SSTI Digest

Jason Williamson is leaving his position as vice president of community development for the South Carolina Technology Alliance to become a founding partner in a new start-up tech firm.

The Special Federal Budget Issue of SSTI's Weekly Digest, published electronically in three parts on Feb. 10, is now available for download as a 25-page PDF. As readers are aware, the Administration's budget request proposes significant changes to the federal government's role in supporting economic development, research, investment and community development.

SSTI's budget summary has received considerable praise from many in the nation's tech-based economic development community for its concise descriptions of the proposed impact for more than 225 different programs, initiatives and line items across 19 agencies and departments. It also includes an SSTI editorial and active links to most of the individual federal programs for more information.

For those interested in technology-based economic development, you'll be hard-pressed to find any good news in the President's Budget Request for FY 2006 unless, that is, you're hoping to go to Mars or heavily involved in homeland security. It's become a matter of routine to expect bad news when the federal budget comes out. It's never a surprise to see the Advanced Technology Program (ATP) or Community Technology Centers (CTC) on the chopping block, and there's always a guessing game as to what level the Administration will propose for the Manufacturing Extension Partnership (MEP). (This time the Administration proposes $46.8 million for MEP, a $60.7 million decrease from FY 2005.)

What is striking about this year's budget request, though, are two general themes: 1) cutting community and economic development spending, and 2) the lack of any type of strategic response toward building tech-based economies across the United States.

Strengthening America's Communities Grants Program The Strengthening America's Communities Grants Program is a new $3.7 billion initiative proposed within the Department of Commerce to provide performance-based grants for both community and economic development. The limited printed information available on the proposal indicates awards will be targeted to distressed areas and low-income audiences with criteria based on job loss, unemployment levels and poverty.

The Administration proposes making the grants flexible in their use in exchange for "strong accountability measures" toward specific economic development or community development goals. The economic development measures identified include increased job creation and new business formation rates. Community development measures include increasing home ownership, commercial development and private sector investment.

Opportunity Zones - While the Administration's FY06 budget request proposes eliminating all other geographically-based tax credit programs (e.g. Enterprise Zones), it is requesting $10 billion over 10 years in tax incentives to competitively select 28 urban and 12 rural economic Opportunity Zones in areas transitioning to new and emerging industries. Targeted areas are those that have lost a significant portion of their economic base as a result of the changing economy, for example, due to loss of manufacturing or textile employment, and are now in the process of transitioning to a more diverse, broad-based, 21st century economy.

Taking one of the largest percentage cuts of all agencies, the U.S. Department of Agriculture (USDA) FY 2006 discretionary budget level of $19.4 billion calls for an 11.8 percent reduction, or $2.6 billion below the FY 2005 level.

No funds are included in the 2006 budget for the Rural Business Enterprise ($41 million in FY05) and Rural Business Opportunity Grant ($3 million) programs or the Empowerment Zones & Enterprise Community (EZ/EC) Program ($13 million).

The Administration's FY 2006 $9.4 billion discretionary budget request for the Department of Commerce reflects a 48 percent increase above FY 2005 estimated expenditures of $6.33 billion. If one excludes the proposed $3.71 billion Strengthening America's Communities Grant Program (see description under Multi-Agency Initiatives above), the agency is actually facing a 5.6 percent cut of more than $357 million. NIST would bear the brunt of the cuts through reduction of the Manufacturing Extension Partnership and elimination of the Advanced Technology Program.

The Administration's FY 2006 budget request for the Department of Defense (DoD) totals $419.3 billion, an increase of 4.8 percent from the FY 2005 appropriation level. However, the budget proposes significant cuts for Defense science and technology (S&T). The FY06 budget provides $10.5 billion for S&T, a 19.5 percent decrease from the FY05 funding level of $13.1 billion. This includes cuts in basic research, applied research and advanced technology development. Spending on basic research is down 12.9 percent from the FY05 funding level, applied research would decline 14.7 percent, and advanced technology development would drop 24.5 percent.

The Administration’s FY 2006 budget request for the Department of Education (ED) is $56 billion, a 0.9 percent decrease ($529.6 million) from the FY 2005 appropriation.

The most positive news in the request concerns the popular Pell Grant federal student loan program. Already lauded in a joint statement from the nation's six leading higher education associations, the ED FY06 budget request for the Pell Grant program of $13.7 billion (a $1.3 billion increase) includes funds allowing an increase in the maximum Pell Grant award by $100 annually over the next five years, from $4,050 to $4,550. In addition, the FY06 budget request includes a one-time $4.3 billion in mandatory funding to retire the Pell Grant shortfall accumulated from 2002 to 2005.

The Administration's FY 2006 budget request for the Department of Energy (DOE) is $23.4 billion, or $475.4 million (2 percent) less than the FY 2005 request. The decrease is largely absorbed by DOE's Environment budget which, at $7.34 billion, reflects a 6.4 percent decrease over FY05. The Science budget, at $3.46 billion, also would have its funding cut by $136.8 million (3.8 percent). The National Nuclear Security Administration and Energy budgets would experience increases of $233.3 million (2.5 percent) and $73.7 million (3 percent), respectively.

The $642 billion FY 2006 budget for the Department of Health and Human Services (HHS) reflects an increase of $58 billion over FY 2005, most of which occurs in mandatory spending programs such as Medicare. Discretionary portions of the HHS FY06 budget total $67.2 billion, a decrease of 1 percent from FY05.

However, individual discretionary programs such as the Food & Drug Administration (FDA), Centers for Disease Control & Prevention (CDC), and the National Institutes of Health (NIH) are quite diverse. For example, funding for FDA will increase by $81 million from FY 2005, whereas funding for CDC will decrease by $491 million.

The FY 2006 discretionary budget request for the Department of Homeland Security (DHS) is $34.15 billion, 6.6 percent above the comparable enacted FY 2005 appropriation. In FY06, DHS seeks to consolidate the research, development, test and evaluation (RDT&E) activities within the DHS Science and Technology (S&T) Directorate. This consolidation, at a one-time cost of $127 million, would bring the scientific and engineering personnel and other RDT&E resources of the department under a single accountable authority.