[Analytical Perspectives]
[Special Analyses and Presentations]
[8. Research and Development]
[From the U.S. Government Printing Office, www.gpo.gov]


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                       8. RESEARCH AND DEVELOPMENT

                            I.  Introduction

  Author Jean-Paul Kauffmann has observed, ``The economy depends about 
as much on economists as the weather does on weather forecasters.'' The 
same cannot be said of those who perform scientific and technological 
research. Scientific discovery and technological innovation generate 
countless advancements in our understanding of the world around us. They 
improve the quality of life. Science and technology have generated much 
of the nation's economic growth over the last 50 years. These advances 
have been possible only through both public and private investment in 
research and development (R&D).
  The R&D investment of the United States is unparalleled. Not only does 
the U.S. continue to lead the world in government-supported R&D 
spending, but U.S. federal R&D expenditures exceed those of the rest of 
the G-8 countries' governments combined, as the most recent data 
indicate in the accompanying figure.

                                     


  The nation's investments in innovation and discovery are also vital to 
strengthening our capabilities to combat terrorism and defend our 
country. The President's 2004 Budget focuses on winning the war against 
terrorism, while moderating the growth in overall spending. These 
priorities have affected the way R&D is being funded and directed, as 
well as the way the results of R&D are being used. Within the federal 
government's research portfolio, agencies are directing many of their 
programs to assist in the defense effort, some of which are being 
transferred to the Department of Homeland Security (DHS). Investments 
today in R&D will translate into tomorrow's capabilities for detecting 
threats to our security, defending ourselves against them, and 
responding to emergencies should they arise.
  The 2004 Budget provides the highest level of federal funding for R&D 
in history, but the focus should not be on how much we are spending, but 
rather on what we are getting for our investment. We must redouble our 
efforts to meet the President's charge to improve

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the management, performance, and results of the federal government. By 
strengthening effective programs and addressing lower performers through 
reforms or shifting funds to higher performers, we will increase the 
productivity of the federal R&D portfolio and transcend the all-too-
common focus on year-to-year marginal increases or decreases. 
Additionally, while it can be difficult to assess the outcomes of some 
research programs--many of which may not have a measurable effect for 
decades--agencies can establish meaningful program goals and measure 
annual progress and performance in appropriate ways. Toward that end, 
the Administration is continuing to implement and improve investment 
criteria for R&D programs across the government. Finally, the government 
will coordinate interrelated and complementary R&D efforts among 
agencies, combining programs where appropriate to improve effectiveness 
and eliminate redundancy, to leverage these resources to the greatest 
effect.
  The federal government has multiple roles in achieving these goals. 
The government should be strong in its support of basic research, which 
by definition is directed toward greater understanding of fundamental 
phenomena without specific applications in mind. Basic research is the 
source of tomorrow's discoveries and new capabilities, and this long-
term research will fuel further gains in economic productivity, quality 
of life, and national security. The government should also support 
applied research, which is defined as research meant to address specific 
needs, and development, which applies scientific knowledge and 
technology to specific needs. Together, this R&D is critical to the 
missions of the federal agencies, particularly in priority areas that 
private sources are not motivated to support. If the private sector 
cannot profit from the development of a particular technology, federal 
funding may be appropriate if the technology in question addresses a 
national priority or otherwise provides broad societal benefits. 
Finally, the federal government should help stimulate private investment 
and provide the proper incentives for private sources to continue to 
fuel the discovery and innovation of tomorrow. The Administration 
proposes to do this, for instance, by permanently extending the Research 
and Experimentation tax credit.
  This chapter discusses how the Administration will improve the 
performance of R&D programs through new investment principles and other 
means that encourage and reinforce quality research. The chapter also 
highlights the priority areas proposed for R&D agencies and the 
coordinated efforts among them. The chapter concludes with details of 
R&D funding across the federal government.

               II.  Improving Performance of R&D Programs

  R&D is critically important for keeping our nation economically 
competitive. It will help solve the challenges we face in health, 
defense, energy, and the environment. As a result, and consistent with 
the Government Performance and Results Act, every federal R&D dollar 
must be invested as effectively as possible.

                         R&D Investment Criteria

  The Administration is improving the effectiveness of the federal 
government's investments in R&D by applying transparent investment 
criteria and considering the expected results of program funding 
recommendations. R&D--especially basic research--requires special 
consideration in the context of performance assessment. Rocket pioneer 
Werner von Braun once explained, ``Basic research is what I'm doing when 
I don't know what I'm doing.'' Research often leads scientists and 
engineers down unpredictable pathways with unpredictable results. This 
poses a difficult problem for determining research priorities in a 
budget. Adopting ideas first laid out by the National Academy of 
Sciences, the Administration is improving methods for how to set 
priorities based on expected results, including applying specific 
criteria that programs or projects must meet to be started or continued, 
clear milestones for gauging progress, and improved metrics for 
assessing results.
  As announced in the President's Management Agenda, the investment 
criteria were first applied in 2001 to selected R&D programs at the 
Department of Energy (DOE). Through the lessons learned from that DOE 
pilot, this year the criteria were broadened in scope to cover other 
types of R&D programs at DOE and other agencies.
  To accommodate the scope of a wide range of R&D activities ranging 
from basic research to development and demonstration programs, a new 
framework was devised for the criteria to address three fundamental 
aspects of R&D:
    Relevance--Programs must be able to articulate why 
          investments are important, relevant, and appropriate;
    Quality--Programs must justify how funds will be allocated 
          to ensure quality; and
    Performance--Programs must be able to monitor and document 
          how well the investments are performing.
  In addition, R&D projects and programs relevant to industry are 
expected to meet additional criteria to determine the appropriateness of 
the public investment, enable comparisons of proposed and demonstrated 
benefits, and provide meaningful decision points for completing or 
transitioning the activity to the private sector.

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  Broader Application of the R&D Investment Criteria. This was the first
 year of implementation of the investment criteria for most R&D
 agencies. The National Aeronautics and Space Administration is
 recasting its strategic plans and budget to tie directly to the R&D
 criteria. To reflect the criteria, the National Science Foundation is
 changing the way it characterizes its budget, as well as the guidelines
 it uses to evaluate its research. The National Institutes of Health
 have dramatically, revised their research performance goals to be both
 clearer and more ambitious. Several agencies' R&D programs were
 assessed using a Program Assessment Rating Tool (PART) that was based
 on the R&D criteria (see the Performance and Management Assessments
 volume of the budget for more details). The R&D agencies have more work
 to do to integrate the R&D criteria more meaningfully into their
 management processes and budget decisions.


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  The Administration has been studying management strategies for R&D 
that some agencies use to promote particularly effective programs. The 
Office of Management and Budget (OMB) and the Office of Science and 
Technology Policy (OSTP) are continuing to assess the strengths and 
weaknesses of R&D programs across agencies, in order to identify and 
apply good R&D management practices throughout the government. For 
example, some agencies have a more deliberate project-prioritization 
process, while other agencies have more experience estimating the 
returns of R&D and assessing the impact of prior investments. Assessing 
and implementing new approaches is an iterative process, involving the 
research agencies and the science and technology community.
  As the investment criteria are implemented more broadly and more 
deeply, one theme that occurs again and again is the importance of 
coordination and partnerships. First, partnerships are relevant to the 
question of the proper federal role. These include partnerships with 
industry (such DOE's coal and FreedomCAR R&D initiatives), partnerships 
with other countries (such as for the International Thermonuclear 
Experimental Reactor initiative for fusion energy), and partnerships 
with university researchers. In a different sense, partnerships and 
coordination across agencies can make the use of research resources more 
efficient and effective. The themes of coordination and partnerships 
will be pursued more explicitly in further implementation of the 
investment criteria.
------------------------------------------------------------------------

  Year Two in DOE Implementation of the Criteria. DOE used the criteria
 to evaluate 80 applied research projects and programs, and the results
 of these evaluations guided the budget's allocation of funds among
 programs. In some cases, the evaluation resulted in shifting funding
 from activities supporting technologies that are near
 commercialization, such as clean coal demonstration projects, to long-
 term, high-risk R&D, such as research on revolutionary new ways to
 store large amounts of hydrogen in a small space, which will help
 advance the introduction of fuel cell vehicles.

  Application of the criteria in DOE programs also led to
 recommendations to terminate or redirect funding from some activities,
 either because the case for federal participation was weak or other
 higher-priority research activities could use these funds more
 effectively. For example, the budget proposes to significantly reduce
 funding for the Advanced Petroleum-Based Fuel program, which was
 determined to supplant private investments that would otherwise be made
 to achieve the clean air requirements of EPA's regulation.


------------------------------------------------------------------------
  DOE has started to use the results of the R&D investment criteria to 
help analyze its portfolio of investments on the basis of the potential 
public benefits.
  For example, the accompanying ``bubble chart'' illustrates notionally 
how programs might be compared on their potential ability to reduce 
future carbon emissions. The chart compares program benefits (left axis) 
with the years until the technology is expected to be in the marketplace 
(bottom axis) and the anticipated budget cost (bubble size, where each 
bubble represents a different program). This approach would help to 
analyze whether investments are balanced across time and type of 
benefits, as well as sensitive to alternative future scenarios (for 
example, high or low oil prices).
  The justification for federal R&D spending is generally greatest where 
public benefits are the largest, and motivation for private industry to 
do the research is lowest. For instance, short research horizons in the 
private sector may postpone or preclude longer-term research with large 
public benefits.

                                     

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  In this example, two programs (marked ``A'' and ``B'') are expected to 
deliver about the same benefit, but program ``A'' will likely enter the 
market first. However, program ``A,'' given its near-term nature, may 
not need federal support to achieve the benefits and might be better 
left to the private sector.
  Analyses like this can be used for many aspects of programs, including 
cost sharing and federal role. For example, the programs labeled ``C'' 
in the chart are not expected to deliver significant carbon-emissions 
reductions, but may score well on some other type of benefit, such as 
energy-security benefits.
  Attempts to analyze such data for the Department's applied R&D 
programs have illustrated the need for consistent methods of analysis, 
including ways to present benefits estimates that make comparisons 
meaningful. DOE is working to improve the consistency and quality of its 
data.
  OMB will continue to work with the R&D agencies and others to 
integrate the R&D criteria more meaningfully into the budget formulation 
process in the coming year. Based on lessons learned and other feedback 
from experts and stakeholders, the Administration will continue to 
improve the R&D investment criteria and their implementation, towards 
more effective management of R&D programs and better-informed budget 
allocation decisions across the R&D agencies.

                            Research Earmarks

  The Administration supports awarding research funds based on merit 
review through a competitive process. Such a system ensures that the 
best research is supported. Research earmarks--in general the assignment 
of money during the legislative process for use only by a specific 
organization or project--are counter to a merit-based competitive 
selection process. The use of earmarks signals to potential 
investigators that there is an alternative to creating quality research 
proposals for merit-based consideration, including the use of political 
influence or by appealing to parochial interests.

                                     

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  Moreover, the practice of earmarking funds directly to colleges and 
universities for specific research projects has expanded dramatically in 
recent years. Despite broad-based support for merit review, earmarks for 
specific projects at colleges and universities have yet again broken 
prior records. According to The Chronicle of Higher Education, academic 
earmarks have steadily increased from a level of $296 million in 1996 to 
over $1.8 billion in 2002. These funds represent an increasing share of 
the total federal funding to colleges and universities, which 
increasingly displaces competitive research, awarded by merit. For 
example, in 1996, academic earmarks accounted for 2.5 percent of all 
federal funding to colleges and universities. By 2001, the earmarked 
share of federal academic funding had increased to a high of 9.4 
percent.
  Some argue that earmarks help spread the research money to states that 
would receive less research funding through other means. However, The 
Chronicle of Higher Education reports that this is not the main role 
they play. In 1999, for example, only a small share of academic earmark 
funding went to the states with the smallest shares of federal research 
funds. Meanwhile, earmarks help some rich institutions become richer. In 
1999, 13 of the 25 institutions receiving the most earmarks were also 
members of the top 100 for total research funds.
  Some proponents of earmarking assert that earmarks provide a means of 
funding unique projects that would not be recognized by the conventional 
peer-review process. On the contrary, a number of agencies have 
procedures and programs to reward out-of-the-box thinking in the 
research they award. For example, within the Department of Defense 
(DOD), the Defense Advanced Research Projects Agency seeks out high 
risk, high payoff scientific proposals, and program managers at the 
National Science Foundation (NSF) set aside a share of funding for 
higher-risk projects in which they see high potential.
  Many earmarks have little to do with an agency's mission. For example, 
the Congress earmarked DOD's 2003 budget to fund research on a wide 
range of diseases, including breast cancer, ovarian cancer, prostate 
cancer, diabetes, leukemia, and polio recovery. Funding at DOD for 
increases to medical research projects over two-thirds of a billion 
dollars in this year alone. While research on these diseases is very 
important, it is generally not unique to the U.S. military and can be 
better carried out and coordinated within civil medical research 
agencies, without disruption to the military mission.
  The Administration will continue to work with academic organizations, 
colleges and universities, and the Congress to discourage the practice 
of research earmarks and to achieve our common objectives.

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          III.  PRIORITIES FOR FEDERAL RESEARCH AND DEVELOPMENT

  The 2004 Budget requests record levels for federal R&D ($122.7 
billion, a seven-percent increase, as shown in Table 8-2). This request 
for federal R&D funding is over 60 percent greater than the request of 
just five years ago. The 2004 Budget includes an emphasis on basic 
research, increasing basic research funding across the agencies by $1.2 
billion (or 5 percent) over the already impressive levels requested for 
2003.
  In a 1995 report from the National Academy of Sciences, the scientific 
community proposed a ``Federal Science and Technology'' (FS&T) budget to 
highlight the creation of new knowledge and technologies more 
consistently and accurately than the traditional R&D data collection. 
Also, because the FS&T budget emphasizes research, funding for defense 
development, testing, and evaluation is absent. FS&T is readily tracked 
through the budget and appropriations process, so the effects of budget 
decisions are clear more immediately. As shown in Table 8-3, the 2004 
Budget requests $58.9 billion for FS&T (a two-percent increase over the 
2003 request). The resulting FS&T budget is less than half of the total 
federal spending on R&D, though FS&T also includes some funding that is 
not R&D.
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  Fueling Our Future. Hydrogen-powered fuel cell vehicles have the
 potential to provide energy diversity, fuel economy, and environmental
 benefits. Since hydrogen can be manufactured from a number of domestic
 fossil (natural gas and coal), nuclear, and renewable resources, it
 offers the potential for eventual ``freedom'' from the nation's near-
 exclusive reliance on petroleum for transportation. The budget's
 FreedomCAR (Cooperative Automotive Research) and FreedomFuel research
 initiatives will address the difficult technical and cost challenges
 faced in commercialization of fuel cell vehicles. The budget proposes
 to spend over $1.5 billion on FreedomCAR and FreedomFuel over the next
 five years, including more than doubling DOE's spending on hydrogen
 research and development in 2004. This funding will accelerate
 achieving the national energy security and environmental benefits from
 widespread use of hydrogen vehicles.


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  The President's Budget strengthens the nation's investment in the 
physical sciences. Research in the physical sciences not only leads to a 
better understanding of the universe but also spurs progress in a host 
of areas including microelectronics, information technologies, 
communications, defense technologies, energy, agriculture, and the 
environment. Physical sciences research provides education and training 
opportunities vital for a technologically advanced society. Modern 
health science uses sophisticated approaches that are increasingly 
reliant on the physical sciences and associated analytical tools. For 
instance, the development of magnetic resonance imaging (MRI), among the 
20th century's greatest advances in medical diagnosis, depended heavily 
on advanced concepts from physics. Only with renewed support of research 
and equipment for fields such as physics, chemistry, and materials 
science will the nation be able to take full advantage of recent major 
investments in the health sciences and spur progress in other areas.
  To these ends, the 2004 Budget provides NSF with a 13-percent increase 
in physical science investments. In addition, DOE's Office of Science 
will almost double its investment in new nanoscale science research 
centers while maximizing the operation of the Department's existing 
suite of national scientific user facilities. Two new NASA space 
telescope programs, the Laser Interferometer Space Antenna (LISA) and 
Constellation-X, will address fundamental questions about the nature of 
gravity and high-energy physics in space. The changing nature of science 
has opened significant opportunities for fundamental discovery at the 
intersection of physics and astronomy that require the Administration to 
set priorities and increase interagency coordination. This year, under 
the auspices of the National Science and Technology Council (NSTC), 
these and other agencies will work with OSTP to develop a plan for 
coordination in this area.
  Over the past year, OSTP and OMB have worked with the federal agencies 
and the science community to identify top priorities for federal R&D. 
Some are in areas critical to the nation, such as information 
technologies. Some are in emerging fields, such as nanotechnology, that 
will provide new breakthroughs across many fields. Others, such as anti-
terrorism R&D, address newly recognized needs. The discussion below 
identifies four multi-agency priority areas, followed by highlights of 
agency-specific R&D priorities.

                       Multi-Agency R&D Priorities

  The 2004 Budget targets investments in important research that 
benefits from improved coordination across multiple agencies. Two of 
these multi-agency initiatives--nanotechnology and information 
technology R&D--have separate coordination offices to ensure coordinated 
strategic planning and implementation. The Administration is in the 
process of forming new organizations and strengthening interagency 
coordination for two other priority areas--combating terrorism and 
climate change R&D. The Administration will continue to analyze other 
areas of critical need that could benefit in the future from improved 
focus and coordination among agencies.

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  Combating Terrorism R&D: The nation's advantage in scientific R&D is 
being harnessed to help prevent future terrorist activities, minimize 
our nation's vulnerability to terrorist acts, and respond and recover if 
an attack should occur. Combating terrorism R&D applications span a wide 
range, including:
    providing tactical warning and assessment of a biological 
          attack;
    developing gear for first responders;
    enabling the most effective use of the wealth of information 
          collected by the intelligence community;
    developing means to assess the efficacy of proposed 
          protective measures;
    determining the vulnerabilities in the nation's critical 
          infrastructure; and
    preventing the importing of a nuclear weapon or special 
          nuclear material.
  Research is focused on areas with the potential to dramatically 
enhance our capabilities for detecting the presence of, and responding 
to, nuclear, biological, chemical, radiological, and conventional 
explosive threats in air, sea, rail, and road transport, both within and 
beyond our borders. Other priority areas include advances in information 
technology to identify anomalies that might indicate terrorist intent on 
the part of individuals or groups of individuals, and the development of 
better biometric techniques for verifying or determining terrorist 
identity.
  The NSTC's Committee on Homeland and National Security will work with 
the Office of Homeland Security, the National Security Council, and the 
new Department of Homeland Security to identify priorities for and 
facilitate planning among federal departments and agencies involved in 
homeland or national security R&D. The coordinated federal effort will 
emphasize: strategies to combat weapons of mass destruction; 
radiological and nuclear countermeasures; biological agent detection, 
diagnostics, therapeutics, and forensics; information analysis; social, 
behavioral, and educational aspects of combating terrorism; border 
entry/exit technologies; and linkages to other countries' information 
systems to permit tracking of large-scale health phenomena.

  Networking and Information Technology R&D: The budget provides $2.2 
billion (a six-percent increase) for the multi-agency Networking and 
Information Technology Research and Development Program (NITRD). By 
coordinating key advanced information technology research efforts, the 
NITRD agencies leverage resources to make broader advances in computing 
and networking than a single agency could attain. For example, the NITRD 
agencies develop and deploy computing platforms and software that 
perform over a trillion computing operations per second, to support 
advanced federal research in the biomedical sciences, earth and space 
sciences, physics, materials science and engineering, and related 
scientific fields. Accomplishments include: development of end-to-end 
optical fiber networking, providing vast improvements in bandwidth and 
network security for research and commercial applications; new 
technologies enabling cluster, or ``grid,'' computing, providing for the 
first time access to high-performance computation for scientific 
researchers nationwide; technologies for network security protection 
such as intrusion detection and risk and vulnerability analyses; and 
technologies for archiving, managing, and using large-scale information 
repositories, or ``digital libraries.'' In 2004, research emphases 
include network ``trust'' (security, reliability, and privacy); high-
assurance software and systems; micro- and embedded sensor technologies; 
revolutionary architectures to reduce the cost, size, and power 
requirements of high end computing platforms; and social and economic 
impacts of information technology.
  Due to its impact on a wide range of federal agency missions ranging 
from national security and defense to basic science, high end 
computing--or supercomputing--capability is becoming increasingly 
critical. Through the course of 2003, agencies involved in developing or 
using high end computing will be engaged in planning activities to guide 
future investments in this area, coordinated through the NSTC. The 
activities will include the development of an interagency R&D roadmap 
for high-end computing core technologies, a federal high-end computing 
capacity and accessibility improvement plan, and a discussion of issues 
(along with recommendations where applicable) relating to federal 
procurement of high-end computing systems. The knowledge gained from 
this process will be used to guide future investments in this area. 
Research and software to support high end computing will provide a 
foundation for future federal R&D by improving the effectiveness of core 
technologies on which next-generation high-end computing systems will 
rely.

  Nanotechnology R&D: The budget provides $792 million for the multi-
agency National Nanotechnology Initiative (NNI), a seven-percent 
increase over 2003. The initiative focuses on long-term research on the 
manipulation of matter down to the atomic and molecular levels, giving 
us unprecedented building blocks for new classes of devices as small as 
molecules and machines as small as human cells. This research could lead 
to continued improvement in electronics for information technology; 
higher-performance, lower-maintenance materials for defense, 
transportation, space, and environmental applications; revolutionary 
advances in energy conversion and storage technologies; and accelerated 
biotechnical applications in medicine, healthcare, and agriculture. In 
2004, the initiative will continue to focus on fundamental nanoscale 
research through investments in investigator-led activities, centers and 
networks of excellence, as well as the supporting infrastructure. 
Priority areas include:
    research to enable efficient nanoscale manufacturing; novel 
          instrumentation for nanoscale measurements;
    nano-biological systems for medical advances and new 
          products;

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    innovative nanotechnology solutions for detection of and 
          protection from biological-chemical-radiological-explosive 
          agents;
    the education and training of a new generation of workers 
          for future industries; and
    partnerships and other policies to enhance industrial 
          participation in the nanotechnology revolution.
  The convergence of nanotechnology with information technology, modern 
biology and social sciences will reinvigorate discoveries and innovation 
in many areas of the economy.
  A recent report of the National Research Council (NRC) underscored the 
importance of nanoscale science and engineering research and praised the 
NNI for its role in coordinating interagency nanotechnology funding. In 
response to the recommendations in the report, an external advisory 
board will provide advice aimed at strengthening the NNI. The 
President's Council of Advisors for Science and Technology (PCAST), with 
expertise relevant to nanotechnology or the management of large-scale, 
multidisciplinary R&D programs, will conduct this external review. PCAST 
will be tasked with articulating a strategic plan for the program, 
defining specific grand challenges to guide the program and identifying 
metrics for measuring progress toward those grand challenges. PCAST will 
undertake this effort immediately, and it will advise the federal 
nanotechnology R&D effort on a continuing basis.

  Climate Change R&D: In February 2002 President Bush announced the 
formation of a new management structure, the Climate Change Science 
Program (CCSP), to coordinate and oversee ongoing work in the US Global 
Change Research Program (USGCRP) and the Climate Change Research 
Initiative (CCRI), launched by the President in June 2001. The CCSP 
includes participation from 13 federal agencies with a combined budget 
of approximately $1.7 billion for climate change research.
  The CCRI component of the program focuses on reducing significant 
uncertainties in climate science, improving global climate observing 
systems, and developing resources to support policymaking and resource 
management. To meet these goals, the 2004 Budget includes $182 million 
for government-wide CCRI activities, an increase of $142 million, which 
support the following three priority areas: (1) key climate change 
science efforts in ongoing USGCRP activities; (2) climate quality 
observations, monitoring, and data management; and (3) climate modeling 
and other tools to inform decision-makers.
  The budget also continues significant funding for climate change 
technology R&D, which is coordinated through the Climate Change 
Technology Program (CCTP) as part of the President's National Climate 
Change Technology Initiative (NCCTI). The CCTP is creating an inventory 
of climate change technology R&D and will recommend priority programs to 
help meet the President's near-term goal of an 18-percent reduction in 
energy intensity by 2012, as well as to help address the long-term 
climate change challenge. One priority program and a key component of 
the President's initiative is the NCCTI Competitive Solicitation 
program, which competitively awards funds based on a technology's 
potential to reduce, avoid, or sequester emissions of greenhouse gases. 
The budget provides $40 million for this innovative program.

  Education R&D: The Administration continues to support research that 
enables the successful development and implementation of research-based 
programs and practices called for in the No Child Left Behind Act of 
2002, including: (1) comparative trials of preschool curricula, research 
on developing the English literacy or Spanish speaking students, 
research on effective mathematics education, and research on social and 
character development; and, (2) efforts to address fundamental gaps in 
research knowledge in reading comprehension, cognition and learning in 
the classroom, teacher quality, knowledge utilization, and proficiency 
in algebra. This education R&D agenda builds upon the ongoing efforts of 
the Interagency Education Research Initiative (IERI) being carried out 
in partnership by the National Science Foundation ($25 million in 2004), 
the Department of Education ($20 million in 2004), and the National 
Institute of Child Health and Human Development ($5 million in 2004), as 
well as the research programs of the individual agencies.
  The President's goal of improving the quality of math and science 
education in Grades K-12 continues to be pursued through the Math and 
Science Partnerships (MSP) Initiative, which supports school districts 
to form partnerships with institutions of higher education, allowing 
scientists and engineers to be part of the solution in improving student 
math and science achievement. The budget provides $200 million for this 
initiative at the National Science Foundation and $12.5 million at the 
Department of Education.

                          Agency R&D Highlights

  Each federal agency conducts R&D in the context of that agency's 
unique mission, structure, and statutory requirements. Below are 
highlights of key programs in selected agencies in the 2004 Budget. 
Table 8-3 shows the FS&T budget. As shown in Table 8-2, these programs 
and those of other agencies are part of the larger federal R&D 
portfolio.

  National Institutes of Health (NIH): The 2004 Budget provides $27.9 
billion for NIH.
    The Administration has demonstrated its strong commitment to 
          biomedical research by completing a five-year doubling of the 
          NIH budget.
    NIH continues to play a key role in addressing pressing 
          health research issues, such as access to state-of-the-art 
          instrumentation and biomedical technologies; development of 
          specialized animal and non-animal research models; and 
          emphasis on ``smart'' network-connected technologies, 
          computer-aided drug design, gene and molecular ther

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          apy development, and bioengineering approaches to decreased 
          health care costs.
    In addition, the NIH budget continues support for biodefense 
          research by providing $1.6 billion for NIH to accelerate 
          clinical trials; target the development of new therapeutic and 
          vaccine products for agents of bioterrorism; and establish 
          regional Centers of Excellence in Biodefense and Emerging 
          Infectious Diseases.

  National Aeronautics and Space Administration (NASA): The 2004 Budget 
provides $9.2 billion for FS&T programs at NASA, a five-percent increase 
over the 2003 request.
    The 2004 Budget restructures NASA's programs to fit into a 
          new agency vision and mission that emphasize R&D that only 
          NASA can do, which includes reducing or terminating programs 
          that are low priority or are not central to the agency's 
          mission.
    The budget provides $90 million ($2 billion over five years) 
          for the development of the Jupiter Icy Moons Orbiter, the 
          first nuclear-electric space mission. This mission is 
          important in the ongoing search for life beyond Earth, and it 
          will also help prove new power and propulsion technologies for 
          future NASA missions.
    NASA will begin a Human Research Initiative ($37 million), 
          which will provide the research and experience to understand 
          and address health and logistical challenges posed by the 
          hazardous environment of space.
    The budget provides $1.1 billion for investments in future 
          launch systems.
    The budget initiates the next generation of Earth Observing 
          System satellites that are a significant part of the Climate 
          Change Science Program.
    A PART assessment found the Mars Exploration Program to be 
          effective, but the program should improve its long-term 
          measures of program results.

  National Science Foundation (NSF): To further promote research and 
education across the fields of science and engineering, the 2004 Budget 
provides $5.5 billion for NSF (a nine-percent increase over the 2003 
request).
    The budget provides a 13-percent increase (or a $100 million 
          boost) for NSF programs that emphasize the physical sciences, 
          such as awards for individual researchers and centers in 
          physics, chemistry, and astrophysics research. This represents 
          a 35-percent increase ($219 million) over funding levels of 
          five years ago.
    The budget provides: $656 million for NSF's lead role in 
          NITRD, focusing on long-term computer science research and 
          applications; $221 million for NSF's lead role in the National 
          Nanotechnology Initiative; and $213 million for climate change 
          research.
    To enhance science infrastructure capabilities, the 2004 
          Budget continues construction of the international Atacama 
          Large Millimeter Array telescope in Chile, the EarthScope 
          projects for investigating features and processes beneath the 
          North American continent, and IceCube, a South Pole facility 
          for detecting neutrinos.
    The budget provides $200 million for the President's Math 
          and Science Partnership program, to improve the quality of 
          math and science education in Grades K-12. The budget also 
          aims to further attract the most promising U.S. students into 
          graduate level science and engineering by increasing graduate 
          stipends to $30,000 annually, compared with $18,000 in 2001.
    PART assessments were conducted on two NSF programs, Tools 
          and Geosciences, which were found to be effective and 
          moderately effective, respectively.

  Department of Energy (DOE): The 2004 Budget provides $5.2 billion for 
FS&T at DOE, a three-percent increase from 2003.
    DOE will begin a major new initiative to accelerate the 
          worldwide availability and affordability of hydrogen-powered 
          fuel cell vehicles. The new FreedomFuel initiative will focus 
          on research to advance hydrogen production, storage, and 
          infrastructure. It complements the FreedomCAR program 
          announced last year, which is aimed at developing viable 
          hydrogen fuel cell vehicle technology.
    The 2004 Budget provides $3.3 billion for the Office of 
          Science, including funding to ensure its continuing leadership 
          in physical science research and its unique research in 
          genomics, climate change, and supercomputing.
    The budget dedicates $320.5 million to the President's Coal 
          Research Initiative on clean coal technologies, including $62 
          million for carbon sequestration research on ways to 
          economically dispose of greenhouse gases or otherwise isolate 
          them from the environment.
    DOE will continue its emphasis on R&D to improve energy 
          efficiency and reliability in buildings, industry, and the 
          federal government ($549 million) and on R&D to reduce the 
          cost of renewable energy technologies, such as wind, solar, 
          geothermal, and biomass ($444 million in 2004, a nine-percent 
          increase).
    The budget provides $10 million for Generation IV Nuclear 
          Energy Systems Initiative and $63 million for the Advanced 
          Fuel Cycle Initiative to develop innovative, next-generation 
          nuclear reactor and fuel cycle technologies that are 
          sustainable, proliferation-resistant, and economical.
    This year, DOE assessed all of its major basic science 
          programs using the PART and evaluated 80 individual applied 
          research projects and programs through the R&D investment 
          criteria. The Department will work to improve its measures of

[[Page 180]]

          performance and how it estimates the benefits of its R&D.

  Department of Defense (DOD): DOD funds a wide range of R&D to ensure 
that our military forces have the tools to protect the nation's 
security. DOD's 2004 budget includes $5.0 billion that appears in the 
FS&T budget.
    The 2004 Budget funds ``Science and Technology'' programs to 
          explore and develop technical options for new defense systems 
          and to avoid being surprised by new technologies in the hands 
          of adversaries. Areas of emphasis include computing and 
          communications, sensors, nanotechnology, and hypersonic 
          propulsion systems. DOD's S&T includes the basic and applied 
          research counted in FS&T, plus advanced technology 
          development.
    The Missile Defense Agency continues to develop technologies 
          for intercepting ballistic missiles in multiple phases of 
          flight. The budget provides funding for missile defense R&D, 
          which includes new efforts for high-speed, boost-phase 
          interceptors, sea-based radars, directed energy technology and 
          advanced battle management systems.
    The Army continues development efforts in support of the 
          Future Combat System as a major part of its transformation to 
          a lighter, more mobile, and more effective fighting force.
    Development continues on the Joint Strike Fighter, the next 
          generation affordable multi-role fighter aircraft, which will 
          use innovative technologies to keep costs low.
    R&D to address terrorist and other unconventional threats 
          continues to be a high priority. Systems and technologies 
          under development to address defense against chemical or 
          biological agents include: improved detectors of chemical and 
          biological threats; troop protective gear for use under 
          chemical and biological attack that is both more effective and 
          more comfortable; and vaccines to protect against biological 
          agents.

  Department of Agriculture (USDA): The 2004 Budget provides $1.8 
billion, a one-half percent increase, for FS&T at the Department of 
Agriculture.
    The budget includes increases above the 2003 Budget for in-
          house research for high priority needs as follows: counter-
          terrorism and emerging and exotic diseases ($8 million 
          increase), genomics ($8 million increase), and cybersecurity 
          ($2 million increase).
    The 2004 Budget includes $5 million in funding for new 
          priority Forest Service research on biobased products, 
          bioenergy, Sudden Oak Death (SOD), and to accelerate research 
          on rapid management response for invasive species.
    A portion of funding associated with the Plum Island Animal 
          Disease Center (PIADC) is included in the budget for the 
          Department of Homeland Security.

  Department of the Interior (DOI): Within the Department of the 
Interior, the 2004 Budget provides $896 million for the United States 
Geological Survey (USGS), a three-percent increase.
    The budget provides an increase of $4.1 million to support 
          site specific research to focus eradication efforts against 
          established invasive species, and to initiate development of 
          an invasive species national early detection network.
    An additional $3 million will enhance the ability of 
          scientists, state and local governments, and citizens to 
          integrate and apply geospatial data and remote sensing 
          imagery.
    $200 million for water quality and quantity information 
          includes support for 7,200 streamgages, with data available on 
          the web for 80 percent of the steamgages, and continues study 
          on 42 sites for the National Water Quality Assessment program.
    $5 million will support data integration to inform decisions 
          related to: using water and mineral resources; planning for 
          transportation and utility infrastructure; and reducing the 
          costs of geologic hazards throughout the nation.
    A PART assessment of the National Mapping Program found that 
          the program has a clear purpose and is designed to have a 
          unique impact, but the program is not optimally designed. USGS 
          is working to address these concerns through program 
          evaluation, workforce planning and future business practices.

  Department of Commerce (DOC): The 2004 Budget provides $851 million 
for FS&T at the Department of Commerce.
    For the National Institute of Standards and Technology 
          (NIST), the budget provides $457 million for research and 
          physical improvements at NIST's Measurement and Standards 
          Laboratories. The budget also supports NIST facilities, 
          including equipment for the Advanced Measurement Laboratory in 
          Maryland and renovations of facilities in Boulder, Colorado.
    The 2004 Budget terminates the Advanced Technology Program 
          (ATP), requesting $27 million for administrative and 
          termination costs. ATP is intended to fund the development and 
          dissemination of high-risk technologies through cost-shared 
          grants to companies. The Administration believes that other 
          federal R&D programs have a clearer federal role and are of 
          higher priority. Large shares of ATP funding have gone to 
          major corporations, and projects often have been similar to 
          those being carried out by firms not receiving such subsidies. 
          The Administration previously proposed legislative reforms to 
          ATP to help address these concerns, but these have not been 
          enacted.
    For the National Oceanic and Atmospheric Administration 
          (NOAA) the 2004 Budget provides $367 million, an increase of 
          $76 million (26 percent),

[[Page 181]]

          to improve understanding of climate change, weather, air 
          quality, and ocean processes.
    Within this funding level, the budget provides $57 million 
          for the National Sea Grant College Program. The recently 
          passed Sea Grant reauthorization takes initial steps to 
          increase the focus on competition within this program. The 
          Administration will continue to work with NOAA to further 
          increase the percentage of funding awarded through merit-based 
          competition.

  Department of Veterans Affairs (VA): The 2004 Budget provides $822 
million for FS&T at the Department of Veterans Affairs, an increase of 
3.4 percent. In addition, the Department receives significant funding 
from other governmental agencies and private entities to support VA-
conducted research, which brings the total VA R&D to $1.8 billion.
    The 2004 Budget funds clinical, epidemiological, and 
          behavioral studies across a broad spectrum of medical research 
          disciplines.
    Among the agency's top research priorities are improving the 
          translation of research results into patient care, special 
          populations (those afflicted with spinal cord injury, visual 
          and hearing impairments, and serious mental illness), 
          geriatrics, diseases of the brain (e.g., Alzheimer's and 
          Parkinson's disease), treatment of chronic progressive 
          multiple sclerosis, and chronic disease management.

  Environmental Protection Agency (EPA): The budget provides $776 
million for FS&T for the Environmental Protection Agency to ensure that 
its efforts to safeguard human health and the environment are based upon 
the best available scientific and technical information.
    EPA has appointed an Agency Science Advisor to improve 
          environmental science integration and coordination at EPA.
    The President's Budget provides $6.5 million to improve the 
          validity of existing and proposed chemical testing programs 
          through computational toxicology research, which integrates 
          modern computing with advances in genomics to develop 
          alternatives to traditional animal testing approaches.
    In support of the President's Management Agenda, the Agency 
          will use the R&D Investment Criteria to improve R&D program 
          management and effectiveness and demonstrate performance.
    EPA will continue to improve its risk assessment 
          capabilities, methodologies, and management.

  Department of Transportation (DOT): The 2004 Budget provides $606 
million for FS&T at the Department of Transportation, an increase of 11 
percent.
    The Federal Highway Administration ($404 million in 2004) 
          supports research, technology, and education to improve the 
          quality and safety of the nation's transportation 
          infrastructure, such as increasing the quality and longevity 
          of roadways, identifying safety improvements, and promoting 
          congestion mitigation through the use of Intelligent 
          Transportation Systems.
    The budget of the National Highway Traffic Safety 
          Administration provides $95 million (an increase from 2003 of 
          $14 million) for R&D in crash worthiness, crash avoidance, and 
          data analysis to help reduce highway fatalities and injuries. 
          The budget also includes funding for a crash causation survey.
    In 2004, R&D at the Federal Motor Carrier Safety 
          Administration focuses on issues including driver safety 
          performance, commercial vehicle safety performance, carrier 
          compliance and safety, and other studies toward the goal of 
          achieving a substantial reduction in crashes and fatalities.
    The 2004 Budget provides $100 million for the Federal 
          Aviation Administration to maintain its focus on safety and 
          environmental research to develop the most effective 
          technologies to prevent aviation-related accidents and reduce 
          noise pollution.
    The Transportation Security Administration and the Coast 
          Guard, which have each contributed to DOT's R&D portfolio in 
          the past, have been transferred to DHS.

  Department of Education: The 2004 Budget provides $373 million for 
FS&T at the Department of Education, a decrease of $68 million from the 
2003 request.
    The President fulfills his promise to reform education 
          research with the recent creation of the Institute of 
          Education Sciences (IES), through the Education Sciences 
          Reform Act.
    Within IES, the 2004 research portfolio of the National 
          Center for Education Research will support comparative trials 
          of curricula in preschool, mathematics, and English 
          instruction for language minority students, as well as 
          continuing efforts to study reading comprehension and 
          cognition as it relates to student learning.
    The National Institute for Disability and Rehabilitation 
          Research (NIDRR) ($110 million in 2004) conducts research, 
          demonstration projects and training, and related activities 
          that increase the opportunities for people with disabilities 
          to lead independent lives. Consistent with the President's New 
          Freedom Initiative, NIDRR's activities enhance community 
          integration and employment outcomes. In 2004, NIDRR will 
          continue priority research in areas such as accessibility of 
          telecommunications systems and mental illness.
    The Office of Special Education Programs (OSEP) supports 
          special education research projects, demonstrations, and 
          outreach to provide new knowledge in the field of special 
          education and early intervention, and to translate 
          scientifically valid information into applied educational 
          strategies. These activities promote improved education 
          outcomes for students with disabilities. In 2004, OSEP is 
          planning new research in areas such as teacher quality, 
          assessment and accountability.

[[Page 182]]

  Department of Homeland Security (DHS): While funding for the new 
Department of Homeland Security is not currently included in the FS&T 
budget, the 2004 Budget requests $1.0 billion for DHS R&D.
    The Department will house a Science and Technology (S&T) 
          Directorate, which will assess the Department's long-term 
          needs, help develop a policy and strategic plan for 
          identifying priorities and goals and will support the conduct 
          of R&D for developing countermeasures to chemical, biological, 
          radiological and nuclear weapons and other terrorist threats. 
          The 2004 request for direct activities of the S&T Directorate 
          is $803 million.
    DHS will harness the expertise, energy and ingenuity of the 
          private sector, academia, and government labs to develop and 
          produce advanced technologies, systems, and procedures needed 
          for homeland security.
    The creation of DHS consolidates a large share of homeland-
          security related R&D into one agency, which will ensure 
          consistent strategic direction; DHS will coordinate with other 
          agencies to avoid wasteful duplication. For example, the 
          Department will carefully plan and coordinate R&D to increase 
          the effectiveness of threat detection, destruction, and 
          mitigation activities, and provide new related capabilities 
          where none existed previously.

                     Stimulating Private Investment

  Along with direct spending on R&D, the federal government has sought 
to stimulate private R&D investment through tax preferences. Current law 
provides a 20-percent tax credit for private research and 
experimentation expenditures above a certain base amount. The credit, 
which expired in 1999, was retroactively reinstated for five years, to 
2004, in the Tax Relief Extension Act of 1999. The budget proposes to 
make the Research and Experimentation (R&E) tax credit permanent. The 
proposed extension will cost nearly $23 billion over the period from 
2004 to 2008, and $68 billion through 2013. In addition, a permanent tax 
provision lets companies deduct, up front, the costs of certain kinds of 
research and experimentation, rather than capitalize these costs. 
Finally, equipment used for research benefits from relatively rapid cost 
recovery. Table 8-1 shows a forecast of the costs of the tax credit.

                 Table 8-1.  PERMANENT EXTENSION OF THE RESEARCH AND EXPERIMENTATION TAX CREDIT
                                 (Budget authority, dollar amounts in millions)
----------------------------------------------------------------------------------------------------------------
                                                            2004     2005     2006     2007     2008   2004-2008
----------------------------------------------------------------------------------------------------------------
Current Law.............................................    4,990    2,910    1,240      520      170     9,830
Proposed Extension......................................    1,005    3,278    5,187    6,291    7,129    22,890
                                                         -------------------------------------------------------
     Total..............................................    5,995    6,188    6,427    6,811    7,299    32,720
----------------------------------------------------------------------------------------------------------------

                          IV.  FEDERAL R&D DATA

                           Federal R&D Funding

  R&D is the collection of efforts directed towards gaining fuller 
knowledge or understanding and applying knowledge toward the production 
of useful materials, devices, and methods. R&D investments can be 
characterized as basic research, applied research, development, R&D 
equipment, or R&D facilities, and OMB has used those or similar 
categories in its collection of R&D data since 1949.

  Basic research is defined as systematic study directed toward greater 
knowledge or understanding of the fundamental aspects of phenomena and 
of observable facts without specific applications towards processes or 
products in mind.
  Applied research is systematic study to gain knowledge or 
understanding necessary to determine the means by which a recognized and 
specific need may be met.
  Development is systematic application of knowledge or understanding, 
directed toward the production of useful materials, devices, and systems 
or methods, including design, development, and improvement of prototypes 
and new processes to meet specific requirements.
  Research and development equipment includes acquisition or design and 
production of movable equipment, such as spectrometers, microscopes, 
detectors, and other instruments.
  Research and development facilities include the acquisition, design, 
and construction of, or major repairs or alterations to, all physical 
facilities for use in R&D activities. Facilities include land, 
buildings, and fixed capital equipment, regardless of whether the 
facilities are to be used by the Government or by a private 
organization, and regardless of where title to the property may rest. 
This category includes such fixed facilities as reactors, wind tunnels, 
and particle accelerators.

[[Page 183]]

  There are over twenty federal agencies that fund R&D in the U.S. The 
nature of the R&D that these agencies fund depends on the mission of 
each agency and on the role of R&D in accomplishing it. Table 8-2 shows 
agency-by-agency spending on basic and applied research, development, 
and R&D equipment and facilities.

                                                  Table 8-2.  FEDERAL RESEARCH AND DEVELOPMENT SPENDING
                                                     (Budget authority, dollar amounts in millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                         Dollar  Percent
                                                                                                            2002      2003      2004    Change:  Change:
                                                                                                          Estimate  Proposed  Proposed    2003     2003
                                                                                                                                        to 2004  to 2004
--------------------------------------------------------------------------------------------------------------------------------------------------------
By Agency
  Defense...............................................................................................    49,409    57,498    62,753    5,255       9%
  Health and Human Services.............................................................................    23,497    27,466    28,031      565       2%
  National Aeronautics and Space Administration.........................................................     9,611    10,071    11,009      938       9%
  Energy................................................................................................     8,056     8,076     8,535      459       6%
  National Science Foundation...........................................................................     3,557     3,692     4,062      370      10%
  Agriculture...........................................................................................     2,112     1,911     1,943       32       2%
  Veterans Affairs......................................................................................     1,126     1,188     1,232       44       4%
  Commerce..............................................................................................     1,376     1,304     1,190     -114      -9%
  Homeland Security.....................................................................................       266       761     1,001      240      32%
  Transportation........................................................................................       774       627       693       66      11%
  Interior..............................................................................................       623       575       633       58      10%
  Environmental Protection Agency.......................................................................       416       627       556      -71     -11%
  Other.................................................................................................     1,206     1,206     1,100     -106      -9%
                                                                                                         -----------------------------------------------
    Total...............................................................................................   102,029   115,002   122,738    7,736       7%

Basic Research
  Defense...............................................................................................     1,334     1,417     1,309     -108      -8%
  Health and Human Services.............................................................................    13,000    14,304    14,983      679       5%
  National Aeronautics and Space Administration.........................................................     1,911     2,268     2,535      267      12%
  Energy................................................................................................     2,536     2,522     2,571       49       2%
  National Science Foundation...........................................................................     3,090     3,228     3,505      277       9%
  Agriculture...........................................................................................       797       823       819       -4       0%
  Veterans Affairs......................................................................................       465       509       495      -14      -3%
  Commerce..............................................................................................       362       359       412       53      15%
  Homeland Security.....................................................................................        32        47        47        0       0%
  Transportation........................................................................................        17        16        37       21     131%
  Interior..............................................................................................        41        39        38       -1      -3%
  Environmental Protection Agency.......................................................................        63       100       101        1       1%
  Other.................................................................................................       201       213       218        5       2%
                                                                                                         -----------------------------------------------
    Subtotal............................................................................................    23,849    25,845    27,070    1,225       5%

Applied Research........................................................................................
  Defense...............................................................................................     4,081     4,289     3,670     -619     -14%
  Health and Human Services.............................................................................    10,038    12,152    12,820      668       5%
  National Aeronautics and Space Administration.........................................................     2,810     3,101     2,947     -154      -5%
  Energy................................................................................................     2,458     2,538     2,901      363      14%
  National Science Foundation...........................................................................       185       199       204        5       3%
  Agriculture...........................................................................................       875       821       847       26       3%
  Veterans Affairs......................................................................................       638       653       712       59       9%
  Commerce..............................................................................................       715       660       592      -68     -10%
  Homeland Security.....................................................................................        78        64       126       62      97%
  Transportation........................................................................................       502       376       411       35       9%
  Interior..............................................................................................       522       481       537       56      12%
  Environmental Protection Agency.......................................................................       262       355       356        1       0%
  Other.................................................................................................       610       645       661       16       2%
                                                                                                         -----------------------------------------------
    Subtotal............................................................................................    23,774    26,334    26,784      450       2%

Development
  Defense...............................................................................................    43,775    51,677    57,625    5,948      12%
  Health and Human Services.............................................................................       104       139       124      -15     -11%
  National Aeronautics and Space Administration.........................................................     2,588     2,630     3,061      431      16%
  Energy................................................................................................     1,990     2,007     2,088       81       4%
  National Science Foundation...........................................................................         0         0         0        0      N/A
  Agriculture...........................................................................................       132       134       137        3       2%
  Veterans Affairs......................................................................................        23        26        25       -1      -4%
  Commerce..............................................................................................       145        78        43      -35     -45%
  Homeland Security.....................................................................................        93       537       663      126      23%
  Transportation........................................................................................       244       216       226       10       5%
  Interior..............................................................................................        60        55        58        3       5%
  Environmental Protection Agency.......................................................................        91       172        99      -73     -42%

[[Page 184]]


  Other.................................................................................................       379       334       214     -120     -36%
                                                                                                         -----------------------------------------------
    Subtotal............................................................................................    49,624    58,005    64,363    6,358      11%

Facilities and Equipment
  Defense...............................................................................................       219       115       149       34      30%
  Health and Human Services.............................................................................       355       871       104     -767     -88%
  National Aeronautics and Space Administration.........................................................     2,302     2,072     2,466      394      19%
  Energy................................................................................................     1,072     1,009       975      -34      -3%
  National Science Foundation...........................................................................       282       265       353       88      33%
  Agriculture...........................................................................................       308       133       140        7       5%
  Veterans Affairs......................................................................................         0         0         0        0      N/A
  Commerce..............................................................................................       154       207       143      -64     -31%
  Homeland Security.....................................................................................        63       113       165       52      N/A
  Transportation........................................................................................        11        19        19        0       0%
  Interior..............................................................................................         0         0         0        0      N/A
  Environmental Protection Agency.......................................................................         0         0         0        0      N/A
  Other.................................................................................................        16        14         7       -7     -50%
                                                                                                         -----------------------------------------------
    Subtotal............................................................................................     4,782     4,818     4,521     -297      -6%
--------------------------------------------------------------------------------------------------------------------------------------------------------

                  Federal Science and Technology Budget

  Table 8-3 contains the FS&T budget, which accounts for nearly all of 
federal basic research, over 80 percent of federal applied research, and 
about half of civilian development. The FS&T budget highlights the 
creation of new knowledge and technologies more consistently and 
accurately than the traditional R&D data collection. Also, because the 
FS&T budget emphasizes research, funding for defense development, 
testing, and evaluation is absent. FS&T is readily tracked through the 
budget and appropriations process, so the effects of budget decisions 
are clearer more immediately.

                                                    Table 8-3.  FEDERAL SCIENCE AND TECHNOLOGY BUDGET
                                                     (Budget authority, dollar amounts in millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                         Dollar  Percent
                                                                                                            2002      2003      2004    Change:  Change:
                                                                                                          Estimate  Proposed  Proposed    2003     2003
                                                                                                                                        to 2004  to 2004
--------------------------------------------------------------------------------------------------------------------------------------------------------
By Agency
  National Institutes of Health.........................................................................  23,279    27,344    27,893      549       2%
  NASA..................................................................................................  7,868     8,701     9,164       463       5%
      Space Science.....................................................................................  2,902     3,414     4,007       593      17%
      Earth Science.....................................................................................  1,592     1,628     1,552       -76      -5%
      Biological & Physical Research....................................................................    824       842       973       131      16%
      Aeronautics Technology \1\........................................................................    997       947       959        12       1%
      Crosscutting Technologies \1\.....................................................................  1,553     1,869     1,673      -196     -11%

  National Science Foundation...........................................................................  4,823     5,028     5,481       453       9%

  Energy \2\............................................................................................  5,194     5,065     5,211       146       3%
    Science Programs....................................................................................  3,232     3,256     3,311        55       2%
    Renewable Energy....................................................................................    385       407       444        37       9%
    Nuclear Energy \3\..................................................................................    362       327       388        61      19%
    Energy Conservation \4\.............................................................................    631       596       549       -47      -8%
    Fossil Energy \5\...................................................................................    583       479       519        40       8%

  Defense...............................................................................................  5,415     5,706     4,979      -727     -13%
    Basic Research......................................................................................  1,334     1,417     1,309      -108      -8%
    Applied Research....................................................................................  4,081     4,289     3,670      -619     -14%

  Agriculture...........................................................................................  1,862     1,834     1,843         9       0%
    CSREES Research & Education \6\.....................................................................    551       560       526       -34      -6%
    Economic Research Service...........................................................................     67        73        77         4      N/A
    Agricultural Research Service \7\...................................................................  1,003       958       987        29       3%
    Forest Service \8\..................................................................................    241       243       253        10       4%

  Interior (USGS).......................................................................................    914       867       896        29       3%

  Commerce..............................................................................................    926       841       851        10       1%
    NOAA (Oceanic & Atmospheric Research) \9\...........................................................    356       291       367        76      26%
    NIST \10\...........................................................................................    570       550       484       -66     -12%

  Veterans Affairs \11\.................................................................................    756       794       822        28       4%

  Environmental Protection Agency \12\..................................................................    788       825       776       -49      -6%

  Transportation........................................................................................    693       548       606        58      11%

[[Page 185]]


    Highway research \13\...............................................................................    448       421       506        85      20%
    Aviation research \14\..............................................................................    245       127       100       -27     -21%

  Education.............................................................................................    310       363       373        10       3%
    Special Education Research and Innovation...........................................................     78        78        78         0       0%
    NIDRR \15\..........................................................................................    110       110       110         0       0%
    Research, Development, and Dissemination \16\.......................................................    122       175       185        10       6%
                                                                                                         -----------------------------------------------
       Total............................................................................................  52,828    57,916    58,894      978       2%
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Aeronautics Technology and Crosscutting Technologies replace what had been listed as Aerospace Technology.
\2\ All years reflect levels before transfer of funds to Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR)
  programs.
\3\ All years reflect transfer of oversight responsibility for the Idaho National Engineering and Environmental Laboratory.
\4\ Excludes weatherization and state grant programs.
\5\ Enacted and requested levels exclude balances transferred from the Clean Coal Technology program: $34 million in 2002 and $40 million in 2003.
\6\ Excludes receipts for Native American Endowment, $7 million in 2002, and $7 million in 2003, and $9 million in 2004.
\7\ Excludes buildings and facilities. Excludes portion of Plum Island Animal Disease Center, now included in DHS.
\8\ Forest and Rangeland Research.
\9\ The 2003 level does not include the Sea Grant program.
\10\ Excludes Manufacturing Extension Program.
\11\ Medical Research.
\12\ Science and Technology plus superfund transfer. Includes combating-terrorism supplemental funding, primarily for drinking water vulnerability
  assessments. The 2003 superfund transfer includes funding for building decontamination research.
\13\ Includes R&D funding for the Federal Highway Administration, the Federal Motor Carrier Safety Administration, and the National Highway Traffic
  Safety Administration.
\14\ Federal Aviation Administration Research, Engineering, and Development. Starting with 2003 request, excludes funding for aviation security
  research, now funded through DHS's Transportation Security Administration.
\15\ National Institute on Disability and Rehabilitation Research.
\16\ Does not include funding for Regional Educational Labs.

                         Interagency R&D Efforts

  Table 8-4 shows agency spending for Networking and Information 
Technology R&D, the National Nanotechnology Initiative, and the Climate 
Change Science Program.

                          Table 8-4.  AGENCY DETAIL OF SELECTED INTERAGENCY R&D EFFORTS
                                 (Budget authority, dollar amounts in millions)
----------------------------------------------------------------------------------------------------------------
                                                                                                 Dollar  Percent
                                                                    2002      2003      2004    Change:  Change:
                                                                  Estimate  Proposed  Proposed    2003     2003
                                                                                                to 2004  to 2004
----------------------------------------------------------------------------------------------------------------
Networking and Information Technology R&D
   National Science Foundation..................................    662       678       724       46       7%
   Defense......................................................    439       442       461       19       4%
   Health and Human Services \1\................................    347       374       441       67      18%
   Energy.......................................................    306       310       317        7       2%
   NASA.........................................................    181       213       195      -18      -8%
   Commerce.....................................................     36        38        39        1       3%
   Environmental Protection Agency..............................      2         2         2        0       0%
                                                                 -----------------------------------------------
     Total......................................................  1,973     2,057     2,179      122       6%

National Nanotechnology Initiative
   National Science Foundation..................................    204       221       247       26      12%
   Energy.......................................................     89       133       197       64      48%
   Defense......................................................    180       202       176      -26     -13%
   National Institutes of Health................................     59        65        70        5       8%
   Commerce (NIST)..............................................     77        78        53      -25     -32%
   NASA.........................................................     35        33        31       -2      -6%
   Agriculture..................................................      0         1        10        9     900%
   Environmental Protection Agency..............................      6         6         5       -1     -17%
   Homeland Security (TSA) \2\..................................      2         2         2        0       0%
   Justice......................................................      1         1         1        0       0%
                                                                 -----------------------------------------------
     Total......................................................    653       742       792       50       7%

Climate Change Science Program
   NASA.........................................................  1,090     1,112     1,068      -44      -4%
   National Science Foundation..................................    189       203       213       10       5%
   Commerce (NOAA)..............................................    100       118       136       18      15%
   Energy.......................................................    117       129       133        4       3%
   Agriculture..................................................     55        66        73        7      11%
   National Institutes of Health................................     56        59        61        2       3%
   Interior (USGS)..............................................     26        26        26        0       0%
   Environmental Protection Agency..............................     21        22        22        0       0%

[[Page 186]]


   Smithsonian..................................................      6         6         6        0       0%
   U.S. Agency for International Development....................      6         6         6        0       0%
   Transportation...............................................      0         0         4        4      N/A
   State........................................................      0         0         1        1      N/A
                                                                 -----------------------------------------------
     Total......................................................  1,666     1,747     1,749        2       0%
                                                                 -----------------------------------------------
Subtotal, CCRI (included in CCSP total).........................      0        40       182      142     355%
----------------------------------------------------------------------------------------------------------------
\1\ Includes funds from offsetting collections for the Agency for Healthcare Research and Quality: $21 million
  in 2002, $15 million in 2003, and $55 million in 2004.

\2\ Activities of the Transportation Security Administration, formerly within DOT.

                     Allocation of Research Funding

  Federal funds appropriated to Executive Branch agencies may be used in 
different ways, ranging from grants awarded to university researchers to 
supporting research at federal laboratories. The Administration supports 
the competitive, merit review process for funding research in most 
cases. However, there are appropriate roles for other modes of 
allocating research funding in some circumstances, such as funding 
research at specific facilities that have unique capabilities.
  In order to better understand and characterize the methods agencies 
use to allocate their research funding, agencies reported how research 
funds are allocated by the following five categories:

  Research performed at congressional direction consists of intramural 
and extramural research programs where funded activities are awarded to 
a single performer or collection of performers with limited or no 
competitive selection or with competitive selection but outside of the 
agency's primary mission, based on direction from the Congress in law, 
in report language, or by other direction.
  Inherently unique research is intramural and extramural research 
programs where funded activities are awarded to a single performer or 
team of performers without competitive selection. The award may be based 
on the provision of unique capabilities, concern for timeliness, or 
prior record of performance (e.g., facility operations support for a 
unique facility, such as an electron-positron linear collider; research 
grants for rapid-response studies to address an emergency).
  Merit-reviewed research with limited competitive selection is 
intramural and extramural research programs where funded activities are 
competitively awarded from a pool of qualified applicants that are 
limited to organizations that were created to largely serve federal 
missions and continue to receive most of their annual research revenue 
from federal sources. The limited competition may be for reasons of 
stewardship, agency mission constraints, or retention of unique 
technical capabilities (e.g., funding set aside for researchers at 
laboratories or centers of DOD, NASA, EPA, NOAA, and NIH; Federally-
Funded Research and Development Centers; formula funds for USDA).
  Merit-reviewed research with competitive selection and internal 
(program) evaluation is intramural and extramural research programs 
where funded activities are competitively awarded following review for 
scientific or technical merit. The review is conducted by the program 
manager or other qualified individuals from within the agency program, 
without additional independent evaluation (e.g., merit-reviewed research 
at DOD).
  Merit-reviewed research with competitive selection and external (peer) 
evaluation is intramural and extramural research programs where funded 
activities are competitively awarded following review by a set of 
external scientific or technical reviewers (often called peers) for 
merit. The review is conducted by appropriately qualified scientists, 
engineers, or other technically-qualified individuals who are apart from 
the people or groups making the award decisions, and serves to inform 
the program manager or other qualified individual who makes the award 
(e.g., NSF's single-investigator research; NASA's research and analysis 
funds).
  Table 8-5 lists how federal R&D agencies report allocating research 
funding among these categories.

[[Page 187]]



                                            Table 8-5.  ALLOCATION OF FEDERAL RESEARCH FUNDING, 2002 and 2003
                                                              (Percent of Agency Research)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                    Research         Inherently      Merit-Reviewed    Merit-Reviewed    Merit-Reviewed
                                                                  Performed at    Unique  Research   Research  with       Research,         Research,
                                                                  Congressional  ------------------      Limited         Competitive       Competitive
                                                                   Direction*                          Competitive     Selection  and    Selection  and
                                                               ------------------                       Selection         Internal          External
                                                                                    2002     2003  ------------------    Evaluation        Evaluation
                                                                  2002     2003                                      -----------------------------------
                                                                                                      2002     2003     2002     2003     2002     2003
--------------------------------------------------------------------------------------------------------------------------------------------------------
By Agency.....................................................
  Health and Human Services...................................       1%      N/A       1%       1%      18%      17%       1%       1%      80%      81%
  Defense.....................................................      10%      N/A       8%       8%      19%      21%      60%      67%       3%       3%
  National Aeronautics and Space Administration...............       6%      N/A       3%       1%       5%       6%      39%      37%      46%      55%
  Energy......................................................       5%      N/A      21%      21%      51%      55%       7%       7%      16%      17%
  National Science Foundation.................................       0%      N/A       0%       0%       5%       5%       7%       6%      88%      89%
  Agriculture.................................................       4%      N/A      50%      51%      36%      39%       0%       0%       9%      10%
  Veterans Affairs............................................       0%      N/A       0%       0%       0%       0%      33%      33%      67%      67%
  Commerce....................................................       4%      N/A      42%      49%      15%      15%      22%      22%      17%      14%
  Interior....................................................       7%      N/A      33%      32%      34%      39%      24%      27%       2%       2%
  Environmental Protection Agency.............................       5%      N/A       7%       9%      54%      45%      15%      15%      19%      31%
  Transportation..............................................      16%      N/A      14%      24%       0%       0%      69%      76%       0%       0%
  Education...................................................       0%      N/A       0%       0%       0%       0%       0%       0%     100%     100%
  Homeland Security...........................................      15%      N/A       5%      41%      75%      55%       5%       4%       0%       0%
  Smithsonian Institution.....................................       0%      N/A     100%     100%       0%       0%       0%       0%       0%       0%
  Other.......................................................      81%      N/A       1%       7%       3%      15%      14%      72%       1%       5%
                                                               -----------------------------------------------------------------------------------------
     Percent of Agency Research...............................       4%      N/A       7%       7%      20%      20%      15%      15%      54%      58%
     Research Funding (dollars in millions)...................    1,977      N/A    3,553    3,548    9,313   10,235    7,064    7,541   25,717   29,772
--------------------------------------------------------------------------------------------------------------------------------------------------------
* 2003 levels for this category are generally not available yet, so percentages shown for 2003 have been modified to add to 100 percent without this
  category.