October 2006

Congress Finalizes Record $76.8 Billion DOD R&D Budget, Boosts Basic Research

By Kei Koizumi

The following analysis of R&D in the DOD FY07 budget has been reprinted with permission from AAAS. It is one of a series of AAAS R&D Funding Updates on FY 2007 congressional appropriations. The complete series of AAAS R&D Funding Updates, including continually updated analyses of R&D in FY 2007 appropriations, is available on the AAAS R&D Web Site [www.aaas.org/spp/rd] in the "FY 2007 R&D" or the "What's New" sections.

Prior to adjourning for their midterm elections recess, the House and Senate gave final approval to the Department of Defense (DOD) spending bill, and President Bush quickly signed the bill into law on 29 September. Among other R&D funding agencies, only the Department of Homeland Security (DHS) has a final FY 2007 appropriation; R&D funding agencies other than DOD and DHS (including the military construction and defense health programs in DOD) will have to keep operating at the lowest of House-approved, Senate-approved, or 2006 funding levels until Congress finishes their appropriations in November or December.

Highlights

• With just days to go before the 1 October start of fiscal year (FY) 2007, Congress finalized an FY 2007 Department of Defense (DOD) budget that contains a record-breaking $76.8 billion for research and development (R&D) spending (see Table A). Nearly the entire $3.5 billion or 4.8 percent increase would go to weapons development programs, but DOD support of basic research would also increase by 4.8 percent to $1.5 billion.

• Once again, Congress would reverse sharp proposed cuts in DOD's "Science and Technology" (S&T) investments. Instead of a greater than 20 percent requested cut, DOD S&T spending would remain near the 2006 funding level at $13.6 billion, $2.4 billion more than the request (see Table C).

• A profusion of congressional earmarks would boost DOD support of basic and applied research above 2006 levels. Basic research ("6.1") would climb 4.8 percent to $1.5 billion (see Table A), while applied research ("6.2") would increase 0.8 percent to $5.2 billion. The research-oriented Defense Advanced Research Projects Agency (DARPA) would see its budget increase 1.4 percent to $3.0 billion (see Table B).

• The Air Force and the Missile Defense Agency (MDA) would be the big winners in weapons development funding. Air Force R&D would climb 10.7 percent to $24.4 billion (see Table B), while MDA development would surge 22.1 percent to $9.4 billion after a steep cut in 2006.

DOD R&D in FY 2007 House-Senate Conference Appropriations

On 25 September, the House and Senate agreed on the conference report (final version) of the FY 2007 Defense appropriations bill (HR 5631), which funds most of the Department of Defense (DOD). DOD, still engaged in a long and expensive war in Iraq, continues to spend record amounts on current military operations. But DOD is also investing record amounts in the next generation of weapons; in February, the Pentagon requested $74.1 billion for DOD R&D in 2007, another substantial $1 billion increase after similar increases in previous years (see Table A). But Congress has added another $2.7 billion on top of the request for a total DOD R&D appropriation in FY 2007 of $76.8 billion, a $3.5 billion or 4.8 percent increase over 2006 that would again send DOD R&D into record territory (see Figure 1). DOD and the Department of Homeland Security are the first and so far only federal departments to get their final budgets in time for the start of FY 2007. For the remaining departments and agencies covered by appropriations, the final Defense bill contains a continuing resolution providing stopgap funding at the lowest of House, Senate, or FY 2006 funding levels through 17 November. The final Defense bill also contains $70 billion in emergency funds for the war in Iraq and Afghanistan outside the regular DOD budget, including $407 million in emergency development funds. (All figures in this analysis include emergency appropriations for both 2006 and 2007. They also assume House-approved appropriations for DOD programs in the Military Quality of Life bill, which has not yet been finalized by Congress and includes some medical research programs. All figures in this analysis are adjusted to reflect rescissions, general reductions, and emergency supplementals in the Defense bill.)

Congress would reverse proposed cuts in DOD research funding. Although physical sciences research is a top priority for the Bush Administration on the nondefense side of the budget, in the Pentagon's February request, DOD support of research would have plummeted. DOD is the fifth largest federal supporter of physical sciences research, with about a tenth of the federal total. In the final Defense bill, DOD basic research funding (the "6.1" category) would climb 4.8 percent to $1.5 billion (see Table A). Funding for the three-service University Research Initiatives (URI) would receive a combined $288 million, a 5.7 percent increase. URI competitively awards basic research grants to university performers. The Defense Research Sciences program, funded in the three services and Defense Agencies, would receive a combined $961 million, up 4.6 percent. DARPA's Defense Research Sciences effort would climb 9 percent to $145 million. The relatively new National Defense Education Program (NDEP), founded last year to encourage U.S. students to pursue science and engineering degrees, would see its budget rise from $2 million last year to $10 million in 2006 and up to $19 million in 2007. The Chemical and Biological Defense Program's (ChemBio) basic research portfolio would gain 10.4 percent to $99 million. (For more on the President's request for FY 2007 DOD R&D, see Chapter 6 of AAAS Report XXXI: R&D FY 2007 or the 22 Feb. R&D Funding Update; for more on earlier House appropriations, see the 19 June R&D Funding Update; and for more on earlier Senate appropriations, see the 2 August R&D Funding Update.)

Figure 1. (click on the image for PDF)

Applied research funding (the "6.2" category) would increase a modest 0.8 percent to $5.2 billion, a dramatic improvement over a requested cut of 15 percent. Much of the improvement would be due to the addition of congressional earmarks that DOD proposed to eliminate. Air Force applied research would gain 7.4 percent to $1.15 billion, while in the Defense Agencies ChemBio "6.2" funding would gain 4.8 percent to $259 million.

In sharp contrast to a requested cut greater than 20 percent, DOD funding of "S&T" (the "6.1" through "6.3" categories plus medical research) would remain stable at $13.6 billion in FY 2007, down 1.2 percent from 2006 (see Table C). For every year this decade, Congress has been far more supportive of S&T funding than the Pentagon, with the Pentagon proposing sharp cuts each year and Congress adding billions of dollars in the appropriations process. Advocates of DOD S&T in the science and engineering community argue that S&T funding is essential for building the knowledge and technology base for future DOD needs.

Figure 2. (click on the image for PDF)

The final 2007 appropriation keeps DOD S&T near its record-high 2005 funding level in real terms (see Figure 2). DOD S&T has increased in recent years after hitting post-Cold War lows in the late 1990s, though it took nearly two decades for S&T funding to return to mid-1980s levels. While this is a relief for DOD S&T advocates, Figure 2 shows that the composition of the DOD S&T portfolio has been changing. DOD support of basic research has increased relatively little, and is a shrinking proportion of the DOD S&T portfolio. While "6.2" funding has increased a little more, recent growth in DOD S&T has come predominantly from growth in "6.3" funding of advanced technology development rather than from research, a trend that has many DOD S&T advocates worried. Recently, advocates have called for at least 20 percent of S&T funding to be devoted to basic research. As Figure 2 shows, Congress, by increasing basic research while cutting "6.3" funding, would reverse the longstanding trendline by boosting the share of S&T devoted to basic research, though only to 11.3 percent.

But despite the good news for research programs, as usual, the big gains go to weapons development programs. DOD weapons development (the non-S&T portion of DOD R&D) would jump $3.7 billion or 6.2 percent to $63.1 billion, led by enormous increases for the Air Force and the Missile Defense Agency (MDA; see Table B). These programs, in "6.4" and higher categories in DOD's classification system, are devoted to engineering, development, and testing work on specific weapons systems and are extraordinarily expensive compared to research programs. For example, the largest single development project in DOD, and indeed the entire federal budget, would once again be the Joint Strike Fighter (JSF), funded by the Navy and the Air Force at $4.3 billion in 2007. Much of the Air Force's $2.4 billion increase would go to development of space and satellite communications, new weapons systems, and classified development programs, capping a series of substantial increases for the Air Force in recent years to record levels (see Figure 3). The MDA's efforts in missile defense systems development would receive a large increase in 2007 after a cut in 2006, climbing 22.1 percent to an all-time high of $9.4 billion; in real terms, the MDA budget has nearly doubled since 2001 (see Figure 3). Adding in some missile defense development efforts in the Army and procurement funding of completed systems elsewhere in the DOD budget, the total 2007 missile defense budget would be $10.5 billion, up 20 percent. The Navy has enjoyed spectacular growth in its development funding over the last several years (see Figure 3) thanks to big-ticket programs such as the JSF, but in 2007 funding would drop slightly to what would still be its second-largest R&D budget ever of $18.8 billion after nearly doubling between 2001 and 2006.

Figure 3. (click on the image for PDF)

Led by the MDA increase, R&D in the Defense Agencies would climb $1.5 billion or 7.7 percent to $21.2 billion (see Table B). In addition to the 22 percent increase for MDA, which is entirely development, Congress has approved a 6.8 percent increase to $451 million for a mix of research and development at the Defense Threat Reduction Agency (DTRA). DTRA's R&D efforts are focused on countermeasures against weapons of mass destruction; the 2007 increase includes $5.1 million in new money for a DTRA University Strategic Partnership Basic Research Program, and a 5 percent increase for DTRA's existing applied research programs to $329 million. While the ChemBio program's overall budget would fall 6.6 percent to $981 million, its basic research portfolio would gain 10.4 percent to $104 million and its applied research program would increase 4.8 percent to $259 million.

The research-oriented Defense Advanced Research Projects Agency (DARPA) would see its budget gain 1.4 percent to $3.0 billion after adjusting for rescissions and general reductions in other parts of the Defense bill. Slightly more than half of DARPA's budget goes to "6.1" and "6.2" activities, with the remainder devoted to "6.3" technology development. Its broad research portfolio is aimed at expanding the frontiers of knowledge and military technology to provide future solutions to DOD's technology needs. DARPA's funding would increase across the board in areas such as tactical technology, materials, network-centric warfare, information and communications technology, cognitive computing, electronics technology, sensors, guidance technology, and basic research, but the DARPA total is dragged down by steep cuts in land warfare technology and biological warfare defense (down 26 percent to $109 million). DARPA's IT (information technology) research efforts would be the big winner in the agency's "6.2" programs: the Information and Communications Technology "6.2" portfolio would jump 15.5 percent to $226 million, while the Cognitive Computing Systems "6.2" portfolio would climb 6.6 percent to $174 million. DARPA's budget would stay at roughly $3.0 billion in today's dollars for the fourth year in a row in 2007 (see Figure 3).

Impacts of Defense R&D

The Department of Defense (DOD) is by far the largest supporter of R&D in the federal government, accounting for more than half the total federal R&D portfolio. Defense-related R&D is also funded by the Department of Energy (DOE), which is responsible for maintaining the U.S. nuclear weapons stockpile, and the new Department of Homeland Security (DHS), whose primary mission is homeland defense but also performs biodefense R&D related to military security (see Figure 1). Although the DOE and DHS parts of the defense portfolio remain unfinished, the final 2007 DOD appropriation is enough to take DOD R&D and total defense R&D to a record high for the fifth year in a row, with no signs of slowing down (see Figure 1).

DOD supports a diverse group of science and engineering disciplines. More than half of DOD's research portfolio supports the engineering sciences, not surprising considering the discipline's potential contributions to DOD's warfighting capabilities (see Figure 4). But DOD also invests heavily in the mathematics and computer sciences research necessary to sustain a high-tech, IT-heavy military and in physical sciences research. In recent years, DOD support of life sciences research has also grown, as a result of growth in congressionally designated medical research programs but also from DARPA, ChemBio, and service investments in biological defense.

Figure 4. (click on the image for PDF)

DOD is responsible for only 11 percent of all federal support of basic and applied research ("6.1" and "6.2"), but is a key sponsor for several science and engineering (S&E) disciplines. DOD supports 34 percent of all federal research in the computer sciences and a similar proportion of all engineering research, as well as significant shares of research in mathematics and oceanography. DOD's impact is even greater in several engineering sub-disciplines such as electrical engineering and mechanical engineering. DOD funds research in these disciplines for their contributions to national defense, but this research also supports graduate education in these fields and seeds major innovations in the civilian economy, most evident in DOD's early support for research that led to the now-ubiquitous Internet. DOD is also a key supporter of social sciences research. DOD support for these disciplines should increase in FY 2007 as a result of the final Defense appropriations bill.

A majority of DOD's R&D (and nearly all the work in categories "6.4" and higher) is performed by industrial firms such as the large defense contractors Lockheed Martin and Boeing. Federally funded research and development centers (FFRDCs), defense laboratories, and colleges and universities also perform R&D. If one excludes DOD development, which is nearly exclusively performed by industry, DOD basic and applied research ("6.1" and "6.2") is performed by a diverse group of institutions. Thirty-nine percent of DOD research is performed by DOD laboratories, while 37 percent is performed by industry. Eighteen percent of DOD basic and applied research is performed by universities and colleges. All performers should benefit from the increases in "6.1" and "6.2" funding in FY 2007; the development increases will go almost entirely to defense contractors.

Outlook and Next Steps

DOD is presiding over a 2006 budget that hit a record $537 billion after Congress approved a $70 billion war supplemental in May. With this congressional agreement, the 2007 DOD budget already totals $506 billion, including $70 billion for seven months' worth of emergency war funding attached to the regular Defense bill, but will almost certainly exceed the 2006 total after the war's full-year costs eventually get appropriated. With military occupation costs in Iraq and Afghanistan actually increasing as time goes on to well over $2.5 billion per week, DOD spending is expected to keep hitting new highs. Within these record totals, DOD R&D has also set new records, in part driven by development costs of new weapons related to current and near-term combat needs. Even the already record-breaking R&D total of $76.8 billion for 2007 could increase if, as expected, a mid-year war supplemental includes some development funding.

Kei Koizumi is director of the R&D Budget and Policy program at the American Association for the Advancement of Science in Washington, D.C. Comments may be submitted to todaysengineer@ieee.org.