Federal R&D Funding Declines for Second Straight Year While National Total Climbs

In current dollars, federally-funded academic R&D expenditure rose 1.1 percent in FY07 to $30.4 billion. After adjusting for inflation, the spending represents a 1.6 percent decline from fiscal year 2006 and a 0.2 percent decline from FY05.

Not all of the news is dire. While funding for R&D from federal government continued its decline, academic S&E R&D expenditures financed by nonfederal sources rose substantially. Industry-funded expenditures grew by 11.2 percent in FY07 after three consecutive years of decline and funding by state and local governments grew by 6.1 percent. Funding from all nonfederal sources combined grew by 7.8 percent or 5.0 percent when adjusted for inflation in FY07.

Meanwhile, another NSF publication, New Estimates of National Research and Development Expenditures Show 5.8% Growth in 2007, reports that total R&D expenditures rose by 5.8 percent in 2007 to $368.1 billion. Nearly all of the increase, however, reflected greater R&D expenditures by industry, which is performing 72 percent of the total R&D. Universities and colleges accounted for 13.3 percent of the R&D performance, followed by the federal government at 10.5 percent.

A striking trend, according to the report, is the substantial and sustained real-dollar expansion of industry R&D since the mid-1980's while federal government support followed a far flatter growth path. NSF estimates that the ratio of total national R&D expenditures to GDP – often reported as a measure of the intensity of R&D effort compared to overall economic activity – totaled 2.66 percent of GDP in 2007.  This ratio, which is also viewed as a useful gauge of a nation's commitment to R&D at a given time, has fluctuated to a low of 2.57 percent in 2004 and a high of 2.74 percent in 2001.

While industry support for R&D is climbing, the emphasis of the sector's support traditionally is for much later-stage research – research that is closer to market. The federal government, on the other hand, has funded the lion's share of early exploration and scientific discovery that provides the foundation for future innovations and technological advancements.

Universities Report on Continued Decline in Real Federal S&E R&D Funding in FY 2007 is available at: http://www.nsf.gov/statistics/infbrief/nsf08320/nsf08320.pdf