As the US stimulus bill nears passage, the focus on federal government funding of R&D has increased. It is hoped that the stimulus funding will make up some of the declines in US federal R&D funding this fiscal year (see IBO 10/15/08). The drop in federal R&D funding, when adjusted for inflation, over the past four years has triggered severe criticism from researchers and business leaders.

Recently released data from the National Science Foundation (NSF) show that in 2008 the downturn, as measured by spending obligations, continued for the most part. However, there were bright spots. For fiscal year 2008 ended October 31, total federal government obligations for basic research, applied research and development declined 2.8% to $111,346 million. The decline follows a 4.0% increase in fiscal 2007, according to the NSF.

While obligations for basic research increased a negligible 0.8% to $27,721 million, the budget for applied research fell 2.2% to $26,988 million, and federal obligations for development dropped 4.7% to $56,637 million. Consequently, basic research, applied research and development represented 25%, 24% and 51% of federal research obligations in fiscal 2008.

Including R&D plant obligations (facilities and fixed equipment), total R&D obligations fell 3.0% to $113,213 million last fiscal year. R&D plant obligations decreased 15.1% in fiscal 2008 to $1,867 million, their lowest amount since 1998. R&D plant obligations have declined every fiscal year since 2003, excluding last year when they rose 3.4%.

Even adjusted for inflation, federal R&D obligations fell. Total R&D obligations, including R&D plant, fell 4.8% last fiscal year. In constant dollars (the dollar as valued in 2000), fiscal 2008 federal basic research, applied research and development budgets declined 1.0%, 4.1% and 6.5%, respectively. R&D plant obligations dropped 16.7%.

The Department of Health and Human Services (HHS) represented 53% of research spending (excluding development and R&D plant) by federal agencies in fiscal 2008, the same as fiscal 2007. The HHS’s research budget rose 0.2% to $28,781 million, its highest amount since 2004, following a 0.1% increase in fiscal 2007. But when adjusted for inflation, fiscal 2008 HHS obligations fell 1.7%. Since fiscal 2000, when all NIH development obligations started to be classified as research, HHS research obligations have risen 61%.

The National Institutes of Health (NIH) accounted for 96% of the HHS’s research obligations last fiscal year. In fiscal 2008, the NIH research budget increased 0.3% to $27,708 million, following a 0.2% increase in the previous fiscal year. Since fiscal 2006, NIH research obligations have risen only 1.0%.

The DOE is a different story. For the first time in fiscal 2008, research obligations for the Department of Energy (DOE) were larger than for the Department of Defense (DOD). DOE research accounted for 12% of federal research obligations in fiscal 2008, compared to 11% in the previous year. The DOE’s fiscal 2008 research budget rose 7.1% to $6,487 million, its largest increase since fiscal 2002. Adjusted for inflation, it rose 5.1%.

The Office of Science represented 52% of DOE’s research obligations in fiscal 2008. The Office of Science’s research budget increased 4.1% last fiscal year to $3,391 million, following a 15.6% increase in fiscal 2007. The National Nuclear Security Administration, Energy Efficiency and Renewable Energy, Other and Fossil Energy represented 34%, 6%, 5% and 3% of DOE research obligations. Obligations for Other research, the details of which are not described in the NSF data, rose the fastest, nearly doubling to $307 million. The research budget for Energy Efficiency and Renewable Energy increased 7.3% to $368 million. The DOE’s total research budget was more than double its development budget, which grew 7.6% last fiscal year to $2,103 million.

The NSF’s fiscal 2008 research obligations increased 7.6% to $4,358 million to make up 7% of the federal government’s total research budget. Fiscal 2008 marked the largest increase for NSF’s research budget since fiscal 2003. The NSF research budget has posted gains in annual fiscal obligations since fiscal 2006. Excluding inflation, the NSF’s research obligations increased 5.5% in fiscal 2008.

For fiscal 2008, research obligations for the US Department of Agriculture (USDA) declined 13.5% to make up 3% of total federal research obligations, down from 4% in fiscal 2007. Last fiscal year was the first decline in the USDA’s annual research budget since 1996. Adjusted for inflation, the USDA’s research obligations decreased 15.1%. Research obligations for the Agriculture Research Service accounted for 51%, or $919 million, of the USDA’s research budget last fiscal year and declined 4.6%.

In fiscal 2008, out of the eight research disciplines listed in the graph above, the life sciences accounted for $27,533 million, 51% of the federal government’s total research budget for science and engineering. The largest beneficiary of life sciences research obligations was the HHS, which received 85% of these obligations last fiscal year. Out of the eight disciplines, the life sciences accounted for 81%, or $23,359 million, of HHS’s total research budget in fiscal 2008. The USDA received $1,469 million, 5% of total life sciences research obligations, and Other, which is not broken out in the NSF data, received 3%.

The federal budget for physical sciences research totaled $5,607 million last fiscal year. The DOE received 44% of these obligations, or $2,450 million, while NASA and the NSF each received 15%. Physical sciences research accounted for 38% of total DOE research obligations, as did engineering.

Other agencies not broken out by the NSF data, but including the EPA, received 25% of federal research budget for the environmental sciences research last fiscal year. The NSF and NASA received 22% and 21%, respectively.

Although federal obligations for development declined last fiscal year, the budget for development still exceeded research obligations. The DOD’s major systems programs accounted for 78% of total federal development obligations in fiscal 2008, up from 76% in fiscal 2007. As for the remaining 22% of development obligations, the DOD’s advanced technology programs accounted for 38%, NASA accounted for 33% and the DOE accounted for 17%. Fiscal 2008 development budgets declined for each of these agencies, except NASA and the DOE, for which they rose 2.0% to $4,113 million and 7.6% to $2,103 million, respectively.

Chart: US Federal Research Obligations FY08 Projected

Environmental Sciences 3,408

Life Sciences 27,533

Mathematics and Computer Sciences 3,129

Physical Sciences 5,607

Psychology 1,758

Social Sciences 1,146

Other Sciences 2,869

Engineering 9,258

Chart: US Federal Research Obligations

HHS DOE NSF

FY06 28,680 5,720 3,791

FY07 Preliminary 28,721 6,055 4,051

FY08 Projected 28,781 6,487 4,358