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1 5 Department of Defense Joanne Padrón Carney American Association for the Advancement of Science HIGHLIGHTS For the first time in recent years, the Department of Defense (DOD) R&D budget would decline, with a proposed decrease of over $5.1 billion or 6.2 percent to $77.8 billion (see Table II-2) from FY Although the overall outlook for defense programs reflects the continued interest of President Obama to keep discretionary spending flat, some areas would see growth. Furthermore, defense discretionary spending across all relevant agencies would still account for more than fifty percent of the total federal R&D discretionary portfolio. While declines can be found in every DOD account ( 6.1 to 6.7 ) there is one notable exception in the fiscal year (FY) 2012 budget request for the basic research ( 6.1 ) account. For the second year in a row, the Administration would request an increase in the 6.1 portfolio, requesting a 14.5 percent increase raising the account $264 million for a total request of $2.1 billion in FY All military services would see increases in their basic research accounts. Army basic research would increase 4.0 percent for total request of $437 million, the Navy could grow 6.2 percent for total request of $577 million, and the Air Force would increase 9.6 percent for a total request of $519 million. Defense Agencies, on the other hand, would see a significant gain, with especially large increases set for Defense Research Sciences (up 49.9 percent to $291 million) and the National Defense Education Program up 34.9 percent to $102 million (see Table II-4). DOD Science and Technology (S&T) spending, which includes basic research, applied research, medical research, and technology development would fall 11.8 percent or $1.7 billion to $13.0 billion (see Table II-5). 59

2 Joanne Padrón Carney In contrast to previous years, the research-oriented Defense Advanced Research Projects Agency (DARPA) would not do as well with a total request of $2.98 billion in FY 2012, the same amount enacted in FY 2010 (see Table II-3). DOD weapon development, on the other hand, would decline 5.2 percent for a total of $63.5 billion. Figure 1. Trends in Defense R&D Trends in Defense R&D in billions of constant FY 2011 dollars DOD ARRA DHS Defense R&D ( ) DOE Defense DOD S&T Other DOD R&D Source: AAAS Report: Research & Development series. FY 2011 and FY 2012 figures are latest estimates. R&D includes conduct of R&D and R&D facilities. DOD S&T figures are not comparable for all years because of changing definitions AAAS TRENDS IN DOD R&D The Department of Defense (DOD) continues to spend large amounts in wartime but is shifting toward troop withdrawal; hence its total budget request of $671 billion reflects a decline from previous years. The reduction in the overall military budget reflects the Pentagon s Defense Efficiency Initiative released in May 2010 that detailed $154 billion in reductions over five years via the elimination of redundant programs and improving programmatic efficiencies. 1 This effort to reduce spending is also reflected in the DOD s R&D investment, which would decline 6.2 percent to $77.8 billion in FY 2012 (see Table II-2), a level that is also below the 2010 enacted level and the FY 2011 request (Figure 1)

3 DEPARTMENT OF DEFENSE DOD basic research funding (the 6.1 category) would increase 14.5 percent to $2.1 billion (see Table II-4), a significant level of support compared to the declines seen in the other RDT&E accounts. The majority of 6.1 research is performed in universities in critical fields such as engineering, materials science and computer science. Basic research programs within the Army, Navy, Air Force and Defense Agencies all would receive increases in the FY 2012 request, with especially large increases set for Defense Research Services and the National Defense Education Program (see Table II-4). Funding for the three-service University Research Initiatives program, which awards basic research grants competitively to university performers, would receive a combined $334 million, essentially staying flat with a slight increase of 0.4 percent or $1 million from FY The Defense Research Sciences program, funded in the three services and in DARPA, would grow substantially with an increase of 15.5 percent for a total request of $1.3 billion. The single largest percentage increase among basic research programs, however, would go to the Defense Research Services program within the Defense Agencies increasing 49.9 percent from $194 million in FY 2010 to $291 million in FY The second largest percentage increase would go to the National Defense Education Program, ramping up 34.9 percent for a total request of $102 million, a $26 million increase above FY From 2001 to 2008, basic research remained relatively stable at $1.6 billion in today s dollars, but jumped to $1.81 billion in FY 2010, and the FY 2012 request would continue that growth to over $2.0 billion (see Figure 2). Congressional appropriators provided a significant boost to 6.1 research in 2010, despite the Administration s request to decrease that account. Applied research (the 6.2 category) would fall again, although not at the same pace as in previous years, dropping 3.9 percent or $197 million to $4.8 billion (see Table II-2). The relief in cuts to 6.2 accounts, however, is not uniformly applied across all the services and some units would suffer more drastic decreases. Air Force applied research would decrease 2.0 percent with a request of $1.2 billion, while Army research would drop 34.2 percent for a total request of $869 billion. On the other end of the spectrum, Navy 6.2 programs would increase 7.6 percent and the Defense-Wide applied research programs would ramp up 13.0 percent with a total request of $2.0 billion in FY

4 Figure 2. Trends in DOD S&T Joanne Padrón Carney Trends in DOD S&T in billions of constant FY 2011 dollars 15 ARRA - DOD S&T 10 Medical research DOD "6.3" 5 DOD "6.2" DOD "6.1" Source: AAAS analyses of R&D in annual AAAS R&D reports. FY 2011 and FY 2012 figures are latest AAAS estimates of FY 2010 request. Medical research appropriated outside RDT&E; appropriated in "6.2" accounts before AAAS In a repeat of the usual budgetary dance, the Pentagon would dramatically cut medical research programs (see Table II-2) in the Defense Health Program, by 54.0 percent down to $664 million (see Figure 2). These programs received over $1.4 billion in the final congressional action for FY 2010, a significant boost compared to the $903 million in the FY 2008 enacted level. Most of the research goes toward breast, ovarian, and prostate cancer research through peerreviewed, competitively awarded grants. Over the years, the DOD peerreviewed program has become a major force in cancer research; by comparison, NIH spending on these three cancers totaled $1.22 billion in In addition, there are several earmarked medical research projects that do not undergo peer-review in this account and hundreds of millions of dollars in earmarked medical research programs in Army accounts that are not included in the FY 2012 request. DOD funding of S&T (the 6.1 through 6.3 categories plus medical research) would fall 11.8 percent or $1.7 billion to $13.0 million in FY 2012 (see Table II-5). The cuts largely fall to the 6.3 development accounts which would decrease 15.8 percent to $5.5 billion with 6.2 accounts dropping only 3.9 percent for a total request of $4.8 billion. For every year this decade, Congress has been far more 62

5 DEPARTMENT OF DEFENSE supportive of S&T funding than the Pentagon. In what has now become an annual ritual, the Pentagon proposes sharp cuts each year and Congress adds billions of dollars in the appropriations process, primarily, but not entirely, through the addition of earmarks. 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. Over the past decade, there had been growing support inside and outside the Pentagon for setting 3 percent of the DOD budget as a goal for the proper level of S&T investment. But the FY 2012 request for DOD S&T would continue to hold at 2.3 percent of the non-emergency DOD budget, the same ratio as last year s request. The 2012 DOD request marks another decline from recent gains in DOD S&T accounts in FY (see Figure 1). DOD S&T increased in the first half of this decade after hitting post-cold War lows in the late 1990s; after 2005, however, declines emerged in S&T programs, mostly in the 6.3 programs (see Figure 2). More recently, in FY , the S&T accounts again enjoyed increases, mostly in the 6.1 and 6.2 accounts. Figure 3. Trends in DOD R&D by Agency 30 Trends in DOD R&D by Agency in billions of constant FY 2011 dollars Air Force All Other DOD R&D Navy Army Other Defense Agencies MDA DARPA Source: AAAS Report: Research and Development series. FY 2011 and FY 2012 figures are latest AAAS estimates AAAS 63

6 Joanne Padrón Carney Development programs would again decrease in the FY 2012 budget. DOD weapons development (the non-s&t portion of DOD R&D) would decrease $3.5 billion for a total budget of $63.5 billion. In previous years, weapons development enjoyed large increases, but the FY 2012 budget request includes proposed cuts to programs of low priority. Army, Navy and Air Force R&D would all decrease in FY 2012 (see Table II-3). The Army would decrease 16.2 percent to $9.7 billion, the Navy would decrease 9.7 percent to $18.0 billion, and the Air Force, which saw increases in FY 2010, would decline slightly, falling 0.2 percent to $27.9 billion (see Figure 3). R&D in the Defense Agencies would also decrease in the FY 2012 budget, dropping 2.7 percent for a total budget of $20.0 billion. However, there are some Defense Agencies programs that would see increases (see Table II-3). The Defense Threat Reduction Agency (DTRA) would receive a modest increase of $21 million or 4.1 percent to $534 million. The Chemical and Biological Defense program would also increase 4.1 percent for a total request of $1.3 billion. The Missile Defense Agency (MDA) would receive a decrease in FY 2012, falling 4.3 percent ($294 million) for a total of $6.6 billion. MDA still remains the largest total budget of all the Defense Agencies and is a development-oriented agency with almost all of its funding in the 6.4 category; its annual budget had doubled in real terms since the beginning of the decade and had received increases in the annual request until now. The research-oriented Defense Advanced Research Projects Agency (DARPA) continues to remain at a flat funding level with a zero percent increase in FY 2012 for a total request of $2.99 billion (see Figure 3). About 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 basic research funding would increase 69.4 percent to $329 millionalong with funding for applied research which would increase 16.4 percent to $1.3 billion million in the FY 2012 budget. IMPACTS OF DOD R&D The Department of Defense (DOD) is by far the largest supporter of R&D in the federal government, accounting for 52.2 percent of the total federal R&D portfolio. Defense-related R&D is also funded by the 64

7 DEPARTMENT OF DEFENSE Department of Energy (DOE), which is responsible for maintaining the U.S. nuclear weapons stockpile (see Figure 1). The FY 2012 budget request would decrease total defense R&D by almost 6.2 percent (see Table I-1), unless supplemental appropriations push the FY 2012 budget up and bring defense R&D closer to previous year levels. In past years, DOD was responsible for a major portion of the shrinking federal support of basic and applied research; fortunately its support for basic research ( 6.1 ) has shifted direction over recent years with significant increases well above the rate of inflation. This is crucial as the Department is a key sponsor for several science and engineering (S&E) disciplines, especially in the physical sciences. DOD supports almost one-third of all federal research in the computer sciences and a similar proportion of all engineering research, as well other fields such as oceanography research and chemical/biological defense. DOD s impact is even greater in several engineering sub-disciplines such as electrical engineering, mechanical engineering, sensors, and material science. DOD funds research in these disciplines not only for its contributions to national defense, but to support graduate education and to seed major innovations in the civilian economy. A majority of DOD s R&D (and nearly all the work in categories 6.4 and higher) is performed by industrial firms. FFRDCs (federally funded research and development centers), 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. A third of DOD research is performed by DOD laboratories, while 40 percent is performed by industry. More than 50 percent of DOD basic research and slightly less than 20 percent of applied research is performed by universities and colleges, making DOD the third-largest federal sponsor of academic research behind only the National Institutes of Health (NIH) and the National Science Foundation (NSF). DOD R&D spending is heavily concentrated, with five states receiving half of DOD s billions. Because development funding is awarded in multibillion dollar contracts, DOD R&D tends to go states with large military contractors and those near the Pentagon such as California, Maryland, Virginia, Texas, Missouri and Massachusetts. DOD basic and applied research spending, on the other hand, is less concentrated and is performed at university laboratories across the nation. 65

8 OUTLOOK FOR DEFENSE R&D Joanne Padrón Carney DOD s total budget request of $671 billion for FY 2012 reflects a decline from last year s request of $708 billion. Removing funding for the wars in Iraq and Afghanistan, the baseline budget without overseas contingency operations is at $553 billion. Overseas contingency operations would decline in FY 2012 as the Pentagon proposes to withdraw troops from Iraq. Although the Administration has vowed not to fund the two wars through supplementals, the political unrest that has spread throughout the Middle East may force the Pentagon s hand. In past years, DOD R&D has benefited from the record totals in the military budget, in part driven by development costs of new weapons related to near-term combat needs. Today, however, in the current effort to reduce overall discretionary levels, the Pentagon is seeking to cut unnecessary programs, for example, alternate engines for the F-35 fighter plane. Despite the large requested increases in past years, until recently, DOD s longer-term investments in S&T had lagged. The FY 2011 and now the FY 2012 budget requests represent a unique break from past years by increasing DOD support of basic research (6.1 account). The Pentagon s 2010 Quadrennial Defense Review (QDR) emphasized the importance of R&D in new technologies to meet and defeat emerging threats. Furthermore, it recognizes that in a global economy, scientific and technological innovation are no longer confined to any one nation or group of nations. In order for military applications to remain on a competitive edge, the DOD must invest in R&D, and the QDR acknowledges that it must work in partnership with other agencies and sectors such as academia to maximize its ability to innovate and compete. Congress, too, has traditionally added to the Pentagon requests for research, and may continue to add money for research earmarks. And despite calls for a moratorium on earmarks, DOD has been singled out as the agency exception from such fiscal restraint, especially medical research which has enjoyed the benefits of congressional designated funds for almost 20 years. Furthermore, the current debates over reducing the federal deficit by cutting discretionary spending has largely excluded defense discretionary spending from those formulas. Thus Congress may have relatively little trouble boosting DOD R&D funding as in the past. 66

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