Special Federal Budget Issue — February 6, 2004

A Personal Note from the Publisher

Copyright State Science & Technology Institute 2004. 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.

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A Personal Note from the Publisher
This is the eighth year that SSTI has prepared an issue of the SSTI Weekly Digest dedicated solely to the federal budget. The first issue was exactly two pages long. This issue, depending on your font size, is around 15 pages. In fact, it's so large we're sending it in two sections.

Despite battling computer viruses that zapped e-mail inboxes on three computers (don't believe those IT people that tell you viruses don't target Netscape Messenger), three very dedicated SSTI staff members worked late into the night all week long to get this issue to you. All SSTI publications are the result of a team effort and this edition would not have been possible without the efforts of the full SSTI staff, but special thanks to Mark Skinner, Mark Kish, and Heidi Findley for the work they have put into this issue. I think you will find this edition remarkable; a pdf version will be available on our website next week.

Thanks, too, to SSTI sponsors and affiliates whose support of SSTI make the Digest possible. If you aren't already a sponsor or an affiliate, I urge you to join. It is only with the sponsors and affiliates support that SSTI is able to provide this kind of service. For more information on becoming a sponsor or affiliate, please e-mail me at berglund@ssti.org.

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SSTI Analysis
More Losers than Winners for TBED in Federal Budget
Every budget has winners and losers. Much of the press attention on the President's budget released on Monday has been focused on the macro-level winners (increases in spending on defense and homeland security) and losers (the size of the deficit).

For the eighth straight year, SSTI has prepared a special issue of the SSTI Weekly Digest to look beyond the macro and focus on the programs that are of greatest interest to those involved in building tech-based economies. This overview provides a glimpse at the winners and losers in tech-based economic development (TBED). And there are far more losers than winners this year.

Programs slated for increases:

Examples of programs recommended for sizable cuts or elimination:

Finally, anyone who has prepared a budget – be it the private, nonprofit or public sector – has to admire the chutzpah of NASA budget authors who say "major activities for FY2005 will be developed prior to the start of FY2005" for the new Human and Robotic Technologies section, but ask for a 61 percent increase for the unit, anyway.

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Multi-agency Initiatives
The White House Office of Science and Technology Policy (OSTP) released an overview of the federal R&D investment proposed in the Administration's FY 2005 budget request. In FY05, OSTP reports, 13.5 percent of all discretionary outlays are dedicated to R&D — the highest share in 37 years. Of this, the Administration's request commits 5.7 percent of discretionary outlays to non-defense R&D, which represents the third-highest level in 25 years. Multi-agency research priorities for the Administration include:

Climate Change Research Initiative (CCRI)
The budget for CCRI is $240 million, which is 42 percent larger than the amount enacted in 2004. The Department of Energy (DOE), NASA, the National Oceanic and Atmospheric Administration and the National Science Foundation (NSF) account for 90 percent of the CCRI request. The initiative supports near-term research objectives, such as: reducing scientific uncertainty produced by interactions between atmospheric radiation and organic or black soot aerosols, inorganic or mineral dust aerosols, and water as liquid, solid and vapor; developing decision support resources with synthesis and assessment scientific documents;  and improving accuracy of climate model simulations with enhanced computer and cyber infrastructure resources for increased horizontal and vertical model resolutions and for increased effectiveness of data analyses and interpretation.

National Nanotechnology Initiative (NNI)
The President’s 2005 budget provides $982 million for NNI, more than doubling levels funded in 2001, which was the first year of the initiative. This investment will advance understanding of nanoscale phenomena – the unique properties of matter that occur at the level of clusters of atoms and molecules – and enable the use of this knowledge to bring about improvements in medicine, manufacturing, high-performance materials, information technology, and energy and environmental technologies. Ten agencies participate in NNI, with 80 percent of the funding going to DOE, NSF and the Department of Defense (DoD).

Networking and Information Technology R&D (NITRD) Program
The President’s 2005 budget provides $2 billion for the NITRD Program. By coordinating key research efforts and related activities, the NITRD agencies leverage resources to make broader advances in computing and networking than any single agency could attain. More than half of the FY05 NITRD request goes to NSF and the Department of Health and Human Services. Other contributing agencies include the Environmental Protection Agency, DoD, DOE, NASA and the Departments of Commerce.

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U.S. Department of Agriculture
The Administration's FY 2005 budget for the U.S. Department of Agriculture (USDA) calls for $82 billion in spending, an increase of $4 billion or about 5 percent above the FY 2004 level. Discretionary outlays are estimated at $20.8 billion, a 3 percent change, or $720 million below the FY04 level.

Among highlights, USDA's Food and Agriculture Defense Initiative would receive $381 million, a $302 million increase over FY04. The initiative serves to support public agricultural institutions that will identify and respond to high risk biological pathogens in the food and agricultural system. Included in the funding is $178 million to complete construction of the new National Centers for Animal Health in Ames, Iowa, USDA's flagship lab for large animal research and diagnosis. At least $31 million of the total funding appears to be dedicated solely for research.

New funding requests also were made for forest and rangeland research, as well as biomass research and development (R&D). For FY05, the amount available for the former would be $281 million, a $15 million increase, while $14 million is proposed for biomass R&D — a level consistent with FY04. For R&D in wildland fire management, the Administration proposes decreasing funding from $22 million to $19 million. Each of the above programs fall under USDA's Natural Resources Conservation Service (NRCS).

The 2002 Farm Bill authorized a number of new programs, including a loan and grant program for renewable energy and energy efficiency, a value-added grants program, and a rural business investment program. The Administration's FY05 budget request includes discretionary funding instead of mandatory funding for the value-added and renewable energy programs. All three programs are housed under the Rural Business-Cooperative Service (RBS):

Other ongoing RBS and Rural Utilities Service (RUS) programs that would receive funding in FY05 include:

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, extension activities, and economic and statistical analysis. REE's total FY05 funding of $2.44 billion ($64 million decrease) is distributed across four areas:

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Department of Commerce
The Administration's FY 2005 $5.836 billion budget request for the Department of Commerce reflects a $58 million decrease over the FY 2004 level. Several programs of interest to the tech-based economic development community would 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 FY05 request for EDA, $320.3 million, shows a $10 million increase over the FY04 request. 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).

NTIA Technology Opportunities Program — The Administration requested – as it has in each of the last three fiscal years – the program's termination, which represents a $12.9 million decrease from FY04. The OMB budget justification states, "The Technology Opportunities Program grants have demonstrated the use of advanced telecommunications technology to enhance the delivery of social services, such as education, health care and public safety. This program has fulfilled its mission and is proposed for termination."

The Minority Business Development Agency (MBDA) would receive $34.5 million in FY05, an increase of $5.6 million over the FY04 level. MBDA maintains the lead role within the federal government providing management and technical assistance to minority-owned businesses.

The National Oceanic and Atmospheric Administration (NOAA) would receive $3.377 billion in FY05, or $308 million less than FY04. NOAA components supporting significant research activity include:

The U.S. Patent and Trademark Office (USPTO) would have a budget of $1.533 billion in FY05 ($312 million increase) and would be funded for the first time entirely by fees. USPTO is attempting to implement a strategic plan that would result in a reduction in the time required for a complete review of patent applications to 27 months by 2009.

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Department of Defense
The Administration's FY 2005 budget request for the Department of Defense (DoD) totals $401.7 billion, an increase of 7 percent from the FY 2004 appropriation level. Funding for research, development, testing and evaluation also would climb 6.7 percent to $68.9 billion. However, the science and technology portion of that category – including basic research, applied research and advanced technology development – would drop to pre-2003 levels. The basic research is down 5.3 percent from FY04 levels; applied research would drop 12.1 percent, and advanced technology development would decline by 14.6 percent.

The emphasis in the Administration's request continues to be on the more advanced stages of development (advanced component development & prototypes and system development & demonstration), rather than research.

Defense-wide science and tech expenditures would increase while spending at the Army, Navy and Air Force would decline. Research spending at the Missile Defense Agency (MDA) and the Defense Advanced Research Projects Agency would increase. The breakdown by component is as follows:

Army

Navy

Air Force

Defense-wide

Funding requests for other programs of interest also would suffer cuts, including:

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Department of Education
The Administration's FY 2005 budget request for the Department of Education (ED) is $57.3 billion, a 3 percent increase ($1.7 billion) over the FY 2004 spending plan. The new budget request includes $2.93 billion (no change) for the Improving Teacher Quality State Grants program, which gives states and local educational agencies resources to prepare, train and recruit high-quality teachers to improve student achievement. The request also increases funding from the FY04 level ($149 million) by $120 million to $269 million for Mathematics and Science Partnerships, a program for improving academic achievement in math and science, including integrating teaching methods based on scientifically-based research and technology into the curriculum. The proposed increase represents a transfer of funds from the Math and Science Partnership program under the National Science Foundation (except for $80 million), which in FY05 will begin the process of phasing out the program.

The Administration's FY05 request terminates the Community Technology Centers (CTC) program ($9.9 million in FY04). The ED budget summary explains that the Administration is working with Congress to develop legislation reauthorizing programs included in the Carl D. Perkins Vocational and Technical Education Act of 1998. When new authorizing legislation is enacted, resources for the affected programs will be requested, the summary adds. The CTC program, which offers disadvantaged residents of economically distressed areas access to computes and training, is not listed among those programs because it is said to have "limited impact and funding for similar activities is available through other federal agencies."

Under the new budget request, the Administration is proposing to consolidate three ED program budgets "in an effort to reform job training programs, target resources to programs with documented effectiveness, and eliminate funding for duplicative programs." One example is Projects with Industry ($21.8 billion in FY04), a program that seeks to create job and career opportunities in the competitive labor market for disabled individuals.

Additional requests for programs include:

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Department of Energy
The Administration's FY 2005 budget request for the Department of Energy (DOE) is $24.3 billion, or $1.04 billion (4.5 percent) more than the FY 2004 request. Part of that increase, $383 million (4.4 percent), would go to the National Nuclear Security Administration's $9.05 billion budget allotment. Another part, $730 million (9.3 percent), would go to the Environment budget, which is $8.55 billion in FY05. The Science budget, at $3.43 billion, would experience a $68.3 million decrease (2 percent), and the $2.48 billion Energy budget would decline by $45.7 million (1.8 percent).

The FY05 request for the Office of Energy Efficiency and Renewable Energy (EE), $1.25 billion, reflects a 1.2 percent increase over the office's FY04 level. EE conducts research, development and deployment activities to advance energy efficiency and clean power technologies and practices. All of the $15 million increase for EE would be absorbed by renewable energy activities funded within the Energy Supply account. Energy efficiency activities, funded within the Energy Conservation account, would experience a 0.2 percent cut and would provide renewable energy activities an additional $2 million.

One major DOE program, the Coal Research Initiative, would receive $447 million in FY05 between two components — $287 million for the Clean Coal Power Initiative (CCPI) and $160 million for the coal research and development (R&D) program. Funding for the CCPI reflects a $108 million increase over its FY04 level and includes $237 million for the FutureGen initiative launched by DOE last year. FutureGen is expected to yield the world's first integrated carbon-sequestration and hydrogen production research power plant. Initiatives that would receive funding under the coal R&D program are outlined further below.

Another big DOE item is the Hydrogen Fuel Initiative, a $228 million R&D effort to support hydrogen fuel production, storage, distribution and infrastructure. Funding for the initiative would come from EE ($173 million), the Office of Science ($29 million), Office of Fossil Energy ($16 million), and the Office of Nuclear Energy, Science and Technology ($9 million). The Department of Transportation also is contributing $0.8 million in FY05. The Hydrogen Fuel Initiative complements the FreedomCAR Partnership, which supports technologies needed to enable the mass production of affordable, practical hydrogen powered fuel cell vehicles.

Also included in the FY05 budget request is $209 million for nanoscience research, an $8 million increase over its FY04 level, and $264 million for fusion sciences research, or $1.6 million more than last year. Other Office of Science initiatives with respective increased or decreased levels, by percent, include:

Additionally, SSTI highlights the following DOE programs of interest:

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Department of Health and Human Services
The $571.6 billion FY 2005 budget request for the Department of Health and Human Services (HHS) reflects a 2.8 percent increase over the FY 2004 budget authority. Most of the increase occurs in mandatory spending programs such as Medicare and Medicaid.

Collectively, spending for a dozen discretionary programs such as the Food & Drug Administration, Centers for Disease Control & Prevention (CDC) and the National Institutes of Health (NIH) would increase by only 1.2 percent. Individually, the Administration's request for discretionary programs is quite varied. For example, funding for NIH, which supports the vast majority of the nation's medical science research agenda, would grow by 2.6 percent or $729 million to $28.6 billion. Funding for CDC, however, would decrease by 5.9 percent to $4.18 billion.

More than 85 percent of NIH's budget annually is awarded to researchers at 2,800 universities, research hospitals and other research facilities. These funds will support a record total of nearly 40,000 research project grants in FY05, including an estimated 10,393 new and competing awards.

Funding Priorities for NIH in FY05 include:

Of the individual institutes, the National Cancer Institute would receive the largest dollar gain with a $4.87 billion request ($134 million increase). The $1.1 billion request for the National Center for Research Resources reflects an $85 million decrease.

Due in large part to increases in biodefense research, the NIH SBIR/STTR budget is projected to increase by $15.6 million, or 2.6 percent, to an FY05 total of $615.8 million.

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Department of Homeland Security
At $40.2 billion, the FY 2005 funding request for the Department of Homeland Security (DHS) is 10 percent above the comparable FY 2004 resource level.

DHS will hold its budget briefing on Monday, Feb. 9. As a result, SSTI will include a summary of the department's budget in the Feb. 13 issue of the SSTI Weekly Digest. Initial DHS press materials report two science and technology (S&T) related priorities:

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Department of Housing and Urban Development
For the Department of Housing and Urban Development in FY 2005, the Administration has requested $31.3 billion, a $849 million increase over the FY 2004 level. Community Development Block Grants would be funded at $4.62 billion, a $316 million decrease from FY04. Other programs of interest include:

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Department of Labor
The Department of Labor's budget request for FY 2005 is 4.5 percent less than the FY 2004 appropriation. The agency's payroll, however, would increase by 73 full-time equivalent positions, according to the budget overview. The budget decrease is due largely to an anticipated decline in spending for mandatory programs such as unemployment benefits as the economy improves.

Receiving most of the attention in the press is the Administration's plans for the Community College Initiative, a new $250 million employer-focused state grant program for training conducted through community and technical colleges. The budget request states, the grants would be "awarded to states that can certify that the training will be focused on industries with demonstrated labor shortages, such as health care and high-tech manufacturing. The request is expected to result in training and subsequent employment or an opportunity for enhanced employment for up to 100,000 individuals."

A total of $3.28 billion is requested for employment and training programs for adults, an increase of $149.3 million above 2004. The net increase is largely the result of several new program proposals offered in conjunction with a new Consolidated Adult and Dislocated Worker State Grant, to be authorized by an amended Workforce Investment Act.

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Department of Transportation
The Administration's FY 2005 budget request of $58.7 billion for the Department of Transportation (DOT) is 0.2 percent higher than the FY 2004 appropriation. DOT's request would be distributed across the department's five key strategic objectives as follows:

The 1.4 percent balance would go toward "organizational excellence," according to the DOT Budget in Brief.

SSTI also highlights the research and development (R&D) portion of the DOT budget request:

In FY05, the Research, Engineering, and Development line item at the Federal Aviation Administration (FHA) would be $117 million, a decrease of $2.4 million from FY04 appropriations. The majority of the funds, $93 million, will be used for aviation safety research; the balance for issues concerning mobility ($7.7 million) and the environment ($16.7 million).

The Federal Highway Administration (FHWA) requests $428 million for Research and Intelligent Transportation Systems (ITS). FHWA will continue to work on identifying ways to reduce the number of injuries and fatalities on the nation's roadways by demonstrating the application of innovative technologies in highway safety, deploying and evaluating safety technologies and innovations at the state and local levels, and assuring the deployment of best practices in training, management, design and planning.

The National Highway Traffic Safety Administration (NHTSA) requests $94.4 million for research and analysis into reducing highway fatalities and injuries by providing leadership in crash causation and crash prevention research. This includes crashworthiness research for occupant protection and biomechanics; driver distraction testing; crash causation research; and national crash data systems. A new $5 million crash avoidance initiative will analyze real-world data and assess methods to test new motor vehicle technologies and improve driver performance. A new $1 million initiative is also included to develop an innovative crash data system to provide real-time fatality data.

The FY05 budget request for the Federal Transit Administration (FTA) reflects program streamlining and consolidation proposed in pending surface transportation reauthorization legislation. As a result, comparisons to previous year budget allocations are difficult. FTA requests $50.6 million for National Research, while the R&D category received $131 million in FY04, including the University Transportation Centers. The FY05 research request is to be distributed across four programs as follows

At $36 million, the R&D budget for the Federal Railway Administration (FRA) would increase 5.9 percent over FY04 appropriations. The FRA research agenda supports efforts in the areas of rail systems safety, track structures, train occupant protection, human factors in train operations, rolling stock and components, track and train interaction, track control, grade crossings, and hazardous materials. The $2 million increase would provide funding for a High-Speed and Freight Locomotive simulator (partnering with the Army), as well as research in the areas of driver behavior and accident causation. The increase also would continue the installation of the Nationwide Differential Global Positioning System, which will provide precise positioning and navigation information to ensure the safety and security of lives and property throughout the United States.

The request for the Next Generation High Speed Rail initiative is $10 million in FY05.

Poised to receive a nine percent increase in FY05 funds, the Research and Special Programs Administration (RSPA) serves to protect people and the environment from risks of hazardous materials transportation; foster transportation innovations through research, technology, education and training; and prepare the nation's transportation system to aid people and property harmed by natural or terrorist disasters.

The FY05 budget request for RSPA's research and special programs line item is $53 million, 15.2 percent higher than FY04. The research programs element, however, remains $3 million. Funds will be used to improve DOT's overall R&D program and to promote the safe transport of hydrogen fuels and fuel systems so that alternative-fuel vehicles can be developed as a safe alternative to petroleum-fueled vehicles. RSPA will be working with the Department of Energy to obtain $1 million in reimbursable funding for this purpose.

The Minority Business Resource Center (MBRC) program, through the DOT Offfice of the Secretary requests $3.9 million in FY05. $0.9 million in federal subsidy and administrative expenses will support an $18 million short-term loan guarantee program to assist small, disadvantaged and women-owned transportation-related businesses; and $3 million will fund the Minority Business Outreach program, which includes a clearinghouse for national dissemination of information on transportation-related projects and grants to minority educational institutions.

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Department of the Treasury
The Administration requested $48.4 million for the Community Development Financial Institutions (CDFI) account, a 20.7 percent decrease from the FY 2004 appropriation. CDFI provides equity investments, grants, loans, and technical assistance to new and existing CDFIs such as community development banks, community development credit unions, community development loan and venture capital funds, and microenterprise loan funds. CDFI also administers the New Market Tax Credits program, which permits taxpayers to receive a credit against federal income taxes for making qualified equity investments in designated Community Development Entities. The $48.4 million is distributed as follows:

Environmental Protection Agency
The Administration's FY 2005 budget request for the Environmental Protection Agency (EPA) is $7.76 billion, a $133 million increase over the FY 2004 request level. However, the agency's science and technology programs would receive $689 million, a $42 million decrease from FY04, and research programs would receive $512.7 million, or $28.7 million less than they did a year ago. Research in 15 program areas, four of which are detailed further below, would be affected by the cut.

Funding for three areas closely tied to homeland security that would experience increases or decreases, by percent, are:

Other EPA programs of interest include:

National Aeronautics and Space Administration
The Administration's $16.244 billion FY 2005 budget request for NASA represents a 5.6 percent increase over the FY 2004 appropriations. To accompany NASA's new vision for NASA, announced by the President last month, the agency has reorganized around seven enterprises and numerous themes.

The Earth is out, Mars is in, and the budget numbers reflect that. Spending on terrestrial subjects such as earth system science, earth science applications, physical science, Sun-Earth connections, education and aeronautics would see cuts.

Education programs, which includes the minority university research and education program, are reduced by 25.2 percent to $169 million and never recover over the five-year span included in NASA's budget materials. In its brief summary of the NASA budget, the Association of American Universities explains most of the Congressional earmarks on NASA's budget are in this line item and much of the $57 million reduction could be related to that.

For FY05, the Earth Science enterprise would be reduced $128 million or 7.9 percent in FY05 and an additional 6.4 percent in FY06. NASA's contribution to the Climate Change Research Initiative falls within this enterprise.

The Biological & Physical Sciences enterprise, posted to grow by 6.5 percent or $64 million in FY05, would drop to pre-FY04 levels for the four outyears of fiscal years 2006-09.

The winners in the FY05 budget proposal include Space Flight and Space Science, which posted increases of 13.6 percent and 4.2 percent, respectively.

Plans for the new Human and Robotic Technology (HRT) unit are so undefined at this date that NASA's budget request states "major activities for FY 2005 will be developed prior to the start of FY 2005." Nevertheless, the agency requests a 61.1 percent increase over FY04 appropriations of $679 million for programs moved into the theme.

Two new programs are described briefly that would capture $134.9 million (one-third of the new funds) include:

Programs of particular interest to the tech-based economic development community, such as SBIR, STTR, Commercialization Programs and Technology Transfer Programs also fall under the new HRT theme — and appear headed for a 24 percent reduction. Funded in a concept area labeled "Innovative Technology Transfer Partnerships," the four programs collectively would be reduced by $50.9 million. Specific FY05 allocations for the individual programs are not provided but rather the entire line item requests a lump sum of $161.4 million.

NASA also does not hide its animosity toward commercialization and technology transfer. Page EC 2-13 of the NASA FY05 budget request, which describes the Innovative Technology Transfer Partnerships concept area states, "Efforts to document and license technologies, to transfer these technologies to the private sector as legislatively mandated, and to prudently manage NASA's intellectual property, will be very limited."

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National Science Foundation
The end of 2002 saw an act of Congress to double the budget for the National Science Foundation (NSF) by FY 2008. Two fiscal years later, little progress can be seen toward that the goal. Last week, Congress approved $5.58 billion for the agency; the FY 2004 authorization level was $6.39 billion. To double NSF's budget by FY08, the FY 2005 authorization level is set at $7.378 billion. The Administration's budget for next year requests only a 3 percent increase above the FY04 appropriations, raising NSF's total budget to $5.745 billion.

While NSF's overall budget would show a net increase of $167.2 million, several significant changes are made in four appropriation lines to accomplish this:

With such a modest net increase, the NSF budget request includes few new initiatives (e.g., three new construction projects: the National Ecological Observatory Network, the Scientific Ocean Drilling Vessel, and Rare Symmetry Violating Processes). A new $5 million Innovation Fund would provide NSF the opportunity to "respond quickly to rapidly emerging activities at the frontiers of learning and discovery" according to the budget request.

Also a Workforce for the 21st Century priority area funding of $15.4 million is proposed to focus on attracting and preparing U.S. domestic students for the Science, Technology, Engineering and Mathematics (STEM) workforce, especially those students who have traditionally been underrepresented in these fields, and conducting research to inform the preparation of the next generation of the workforce. NSF failed in its attempt to fund the new initiative last year at the $8.5 million level.

The cuts in the Education and Human Resources directorate are borne by:

Education-related programs to receive significant percentage increases include:

The National Nanotechnology Initiative remains a priority area as the FY05 request for NSF's investment in nanoscale science and engineering would grow by 20.3 percent to $305 million.

NSF's centers programs, favorites of many state and local tech-based economic development initiatives, are highlighted for additional funds for new and expanded centers. Selected programs:

Partnerships for Innovation would receive $10 million, or $600,000 more than the FY04 level. The program stimulates the transformation of knowledge created by the national research and education enterprise into innovations that create new wealth, build strong local, regional and national economies and improve the national well-being.

Funding for SBIR/STTR within the Engineering Directorate is $104.1 million, a half-percent increase over FY04, to support innovation research conducted by small technology firms.

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Small Business Administration
The Administration's $678.4 million request for the Small Business Administration (SBA) represents an 11.4 percent decrease from the FY 2004 appropriation. Loan guarantee authority for the 7(a) General Business Loan program, however, would grow to $12.5 billion next year — a 25 percent increase above the FY04 level.

Collectively, SBA's technical assistance programs do not fair well in the Administration's FY 2005 budget, as funding would drop 21.3 percent from FY04 to $111 million. Funding levels for selected activites identified as "core programs" in the agency's press materials include:

The FY05 request also proposes decreasing the government contracting and minority enterprise development line item of the SBA budget by 13.8 percent to $25 million.

The budget includes $4 billion for the Small Business Investment Company (SBIC) Participating Securities and $3 billion for SBIC Debentures (no change from previous year) but is critical of the program's results. The Administration request states "program performance has been weak, with estimated losses to the taxpayer of about $2 billion... The 2005 Budget is proposing increased fees and profit-shares, which are necessary for the program to be fiscally sound. The Budget also improves the subsidy estimation methodology by including historical performance."

The Federal and State Technology Partnership ($2 million in FY04) and Rural Outreach Programs ($250,000 in FY04) are included in SBA's operating budget funds, according to the SBA Media office. The SBA official was unable to specify FY05 funding level requests. However, unconfirmed sources suggest no funding was requested for either program. Both programs support state efforts to strengthen the technological competitiveness of small business concerns.

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