development Program, a multi-agency program to encourage advances in computing, would be $723.6 million ($45 million increase).

The NSF FY04 request also includes a 60 percent hike in major research equipment and facilities and, for the first time, more than $1 billion for its mathematics and physical sciences activities. In the mathematical sciences priority area alone, NSF will seek more than $89 million, a 48 percent increase over its 2003 request of $60 million, to continue its focus on fundamental research and integration of mathematics, statistics and education research across the full range of scientific and engineering disciplines. Funding requests for related programs includes:

To broaden participation in engineering and the sciences, NSF will heighten its emphasis in FY04 on the programs that encourage women and minorities in undergraduate through postdoctorate levels. These include the Historically Black Colleges and Universities (HBCU) Undergraduate Program, with a $20 million investment (+43 percent increase), the Louis Stokes Alliance for Minority Participation, helping minorities toward undergraduate degrees in science and engineering, $32.7 million in FY04 (+23 percent increase), and ADVANCE, a program achieving more diversity among successful scientists with family responsibilities, $21.2 million (+23 percent increase).

return to the top of this page

Small Business Administration
For FY 2004, the Administration requests $798 million in discretionary budget authority for SBA, an increase of $19 million or 2.4 percent over the FY 2003 request, but 12.5 percent less than the FY 2002 appropriation. The FY04 SBA Direct Loan Disbursements would fall to $720 million, a decrease of $138 million from the FY03 request and $618 million less than the FY02 appropriation.

The Administration's FY04 budget request shows no funding for the New Markets Venture Capital Program or other New Markets programs.

return to the top of this page

State Science & Technology Institute
5015 Pine Creek Drive
Westerville, OH  43081
Phone: (614) 901-1690
Fax: (614) 901-1696
Email: ssti@ssti.org

© 2003 State Science and Technology Institute. All rights reserved.