Fallout from the Bailout—time for a bake sale at NIH? (by Steven S. Clark)

After bailing out Wall Street, Congress quickly bailed themselves out in a rush to flee Washington before they could be pinned down with the hard questions that are sure to come. One can imagine the contortions involved as the political class raced for the safety of home districts while simultaneously patting themselves on the back—especially after gorging ad libitum at the pork trough.  Lou Dobbs, the CNN talking head, called Congress’s actions last week, “snarky.”

How the bailout of the financial sector, after federalizing the Dems favorite but failed sibs, Fannie and Freddie, will affect federal discretionary spending, which includes R&D funding, in the years to come is uncertain.  But the immediate effect freezes most federal appropriations at FY 2008 levels.

 Although fiscal year (FY) 2009 began October 1, most of the budget remains unfinished—again—with only three of twelve appropriation bills finalized.  Instead of responsibly returning to finish the budget after the bailout package was decided, our Mensches in Congress departed Washington for a combined Halloween/Thanksgiving/Christmas/New Year break, leaving the final 2009 budget decisions in limbo until next year; thereby providing yet another compelling argument for term limits.

Budget freeze hits US research hard

At least our lawmakers had the good sense to authorize a continuing resolution (CR) rather than let the federal government shutdown as it did during the Clinton years. The CR extends 2008 funding for the various programs covered by the nine unfinished appropriations bills so that the government will continue to function, albeit at last year’s levels.   

The three FY 2009 appropriations bills that were passed are included in the CR and provide funding for the Departments of Defense (DOD), Homeland Security (DHS), and Veterans Affairs (VA); all of which receive substantial increases for their R&D portfolios as described below:

• For DOD R&D programs, congress agreed on $82.4 billion, an increase of $3.0 billion or 3.8 percent to an all-time high. DOD’s basic research efforts will increase by a whopping 12.9 percent or $210 million to $1.8 billion.

• The Department of Homeland Security (DHS) received $1.1 billion in FY 2009 R&D funding, a substantial 9.4 percent or $93 million increase over 2008.

• The VA R&D portfolio, after climbing the past two years from emergency appropriations, will continue to grow after a 6.8 percent increase to $952 million.

Meanwhile, all other federal agencies and programs in the remaining nine unfinished appropriations bills will operate at 2008 funding levels until next March, when a new congress will resume work on 2009 appropriations.  At this time, the total FY 2009 investment in research is actually 0.4% greater than for FY 2008. But, when adjusted for inflation, this represents an overall decline in government research spending for the fifth year in a row. 

Moreover, the picture for R&D funding is even bleaker than this because the CR does not count supplemental revenue in its funding formula.  This means that four science agencies that received supplemental funding last June will actually see a budget decrease for at least the first five months of FY 2009. Thus, the National Institutes of Health (NIH) will have a shortfall of $150 million; the DOE’s Office of Science loses $63 million; the NSF begins FY 2009 down $23 million; and NASA will be short some $63 million. There also is no guarantee that the budget freeze won’t actually won’t be extended for the rest of the year after Washington’s bean counters tally up the budget-busting effect of the bailout.

This budget shortfall comes at a particularly vulnerable time for researchers across the country, especially for those funded by NIH who already are saddled with a dismal grant award success rate of 10% or lower.  The current budget crunch, which is the result of Congress’s failure to complete its task on time, means a further reduction in the grant success rate and reduced awards for already cash-strapped researchers.

Playing politics over a mere $21 billion

Why are we in this budget impasse—why didn’t Congress simply complete the FY2009 budget after finishing the bailout?  The answer to this question can be stated in two words—partisan politics. 

Last June, Congress reached a final agreement on an FY 2009 budget resolution, which established a total of $1,013 billion for regular discretionary spending. This was a mere $21 billion, or 2%, more discretionary spending (less when compared to the entire budget) than that requested by the President, who promised to veto any appropriations bills that exceed his request. Rather than negotiate, re-budget or undertake any other statesman-like activity to resolve this impasse and pass a budget for the country, the Democrats in Congress decided to take a powder and put off remaining appropriations decisions until a new President (read Barak Obama) takes office in January, thus bringing the entire 2009 budget process to a halt. Congressional Dems are banking (pun intended) on an Obama victory in order to protect this measly $21 billion for their domestic projects.

So, there the budget sits, frozen and uncertain, stressing further an already distressed research enterprise and all for a paltry $21 billion—a rounding error in a $3 trillion federal budget, as pundit George Will likes to point out.

It is an understatement to say that whoever is President in 2009 will face a difficult fiscal climate. The financial sector rescue just passed by Congress and signed by Bush means that hundreds of billions of dollars will soon be flowing out of the U.S. Treasury to buy mortgage-backed securities. This outflow either will cut further into discretionary spending or will significantly boost deficit spending, or both. Federal agencies, most of which already face frozen budgets five months into the new fiscal year, are left with few clues as to what their final funding levels will look like. The U.S.science and engineering community once again faces many months of waiting to find out what the federal government’s fiscal commitment to R&D in FY 2009 will be.

Maybe they should have a bake sale and a car wash. 

Detailed analyses of FY 2009 House, Senate, and conference appropriations for individual agencies are available on the AAAS R&D Web site.