SOURCE: Q 180.55 .G6 S53 AUTHOR: Shapley, Willis H. DOCTITLE: Budget Process and R&D SECTITLE: Budget Process and R&D DATE: 1992 SUBJECT: United States research and development funding R&D budget PUBLISHER: Carnegie Commission on Science, Technology, and Government DOCTYPE: Book TITLEID: ISBN_ISSN: Text: THE BUDGET PROCESS AND R&D A CONSULTANT REPORT Willis H. Shapley APRIL 1992 CARNEGIE COMMISSION ON SCIENCE, TECHNOLOGY, AND GOVERNMENT The goal of the Carnegie Commission on Science, Technology, and Government is a nation better prepared to respond to the opportunities and hazards of scientific and technological advances. The Commission was established by Carnegie Corporation of New York in 1988 to assess, and recommend improvements in, the mechanisms by which the federal government and the states incorporate scientific and technological (S&T) knowledge into policy and decision making. The Commission's special focus is on the organization of government as it affects decision-making processes, rather than on specific policy options. The Commission is considering how government can be better organized so that policy options can be systematically formulated using the best available S&T expertise; what mechanisms for analysis need to be strengthened or created; and what technical competency is needed in government. Since policy-making in a democratic society requires balancing diverse and competing goals and values, the Commission is equally concerned that S&T- based policy options be framed in ways that are readily intelligible and accessible both to policymakers and the people who elect them. The Commission is an independent bipartisan body with a five-year charter. In addition to eminent scientists and engineers, the Commission and its Advisory Council include former officials who have served at high levels of government, as well as leaders from the private sectors of American society. This consultant report was prepared for the Commission's work on the Executive Office of the President. The views expressed are those of the author and not necessarily those of the Carnegie Commission on Science, Technology, and Government or the Task Force. CONTENTS PREFACE 1.0 EXECUTIVE SUMMARY 2.0 THE BUDGET PROCESS 2.1 Introduction 2.2 In the Agencies 2.2.1 The Estimates 2.2.2 The Proposal to OMB 2.2.3 The Agency Perspective 2.3 The Office of Management and Budget 2.3.1 The Process in OMB 2.3.2 The OMB Perspective 2.4 The Congress 2.4.1 The Congressional Budget Process 2.4.2 Congressional Perspectives 2.5 Summary Assessment 3.0 R&D CONCERNS 3.1 Introduction 3.2 Priorities and `Balance' 3.2.1 The Concerns 3.2.2 Priorities in the Budget 3.2.3 `Balance' in the Budget 3.2.4 The Implications for R&D 3.3 Budget Data and Presentations 3.3.1 Data for Detailed Budget Decisions 3.3.2 Data for Macrobudget Decisions 3.3.3 Some Concerns and Suggestions 3.4 Stability and Continuity 3.4.1 Concerns with Annual Budgeting 3.4.2 Two-Year Appropriations? 3.5 Fragmentation vs. Aggregation 3.5.1 Two Opposite Concerns 3.5.2 Fragmentation in Budget Review 3.5.3 Aggregation with Non-R&D 3.6 Outcomes and Prospects 3.6.1 Recent Outcomes for R&D 3.6.2 Strengths and Weaknesses of R&D 3.6.3 Outlook for the Future PREFACE This report has been prepared for the Carnegie Commission on Science, Technology, and Government to describe the federal budget process as it affects budgeting for research and development (R&D) and to discuss some of the principal concerns with R&D budgeting that arise in the consideration of public policy on science and technology (S&T). The budget process occupies a central position in federal government decision making on science and technology matters, and therefore is relevant to the whole range of interests of the Carnegie Commission. This report is intended to complement other reports of the Commission and to contribute to a wider understanding of the budget process as it affects R&D. The original version of the report was prepared in June 1990, primarily as an input to other studies of the Commission. It addressed the budget process as then constituted and R&D concerns as seen at that time. It anticipated the deadlock in the process reached in the fall of 1990 and the need for a new budget "summit" agreement. The ensuing enactment of the Budget Enforcement Act of 1990 (BEA) placed major new constraints on the budget and the budget process and a different light on some of the concerns for R&D. As now revised, the report has been updated to take account of the BEA and other developments to the end of 1991, and to focus on R&D concerns believed to be of continuing significance. As will be seen, Chapter 2.0 of the report describes the budget processes in both the Executive branch and the Congress -- the two are intimately intertwined and their interrelations are an essential feature of the overall process. The handling of R&D budgets in Congress is being addressed in more detail in a report of the Carnegie Commission's Committee on Science, Technology, and Congress. The R&D concerns discussed in Chapter 3.0 are genetic in nature and also relate to the process in both branches. They include some of the concerns expressed with respect to priority setting, data availability, stability and continuity, and fragmentation and aggregation of R&D in the budget process. A final section addresses concerns about the outcomes for R&D in the budget process and speculates on the prospects for the future. The report is not focused on any particular budget cycle and does not address the substance or merits of specific budget decisions. In keeping with the longer-term perspective of the Carnegie Commission, it seeks to explain the essential workings of the process and illuminate genetic problems and general concerns from a broad public policy standpoint. The report is based primarily on the knowledge and experience of the writer -- gained over the years as the senior examiner on military and space R&D in the Bureau of the Budget (now OMB), as a senior official in a major R&D agency (NASA), and as the producer of the annual analyses of federal R&D budgets for the American Association for the Advancement of Science (AAAS). The views and suggestions, expressed or implied, are those of the writer and not necessarily those of the Carnegie Commission or any of its study groups. 1.0 EXECUTIVE SUMMARY The report is in two parts. The first describes and discusses the federal budget process through which budgets for R&D are prepared, reviewed, and decided. The second part discusses some of the principal concerns with the treatment of R&D in the budget process that have arisen in the consideration of public policy with respect to science and technology. 1.1 The Budget Process Budgets for R&D are embedded in the budgets of some twenty-one federal agencies and are handled in the process as parts of each agency's total budget. There is no "R&D Budget" as such, although tabulations of federal funding for R&D and discussions of general policies on R&D can create the illusion that there is. The Formal Process The formal budget cycle -- for R&D and all other budgets -- starts every summer in the Executive branch when all the agencies prepare their budget estimates for the fiscal year beginning on October 1 of the following year. After sometimes lengthy internal reviews the agencies make decisions on the proposals they will put forward, the amounts to be requested, and the strategies they will follow in seeking to get their budgets approved. The agency's estimates are reviewed, scrubbed, and coordinated by the Office of Management and Budget (OMB), and, after resolution of disagreements, the budgets for all agencies as approved by the President are submitted to Congress in late January or early February. In Congress, the process is three-pronged. The Budget Committees review the budget from a "macrobudget" standpoint and in the spring produce the "budget resolution" by which Congress sets the overall size and general composition of the budget it will approve. The "authorizing committees" review the programs and budgets of agencies whose appropriations require legislative authorization and initiate the necessary authorization bills. The appropriations committees make "Section 602(b)" allocations of the totals set by the budget resolution to their subcommittees, which review the agency budgets in detail and decide the amounts to be included in the appropriations bills by which Congress finally, usually in early fall, makes the appropriations available to the agencies. The formal process is straightforward enough, but in practice it is often overwhelmed by politics, of both the partisan and the Congress vs. Executive varieties, especially when, as now, the Administration and Congress are controlled by opposing political parties. Political disputes and maneuvering have repeatedly brought the process to a standstill, with stalemates in the spring over the budget resolution and deadlocks in the fall over the final appropriation actions. These crises have been resolved by the device of the "budget summit." This is a meeting of top Administration officials with the congressional leaders of both parties, at which a "bipartisan budget agreement" is reached, setting limits and guidelines for the detailed budget decisions to be made in both Congress and the Executive branch. "Summits" are not a part of the formal budget process, but they have proved to be essential for breaking deadlocks and making the process work. The bipartisan budget agreement that broke the deadlock in the fall of 1990 included strict overall limitations on discretionary spending for FY 1991 through FY 1995, which were enacted into law in the "Budget Enforcement Act of 1990." These limitations were applied in decisions on the FY 1992 budget by both the Administration and Congress, and enabled the FY 1992 process to run to completion without another deadlock. As of this writing (December 1991) the BEA limitations are still in force. However, economic and political concerns may lead the Administration and Congress to agree in 1992 to modify the BEA to permit giving a federal spending stimulus to the economy. If the BEA limitations are suspended or repealed without agreement on similar new limitations, the budget process seems destined to face deadlock again each year. A Summary Assessment While it clearly needs the discipline of an overarching bipartisan budget agreement, the basic structure of the budget process is sound. The process in the Executive branch of budget preparation by the agencies and review by OMB is well established and works fairly well. The President's budget provides the vehicle for a comprehensive consolidated view of the entire budget and an excellent opportunity for Presidential leadership each year. The concept of the congressional budget process of first setting "macrobudget" guidelines in the budget resolution and then filling in the details in the appropriation process is likewise sound. The authorization process, even though often not fully integrated into the appropriation process, provides a useful link between legislative oversight and the budget process. The problems of the budget process are not due to defects in its formal structure but to the challenges it faces and the political environment in which it operates. Criticisms of the Process There is, of course, much dissatisfaction with the budget process. Even when it stays on course and avoids deadlock, it is widely criticized from various standpoints and with varying degrees of justification. Some fault it as ineffective in controlling the deficit or for failing to meet national needs as seen by the critic. Others see it as unnecessarily complex and overly political. Concerns with the effectiveness of the process are really more with the decisions made in the process than with the process itself. Decisions to curb the deficit or to meet more or different national needs can be made within the existing process if there is enough of a consensus on what to do and the political will to do it. The process has been effective in that each year it has ultimately provided appropriations to keep the government running. Concerns with the complexity of the budget process are well justified, but the complexity is hard to cure. The continual preoccupation with budget matters it requires of the top leaders of the agencies and all down the line detracts from their ability to attend to the other requirements of their jobs. However, many of the complexities of the budget process stem directly from the structure of our government established in the Constitution. The need for a congressional budget process and for separate budget reviews in the House and Senate result from the Constitutional provisions that give Congress control of the purse and divide Congress into two houses. Criticism of the process as overly political is justified when political contention is carried to the point of deadlock or when the budget is otherwise used as a football by the Administration or Congress to score partisan political points. It is also justified when appropriations are "earmarked" in Congress for projects of blatant self-interest. These are clearly abuses of the budget process, but it is hard to see how restraints to curb them could be imposed on the political process without violating Constitutional rights and prerogatives of Congress and the Executive branch. Self-restraint cannot be legislated. An Essential Political Process It should be remembered that the budget process is, and should be, apolitical process. It is where the decisions are made on what the government will do. Legislation sets policies and authorizes programs, but it is the appropriations that implement them. All the political and special interests concerned with budget outcomes converge on the budget process to advance their own agendas. The root causes of many of the dissatisfactions with the budget process, in our view, go back to the intractable nature of the basic problem of the federal budget: how to reconcile the justifiable national needs for federal spending with the need to reduce the federal deficit. The problems of the process can be understood, if not entirely forgiven, as symptoms of the frustrations of a democratic decision process struggling with a problem with no acceptable solution in sight. 1.2 R&D Concerns R&D budgets share the genetic problems of the budget process discussed above. The second part of the report addresses several of the special concerns and suggestions with respect to the R&D budgeting that are frequently discussed in the S&T community and by others concerned with federal support of R&D. Priorities and "Balance" One set of concerns is with the setting of R&D priorities in the budget process and the achievement of "balance" in R&D budgets. Both concepts require critical analysis. Our principal conclusions may be summarized as follows. Setting priorities implies a "trade-off" area composed of the programs to be prioritized and some agreed-on criteria for deciding the priorities. Priorities may meaningfully be set for programs having the same or similar goals. But between programs for independent goals, or when the programs have multiple goals, priority setting is essentially arbitrary. The major federal R&D programs have different goals, and the major budgetary decisions on them are largely independent of each other. Aggregations of R&D programs with different goals, or of all federal funding for R&D, are not meaningful and should not be taken as trade-off areas. R&D budgets should be considered primarily in relation to their program goals, not in relation to R&D for other goals. The relative priorities of the many independent program goals must be set arbitrarily in the political process. There is no reason why R&D programs or major initiatives directed at different goals (like the Genome, Superconducting Super Collider, and Space Station projects) should be expected or required to compete only with each other in the budget process. They and the goals they are to serve should compete with all other proposals in the federal budget. For R&D programs directed at the same or similar goals, the establishment of trade-off areas for priority setting is appropriate and may be useful. Examples discussed are R&D and non-R&D costs in the same program, research vs. development in the same area, "level of effort" areas, R&D and necessary supporting costs, and R&D "cross-cuts" that bring together R&D programs of different agencies directed at the same goal. The concept of "balance" within or between R&D budgets may be useful in advocacy contexts, but it is flawed and essentially meaningless for priority setting or other decision making in the budget process. Relative amounts of dollars in a budget are not valid measures of priority, need, or value. Budgeting requires going behind the statistics and examining the substantive content of the programs and the goals they are intended to serve. Budget Data and Presentations There is an abundance of data on R&D budgets available and presented in the budget process. The types of data needed for detailed review and decisions on R&D budgets are different from what is needed for '"macrobudget" decisions on the overall size and general composition of the budget. The report describes the data available and addresses two suggested improvements. One suggestion is that a comprehensive comparable data bank on R&D budgets be established, as proposed in a 1988 report of the Senate Budget Committee. However, the utility of such data in the budget process would not be as great as envisaged in the Committee report, and its collection would run into serious conceptual and practical problems, which, in the writer's view, would be insuperable. An alternative approach to meet some of the concerns expressed in the committee report is suggested. A detailed "directory" report, decoupled from the budget cycle, could provide comprehensive information on what agencies are engaged in what kinds of R&D and could serve as a reference source for in Congress and the Executive branch. At the macrobudget level, a new report on "R&D in the Budget" prepared jointly by OMB and OSTP and issued with the President's budget is proposed. This could help bring the major needs for R&D into focus during congressional and public consideration of the overall size and composition of the budget by identifying the principal "drivers" that justify the levels of the R&D budgets proposed and explaining the consequences of failure to provide the requested funding. Stability and Continuity Under this head the report discusses the concerns with the annual nature of the budget cycle and the suggestion that two-year appropriations would be an improvement. The discussion points out that there are some fundamental reasons for the annual cycle and concludes that the advantages of two-year appropriations are dubious and the likelihood that Congress will agree to them is low. A partial step toward two-year decisions in the budget process is proposed that could give some of the hoped-for advantages of two-year appropriations and still be acceptable to Congress. Fragmentation and Aggregation Concerns have been expressed with the fragmentation of R&D in the budget review process in OMB and in Congress. In addressing these concerns we raise the opposite concern that aggregations of R&D agencies can actually increase the vulnerability of R&D budgets. One specific concern has been with the fact that some major R&D agencies, including NSF, NASA, and EPA, are unduly vulnerable because they are carried in the same appropriations bill and reviewed by the same subcommittee as housing and veterans' programs. Our discussion concludes that this arrangement has benefits for R&D as well as disadvantages and that other aggregations would pose the same problems for the R&D agencies. An aggregation consisting only or primarily of R&D agencies could make R&D even more vulnerable to arbitrary reductions. Outcomes and Prospects The final section of the report considers the concerns stemming from the general dissatisfaction with the outcomes for R&D in the budget process. Looking just at numbers, one can say R&D has fared relatively well in the budget process, with a general trend of increasing budgets in a period when other discretionary budgets have mostly been stagnant. Looking at substance, however, one sees a significant shortfall in meeting important needs and grasping important opportunities. R&D has both strengths and weaknesses in the budget process. The strengths include wide recognition of the need for and importance of R&D, the acceptance of a major federal role in support of R&D, and, perhaps above all, the fact that no one is really against it. The principal weakness is that R&D budgets, like all federal discretionary budgets, are always under the threat of arbitrary cuts as efforts are made to reduce the federal deficit. But R&D also has some generic vulnerabilities of its own. Chief among these is the "level of effort" nature of so many R&D budgets and the tendency in budget reviews to treat all types of R&D budgets and even the total budgets of R&D agencies on a "level of effort" basis. There are also some inherent weaknesses in many of the justifications offered in support of R&D budgets. Finally, there is the vulnerability that arises from the "expanding universe" nature of R&D budgets. The constant expansion of areas of important scientific research and opportunities for technological advances conspires with other factors to make increases in R&D budgets necessary year after year -- increases that are always hard for the deficit-ridden budget to swallow and are always attractive targets for budget reductions. The national S&T leadership will have to decide how best to cope with the prospect that in the years to come federal support for R&D will fall short of meeting the evident needs and opportunities. At some point it may be necessary for the nation to consider a lowering of goals, expectations, and ambitions in science and technology and some painful downsizing of the R&D establishment. No matter where consideration of these troubling prospects leads, the leaders and supporters of R&D must fight hard each year to get the best possible budgets for R&D. They must actively compete in advocacy with other special interests and accept the fact that the budget process is a political process in which essentially arbitrary decisions are made. They must recognize but not be dismayed by the many perils of the budget process and the special vulnerabilities of R&D we have described. They should avoid fostering unnecessary aggregations of R&D budgets and the notion that different kinds of R&D have to be traded off against each other. The outcomes of the budget process for R&D will never be entirely satisfactory. But one can hope and expect that the basic soundness of the many justifications for R&D and its broad base of public support will enable science and technology to continue to be a major constructive force in our society. 2.0 THE BUDGET PROCESS 2.1 Introduction Chapter 2.0 describes the framework and functioning of the federal budget process as it affects R&D. It explains the major stages in the process and the roles and viewpoints of the principal players. It concludes with a brief assessment of the process and some speculation on its future impacts on R&D. It must be made clear at the outset that there is no "R&D Budget" as such. Rather, there are many R&D budgets embedded in the budgets of the twenty- one federal departments and agencies that conduct or support R&D. Tables aggregating federal funding for R&D -- in budget analyses, NSF statistical reports, and the AAAS budget reports, for example -- tend to create the misleading illusion of an overall "R&D Budget." In fact, however, the R&D budgets in each agency are handled in the budget process as parts of the agency's total budget. In order to see how R&D is handled in the process, therefore, we will consider how the process functions for agency budgets generally. The formal steps that agency budgets must go through each year for review and approval in the Executive branch and Congress follow a long and tortuous path. In 1976, every R&D proposal had to endure 123 steps,[1] and in 1982 an updated. study identified 160 steps.[2] Since then, many further complexities have been added, with few, if any, offsetting simplifications. We will not attempt to recount the complexities, but will concentrate on the major stages the process goes through each year. We will follow the cycle from its beginnings in the agencies of the Executive branch, through the reviews of the Office of Management and Budget (OMB) and the approval of the President's budget, and on through the budget resolution, authorization, and appropriations processed in Congress. The functioning of the formal budget cycle is heavily influenced by external forces. First and foremost there is politics. The budget process is the arena in which almost all national decisions are made, reaffirmed, or undone. It is and should be a political process in the broadest sense. But the process is also often embroiled in purely partisan politics and political jockeying for power between Congress and the Executive branch. These political aspects tend to dominate when Congress and the Executive branch are controlled by different political parties, and, as we shall see, this can bring the regular budget process to a state of deadlock. Such deadlocks have been resolved in recent years by the device of "summit" meetings of top Administration officials with the congressional leadership of both parties. These meetings have produced "bipartisan budget agreements," which have then served as external guidance and discipline for the regular budget process, in both the Executive branch and Congress. The most recent example is the agreement reached at a "summit" in October 1990 and enacted into law in the Budget Enforcement Act of 1990 (BEA). The BEA has had a major impact on the entire budget process by virtue of the rigid limitations and strict enforcement measures it prescribes. The impact of the BEA on R&D comes through the specific ceilings it places on the totals of discretionary budgets, which include all R&D budgets, that either the Administration or Congress may approve. For FY 1991 through FY 1993, the BEA sets separate government-wide limitations on defense, international, and domestic discretionary budgets. For FY 1994 and FY 1995, there is a single limitation on all discretionary budgets. If the limitations are exceeded in any category, automatic proportional reductions are required in every budget in that category. OMB is the official scorekeeper, judge, and enforcer. The limitations are set at levels that allow for increases due to inflation but that otherwise generally hold the totals to about the FY 1991 levels. There are some major exemptions, including the savings and loan bailouts, the costs of the 1991 war in the Middle East, and expenditures that can be classified as "emergencies." Entitlement programs are subjected to a separate system of constraints. The BEA provides that its budget limitations can be suspended after two quarters of poor economic conditions if Congress so decides. Although these conditions were met in 1991, Congress did not vote for suspension. The mounting concerns with the economy in both Congress and the Administration may result in some relaxation of the present limitations in 1992. But, new similar constraints will most likely continue to be a significant external force in the budget process. 2.2 In The Agencies 2.2.1 The Estimates The cycle begins each summer with the preparation of estimates within each agency for the fiscal year starting October 1 of the following year. All organizations and levels in the agency are involved in an iterative process of estimating, advocacy, review, and decision for the next eighteen months or more. The agencies must cope with three interacting budget cycles at once. When each new cycle starts, the budget before it is still making its way through Congress, and the budget before that is actually being obligated and expended in the agency. Decisions and problems in the two prior cycles as they progress can have major impacts on the formulation of the budget in the new cycle. The estimates that become the building blocks of the entire process are developed by iterations of "bottom-up" and "top-down" methods of estimating. In "bottom-up" estimating, the estimate is arrived at as the sum of the costs of specific program plans. This mode of estimating requires that program details be well enough defined -- more than a year in advance -- to provide a basis for costing. In R&D budgeting, "bottom-up" estimating can be used, for example, for specific R&D projects, proposed or under way, or for institutional budgets of laboratories and other R&D organizations. In "top-down" estimating, on the other hand, program plans and content are tailored to come within a predetermined dollar figure. This may be an externally imposed budget "ceiling," an internal agency allocation, or the estimator's own estimate of what is reasonable or what the traffic will bear. This mode of estimating is widely used in shaping an agency's overall budget and in developing alternative budget options. An especially important use of the "top-down" method in R&D budgeting is for "level of effort" estimates. These are necessarily used for programs or program areas where the specific projects are too numerous for individual consideration or where they have not yet been identified. For example, in research grant and technology development programs the number of projects is typically too large for central reviewers to consider each of them, and the budget usually must be acted on before the specific projects to be funded are actually selected. The use of "top-down" and "level of effort" estimates for major program areas enables the agency to express its intentions and priorities without committing itself in advance to specific projects. Also, when a major new R&D undertaking is proposed, a "top-down" estimate can serve as a "place holder" to get the project considered for approval in the budget process while the details are being worked out. 2.2.2 The Proposal to OMB The budget proposal that each agency head submits to the Office of Management and Budget (OMB) in September every year is the product of many, often conflicting, external and internal forces. Significant external forces include: - Administration policies and guidance - Budget ceilings or targets set by OMB or mandated by Congress - Decisions reflected in prior year budgets and previously approved five-year budget plans - Formal OMB requirements on budgets in areas of special interest (e.g., selected "cross-cut" areas of R&D) - Agency-OMB agreements or understandings on content and format of the budget estimates - Interagency agreements (e.g., those for coordinating R&D in related fields) - Inputs from special studies and advisory groups - Congressional guidance (statutory, report language, or informal) - Constituency and pressure group demands and expectations Significant internal forces include: - Agency strategic and long-range plans - Program needs and aspirations as seen by the various organizations within the agency - Personal views and preferences of agency head and top leadership - Competition between different programs and organizations for funding within dollar limitations - Built-in requirements for increases in programs approved in prior years or contained in the budget currently before Congress - Overruns and other cost increases in existing programs - Increases desired to capitalize on previous investments - Internal and interagency politics and "turf" battles The top leadership of the agency takes account of these and other factors in a series of in-depth budget reviews with the principal operating organizations and the agency budget staff. The estimates are generally considered on a multiyear basis; five-year projections are required by OMB for all agencies and most major programs. The proposed estimates are scrubbed, new initiatives are challenged and refined, and options are weighed. The process culminates in rounds of tentative decisions and appeals, followed by final decisions by the agency head. Much strategizing enters into these decisions. Should the agency accept the OMB budget ceiling, or should it submit and argue for a higher budget? Should it accept the policy guidance as received or seek to get changes or exceptions. How can programs best be packaged to increase their chances for approval? What are the prudent levels of reserves for contingencies? Should program estimates be on the low side to improve chances of approval? Or should they be on the high side to reduce the impact of future cuts? How can the agency best position itself to cope with the overall budget reductions that are virtually certain to occur before the process is completed? Answers to questions like these can be crucial to the fate of the agency's budget. 2.2.3 The Agency Perspective In choosing strategies and making decisions on the budget, the agency head is obviously often in an ambiguous position. As a political appointee of the President, he or she is a member of the Administration team and is expected to support its policies, including those that run counter to the interests and aspirations of the agency. At the same time, he or she is also the leader of the agency and as such is expected by the agency and its constituencies to protect and advance its interests. Thus, when confronted with restrictive budget limitations from OMB, the agency head must decide whether to abide by them and impose corresponding constraints within the agency, or try to get them eased or find a way to get around them. From the agency head's perspective, the agency's needs can be clearly seen; they are his or her direct responsibility, and they seem small compared to the overall budget problem. The agency head may suspect that the budget limitations are just an initial bargaining position and he or she may know that there will be strong competition for any additional dollars to be had. For all these reasons, the agency head almost always comes down on the side of fighting to increase the agency's budget. Similar considerations obtain throughout the budget cycle, making the role of the agencies in the budget process, once the agency's budget decisions have been made, primarily one of advocacy and defense. Within the limits of antilobbying laws and Administration discipline, agencies feel obliged to maintain year-round campaigns in support of their budgets -- to prevent cutbacks and to lay the groundwork for securing approval of hoped-for increases in future years. These campaigns, and the bargaining, and the wheeling and dealing they entail, are perennial features of the budget process. 2.3 The Office Of Management And Budget 2.3.1 The Process in OMB a. The Setting in OMB. The agency estimates are reviewed in OMB by career civil service budget examiners. The examining staff is organized into seven branches, each having responsibility for the budgets of a group of related agencies. Each branch is headed by a career Deputy Associate Director who reports to a political appointee Associate Director. The examiners are well informed on the programs, problems, and aspirations of their agencies, through program reviews throughout the year, field investigations, and day-to-day contacts. Usually they have had many years of experience working with the same agency. The OMB review does not start from scratch. OMB has usually identified the principal issues in advance and set in motion steps to resolve them or crystallize the options. There may have been direct discussions between senior agency and OMB officials, special studies required by OMB, and policy reviews involving other elements of the Executive Office of the President. The projections in the previous year's budget and the "targets" or "ceilings" sometimes included in OMB's advance guidance to the agency give the examiners baselines against which to assess the estimates submitted by the agency. Thus there are few surprises for OMB when the agency budget submissions are received. The submissions serve, however, as the official statement of the policies, programs, and budget levels the agency head has decided to propose. The agency submissions are in formats prescribed by or agreed to by OMB. They give supporting details for the estimates, justifications for the proposed programs, and projections of future costs. They also contain data required by OMB on a government-wide basis, including the amounts in the estimates for conduct of R&D, R&D facilities, and basic research, and for R&D in each of the "cross-cut" areas designated for special attention. b. The OMB Review. The review process in OMB usually begins with semiformal "hearings" with senior agency officials and program managers. The examiners work in day-to-day contact with the agency budget staffs and other officials as they scrutinize the detailed estimates and justifications, raise additional questions, and request additional supporting information. There are consultations with other parts of OMB and appropriate parts of the Executive Office, such as OSTP and NSC, whose representatives may also have attended the OMB "hearings." In their reviews the examiners are especially concerned with major "new start" programs, their total cost to completion, and the commitments to future operating costs they entail. They have to be on the watch both for overestimating or "padding" and for underestimating or "low-balling" to gain approval. They also have to be alert to proposals inconsistent with Administration policies and those requiring coordination with programs of other agencies. As we have emphasized, R&D budgets follow the same course in the OMB process as other discretionary budgets. They are reviewed primarily on an agency-by-agency basis in the context of the total missions of the agency. The examiners must attempt to assess the relationships of the agency's R&D proposals to the missions the R&D is intended to support, as well as the merits of the R&D itself and its relation to similar R&D in other agencies. Examiners assigned to related R&D programs in different agencies usually work together in arriving at their recommendations. Special attention is given to major jointly funded programs (like the NASA-Air Force National Aerospace Plane) and to R&D areas involving two or more agencies where the division of responsibilities is unclear. The more formal coordinating procedure of the "cross-cut" is applied in selected R&D areas designated jointly by OMB and OSTP. In each such area, an interagency group under OSTP's Federal Coordinating Council on Science and Technology (FCCST) puts together coordinated program and budget options at a range of alternative budget levels prescribed by OMB. The "cross-cuts" are reviewed in OMB on a consolidated basis and are the subject of specific determinations in the decisions on each agency's budget. "Cross-cuts" in the FY 1992 budget included "Global Change," "High Performance Computing and Communication," and "Mathematics and Science Education." The examining staff recommendations are centrally reviewed in OMB in a process that is known as the "Director's Review." The examiners prepare a review memorandum summarizing the agency's request and the staff recommendations, which may be in the form of options. These recommendations are reviewed in meetings with the top leadership of OMB at which representatives of OSTP and other elements of the Executive Office may be present. The staff recommendations and OMB's decisions are considered in the context of Administration policies and the need to produce a total budget that is acceptable from both economic and political standpoints. The total budget must also meet the requirements of the Budget Enforcement Act of 1990 (BEA), which include specific overall dollar limitations on "discretionary" budgets in each of three categories: "Domestic," "International," and "Defense." This means that OMB must carefully tailor the budget to come within the separate limitations prescribed for total budget authority (appropriations) and outlays (expenditures) in each of these categories. Sometimes desired program increases (e.g., NIH research grants for FY 1992) are accommodated without exceeding the outlay limitation by deferring the availability of the new budget authority until the last month of the fiscal year, thereby pushing forward the actual spending (outlays) into the next fiscal year. At or after the Director's Review, decisions are made on the position OMB intends to present to the President. These are communicated to the agency in a "pass back." The agencies are usually given two or three days to respond, and in most cases they protest some or all of OMB's adverse actions, sometimes proposing compromises or new options to lessen the impacts. There follows a period of negotiations between OMB and the agency and consultations within the Executive Office after which the OMB Director decides on the recommendations he will make to the President. The budget of the Department of Defense (DOD), may take a somewhat different course in the OMB review process. The DOD budget is exceedingly complex and an order of magnitude or more larger than other discretionary budgets. This means that lengthier review processes are required both within DOD and by OMB that would be impractical to complete in series in the normal fashion within the time constraints of the budget cycle. For this reason OMB and DOD have agreed, since DOD's establishment in the late 1940s, on a process of "joint review." In the joint review, the OMB examiners and the budget review staff in the Office of the Secretary of Defense (OSD) review together the budget estimates prepared by the three military departments and the other organizations within DOD. They then prepare issue papers and recommendations for consideration by the DOD top leadership. Issues may be raised jointly by the staffs or independently by either OMB or OSD. The issue papers, which may number in the hundreds, are considered by the DOD top leadership in meetings with the OSD and OMB staffs, after which the DOD decides on the budget proposals the Secretary of Defense will make to OMB and the President. The OMB staff then prepares their "Director's Review" memorandum, setting forth the remaining issues on which they believe DOD should be challenged. After considering the staff recommendations, consulting with the NSC and others in the Executive Office, and further OMB discussions with DOD, the OMB Director decides on the positions he will take with the President on the DOD budget. c. The President's Budget. The President's decisions on the budgets of the agencies are made by procedures he establishes each year. Usually they are made with the help of a small group of senior advisers, consisting of the OMB Director, the Chief of Staff, and other senior members of the White House staff, including since the start of the Bush Administration the Director of OSTP in his capacity as Assistant to the President for Science and Technology. Agency heads wishing to appeal the OMB recommendations may meet with this group to resolve differences, if possible, without the personal involvement of the President. Alternatively, the President may wish to deal directly with the agency heads, especially when major policy or political implications are involved in the budget decisions. The President's decisions are communicated to the agencies, which must then promptly revise their budgets to conform to the decisions. The corrected figures and narratives to be printed in the President's budget documents are checked by OMB and readied for the printer. The detailed budget justifications and supporting materials to be submitted to Congress are likewise revised. But the decision process may not yet be quite finished. As the successive budget decisions are made, the President and his advisers may become dissatisfied with the resulting totals or may find that essential additional requirements must be squeezed in. Either of these circumstances can lead to decisions to make across-the-board percentage reductions or other new cuts in the budgets already approved. Such "ratchets" can play havoc with fine-tuned agency budgets, but are one of the tools that may be used in the final shaping of the overall budget. The final step in the OMB process is the production of the "Budget of the United States Government," as the official document that submits the President's budget to Congress is entitled. Under a single cover, this behemoth of more than 2,000 pages contains the President's political presentation of his budget policies and the details of the budget recommendations for the entire federal government, complete with five-year projections into the future and historical data on the past. The production of this document in the space of a few weeks each January is truly a remarkable feat. For R&D, the budget document includes overall summary tables of the amounts for R&D in the agency budgets; other tables summarize the amounts for basic research, for R&D facilities, and for R&D in areas of special interest, including the R&D "crosscuts." There are statements of the Administration's policies on R&D and explanations of what the budget provides for many of the principal programs. In the Bush Administration, R&D has been a top priority and a major theme in the budget, and whole chapters in the narrative portion of the document have been devoted to it. 2.3.2 The OMB Perspective a. OMB's Dual Roles. OMB plays two basically different roles in the budget process. One is to support the President's policies, programs, and commitments. The other is to constrain the budget. OMB's role of supporting the President and his administration has several facets. First, it is OMB's job to see that the budget supports the administration's objectives and commitments to the degree possible within an acceptable total budget. When goals and commitments are incompatible with overall budget limitations, it is up to OMB to sharpen the issues, to try to invent solutions, and to lay out options. Second, OMB's support role includes identifying problems the Administration will face in the budget and providing early warning, when possible, of longer-term future problems. Lastly, the Director of OMB has responsibilities for leadership in the Administration's campaigns for congressional approval of the President's budget. These include devising Administration strategies, defending unpopular decisions, engineering budget "summits," and conducting negotiations with Congress on crucial topics. OMB's role in constraining the budget is well known. It must challenge new spending proposals and seek economies in existing programs. It must resist special pleading from agencies, members of Congress, and lobbyists. It has learned to be skeptical about pitches touting high benefits or low costs. It knows there are always more claims on the budget than there is budget to claim. With some cause, OMB can feel that all the agencies and their allies are attacking the budget and they are its only defenders. To defend the budget each year, OMB has developed an arsenal of counterstrategies and tactics. Every year is a "tight budget year." OMB guidance letters to the agencies always stress the need for economy, often forbid "new starts," may threaten cutbacks in current programs, and frequently impose ceilings on the amounts that can be requested. OMB is adept at finding reasons to defer programs by requiting further study or coordination before approval or by making private-sector or international cost sharing a precondition. OMB frequently uses top-down budget limitations to force an agency to make the difficult choices within a particular program area. OMB budget allowances normally leave little room for unavoidable increased costs; for example, mandatory increases in civil service pay rates are usually required to be absorbed by major agencies within funds budgeted for other purposes. Occasionally, when faced with the certainty of congressional increases in a politically popular program, OMB may decide that the best tactic is to cut the estimate in the President's budget below the otherwise acceptable level. OMB's actions in the budget process reflect the interplay of its supportive and restraining roles. At times when curtailing the deficit is the top priority, the two roles can coincide. But other priorities may still prevail: the Reagan-era commitment to a defense buildup, the savings and loan crisis, and the Persian Gulf war are examples. b. OMB's view of R&D. Both its supporting and restraining roles are apparent in OMB's treatment of R&D. It is fair to say that over the years OMB has been generally supportive of R&D, reflecting the favorable attitudes of most Administrations since World War II. Thus, for example, OMB's predecessor agency, the Bureau of the Budget, took a leading role in the establishment of the National Science Foundation, the organization of R&D leadership in the Department of Defense, and the launching of NASA and the space program. The great expansion of federal support for R&D over the past forty years was worked into the budget totals on a priority basis. In recent budgets OMB has, of course, supported the R&D increases and initiatives endorsed by the President. But R&D has also felt the restraining hand of OMB in many ways. Recommended increases in the R&D budgets have almost always fallen short of the needs as seen by the agencies and their scientific and technical constituencies. A special case was the annual ballet OMB danced with Congress for many years on the research budgets of the National Institutes of Health (NIH). OMB would deny or minimize increases for NIH R&D in the well-founded expectation that whatever budget the President submitted would be boosted substantially in Congress. OMB has also fought hard against many major new R&D initiatives (e.g., the Space Shuttle and the Space Station) until they have been approved by the President, and even then may continue to seek ways to reduce or offset their cost. R&D also feels OMB's restraints when, as in certain areas of energy R&D, OMB believes that the proposed R&D should be paid for by the private sector rather than the federal government. OMB budget restraints seem often to fall especially hard on relatively small R&D programs in agencies whose major interests are elsewhere, as in the Departments of Commerce and Interior, for example. In these cases, the focus in both OMB and the agency may be on the overall budget of the agency, leading to tradeoffs by OMB or the agency that adversely affect R&D. It is fair to say, however, that in cutting back R&D budgets OMB generally tries to avoid second-guessing the R&D agencies on purely scientific or technical matters. When agency overall R&D budgets are to be reduced OMB usually leaves the allocation of funds within the reduced total to the agency's judgment. For many R&D programs, OMB's use of the "level-of- effort" approach likewise leaves the specific scientific and technical choices to the agency. OMB has often sought to persuade the interested scientific communities to take more responsibility for setting priorities in their fields within an acceptable total instead of leaving this task to OMB. 2.4 The Congress 2.4.1 The Congressional Budget Process a. The Setting in Congress. The structure of the present congressional budget process was established in 1974 to provide a better framework for Congress to exercise its responsibilities in the review and control of the annual budget. The basic concept was that Congress should first decide the overall size and composition of the budget and then tailor the specific appropriations to conform to this pattern. The process is prescribed in detail by law, but depends crucially on a degree of self-discipline which Congress has found it difficult to maintain. Originally, the only sanctions to enforce it were schedules and procedural rules of the House and Senate, which even though written into law Congress can ignore or supersede by subsequent legislation. Dissatisfaction with the process has led to two major efforts to impose more discipline, on both Congress and the Executive branch. In 1985 the Gramm-Rudman-Hollings law (GRH) focused on the problem of reducing the annual deficit. It set specific dollar limits on the deficit which would bring it to zero over a five-year period and introduced a new type of sanction by requiring automatic percentage reductions in virtually all discretionary appropriations if the limits on the deficit were breached. GRH also required the President's budget to conform to the prescribed limits on the deficit. As we have seen, the Budget Enforcement Act of 1990 (BEA) superimposed additional disciplines on the budget process in both Congress and the Executive branch. It shifted the focus from reducing the deficit to limiting appropriations and established specific dollar ceilings on discretionary budgets. The sanctions now include tightened procedural rules in Congress and a new system for automatic reductions when limitations are breached. Within these disciplines, the congressional budget process runs its previously prescribed course, through the stages of the budget resolution, the legislative authorizations, and finally the actual appropriations. The statutory schedules are seldom if ever met, and the system can run into serious deadlocks, but each year the essential steps are eventually accomplished. The process starts with the transmission to Congress and public release of the President's budget, usually in the last week of January. This sets off the first rounds of political debate on the budget. The opposition party can be expected to challenge the budget's priorities and economic assumptions, pronounce the President's budget DOA ("dead on arrival"), and vow to replace it with a congressional alternative. Both the Administration and Congress, and the various factions within Congress, begin to stake out the positions they will defend as the process proceeds. Immediately after the release of the President's budget, Congress receives masses of supporting information. OMB furnishes sets of the computer tapes from which the budget documents have been produced, for the use of the Congressional Budget Office (CBO) and the General Accounting Office (GAO) in making their own analyses of the budget. The budget, authorizing, and appropriations committees at once begin a three-pronged review process, in parallel. The agencies submit to them detailed budget justifications, often running to several volumes. Additional supporting materials and special reports are provided in response to congressional requests. Other reports and analyses may have been requested and received from the congressional support agencies -- the Congressional Budget Office (CBO), the Congressional Research Service (CRS), and the Office of Technology Assessment (OTA). b. The Budget Resolution. In the budget committees the process starts with a report on the President's budget prepared by the nonpartisan Congressional Budget Office (CBO). This report analyzes the entire budget and identifies issues and options for Congress to consider. On the spending side of the budget, it critiques the President's proposals in each of the major functional categories into which the budget is divided (e.g., 050 National Defense, 150 International Affairs, 250 General Science, Space, and Technology). The analysis is usually in terms of increases or decreases from baseline projections of the previous year's budget known as "current services estimates," which are intended to represent what the budget would be if no legislative or policy changes were made and current levels of services were maintained. The House and Senate budget committees each hold a series of hearings at which the Director of OMB, top economic policy officials of the Administration and the heads of the departments and agencies having major pieces of the budget testify. By February 25, the budget committees are supposed to receive recommendations on the budget from each of the other committees of Congress. The output of the budget committees is a proposed budget resolution setting forth the framework within which Congress intends to act on the budget. This is in effect a set of instructions from Congress to itself. It is in the form of a "concurrent" rather than a "joint" resolution, and therefore does not require the President's signature or give him an opportunity for a veto. The budget resolution sets overall totals for budget authority (appropriations), outlays (expenditures), revenues, and the deficit. The amounts for budget authority and outlays are broken down into target (but not binding) figures for each major functional category in the budget and the discretionary amounts must come within the total figures prescribed by the Budget Enforcement Act (BEA). The reports on the budget resolution contain instructions, known as "602(a) allocations," to each of the House and Senate committees that set ceilings on the spending and floors on the revenues they may propose. Discretionary budget authority and outlays, which include all funding for R&D, are allocated in a lump sum to the House and Senate appropriations committees, who then have the responsibility for making the "602(b)" suballocations to each of their several subcommittees. The schedule calls for the budget resolution to be agreed to by both House and Senate by April 15, a date that is seldom if ever met. If House and Senate are unable to agree, each house may proceed to make "602(b) allocations" based on its own version of the budget resolution. c. Authorizations. For many agencies there is a statutory requirement that their programs and appropriations be authorized by law each year before the actual appropriations are made. These include, among others, DOD, NSF, and NASA. For these agencies, the Administration submits each year a draft authorizing bill consistent with the President's budget and supported by the same detailed justifications as submitted to the appropriations committees. The authorizing bills are considered by the House and Senate legislative committees having jurisdiction over the agency, known in the budget process as the "authorizing committees." The authorizing committees typically hold detailed hearings on the agency's entire budget and the authorization bills and reports they produce usually give a detailed "markup" of the budget. These bills do not actually provide funds to the agency but authorize the Congress itself to make the actual appropriations, set limits on the amounts to be appropriated, and may place some restrictions on how the agency is to spend the money. In theory, an authorization bill is required to be passed by both houses and signed by the President before it is in order for Congress to consider the related appropriation bill. In practice, this condition is seldom met. When authorization bills are unduly delayed, the appropriations committees can usually get a waiver of the rules permitting the appropriations process to proceed. In such cases the authorization bill becomes unnecessary, unless it contains essential legislative provisions. Sometimes authorization bills never get passed. The significance of the authorization process, however, goes beyond whatever direct impact it may have on the appropriation process. It provides a major vehicle for congressional oversight of agency programs by members and staff specialized in the needs and problems of the agency. The authorization hearings may be valuable to the agencies in providing a forum for drawing attention to their needs. In addition, the authorizing committees often serve as advocates for the agency and its programs within Congress -- with the budget and appropriations committees and on the floor. d. Appropriations. (1) The Subcommittees. The appropriations committees are where the real action is in the congressional budget process. In both House and Senate they are organized into subcommittees, each having jurisdiction over a set of related agencies whose budgets are carried in one of the thirteen appropriations bills by which Congress has traditionally provided funds for the entire government. The subcommittees responsible for major federal R&D programs include Veterans, HUD, and Independent Agencies (NSF, NASA, and EPA), Defense (DOD), Labor, Health and Human Services, and Education (NIH), and Energy and Water Development (most of DOE). The appropriations subcommittees and their staffs wield great authority over the agencies through their control of the purse strings. They also have great influence within Congress by virtue of the seniority of their chairmen and the favors they can do for other members in the budget process. The subcommittees regard themselves as the congressional guardians of the budget and are jealous of their prerogatives, especially when they feel threatened by what they regard as "intrusions" by the budget or authorizing committees into the budget process. (2) Appropriations Hearings. The appropriations subcommittees begin intensive hearings shortly after the President's budget has been received and before the budget resolution has been passed. The hearings are on an agency-by-agency basis. The agency head, some of his top associates, and his budget officers are questioned in depth. The subcommittee chairmen and many of the members, as well as the professional staff, have typically had many years of experience in dealing with the same agency. The staffs have spent much of the preceding year gathering ammunition for these hearings and have primed their chairmen and members with the tough questions they believe should be asked. The agency head and his colleagues often find themselves in a difficult position in these hearings, even when they have good justifications for their budgets and strong defenses against substantive challenges. By long- standing Executive Orders, as well as by political loyalty, they are required to support every detail in the President's budget. Negotiations or compromises with the committees without OMB clearance are against the rules. On the record, at least, agency heads must "stonewall" or "waffle" on many "What if?"-type questions, even ones that are clearly reasonable. A common example occurs when an agency is asked to place programs in order of priority. In an appropriations committee context, acknowledgement of a lower priority can doom a program. The committees are usually on the lookout for reasons justifying cuts in the budget, and a lower priority rating by the agency can give them one. Agencies therefore are generally nonresponsive to questions of priority. The saving grace is that the committees generally understand the agency's dilemma and usually, after making some political hay out of its recalcitrance, let the matter drop and make their own priority judgments. (3) The "602(b)" Allocations. As we have seen, when the budget resolution has been approved, the appropriations committees in the House and Senate must suballocate their lump sum "602(a)" allocations by assigning "602(b)" allocations to each of their subcommittees. The allocations for discretionary. appropriations consist of separate ceilings on budget authority and outlays for the domestic, international, and defense categories established by the Budget Enforcement Act. The "602(a)" allocations are always less than the sum of the "602(b)" needs as seen by the subcommittees (e.g., by $8.7 billion, or 1.7%, for FY 1992). The subcommittees therefore become advocates within the full committee for the budgets and programs under their jurisdiction -- not necessarily for what the agencies have proposed but for what the subcommittees believe that Congress should approve. The debates and political maneuvering in the appropriations committees leading to the "602(b)" allocations are perhaps the most crucial step in determining the composition and priorities of the budget that Congress will ultimately approve. This part of the process has no set pattern and all the parties -- the Administration, the major agencies, and outside pressure groups -- muster all the influence they can to secure outcomes that advance or protect their interests. At this point the countervailing pressures can bring the whole process to a halt. In some years a stalemate has ultimately been resolved by an ad hoc group consisting only of the subcommittee chairmen, known as the "College of Cardinals," who meet privately to make the decisions and deals necessary to put together a final package and then attempt to exercise the muscle needed to gain a favorable vote in the full committee. (4) Final Actions. When the "602(b)" allocations have been settled, each subcommittee can complete its reviews and make its "markup." The subcommittees typically seek to approve as much new budget authority for their programs as they can within their "602(b)" limitations, and may seek to evade the limitations by various "smoke and mirrors" devices. For example, the subcommittee's budget authority totals may be artificially reduced by arbitrary increases in offsetting estimates of economies to be achieved during the year. When the limiting constraint is the outlay limitation, the subcommittee may push outlays into the next fiscal year by deferring the availability for expenditure of the excess budget authority until the end of the fiscal year. In justification, the subcommittees can often point to OMB's use of this device in the President's budget submission. The Subcommittee recommendations must be approved by the full appropriations committees and then by the full House and Senate. The House normally acts first; the statutory date for it to complete action on all appropriations bills is June 30 -- another date that is rarely met. Senate action follows, usually in September, after the summer recess. The conference committees of the House and Senate that meet to iron out differences in the House and Senate bills often do not complete their work before the end of the fiscal year on September 30. In those cases, Congress passes so-called "continuing resolutions" which permit agencies to continue previously approved operations until a specified date; failure to pass appropriations by then threatens to close down the agency, unless the period is extended. When there is no overriding external discipline, like that provided by the Budget Enforcement Act (BEA), the final enactment of the appropriations bills usually becomes embroiled in bitter political conflict. The Administration and Congress, and factions within Congress, go all out in political maneuvering to gain approval for the causes and programs each has espoused and to avoid blame for increasing taxes, higher deficits, or other politically unpopular outcomes. In this situation -- most recently reached in the fall of 1990 -- appropriations bills are subjected to threats of vetoes and sometimes actual vetoes, followed by attempts to muster the two-thirds vote in both houses needed to override. Other pieces of essential legislation, such as extensions of continuing resolutions to keep the government running, may be held hostage by either side -- by refusal of Congress to act or by presidential veto. The process can become deadlocked, with threats, counterthreats, and much brinkmanship on both sides. Total deadlock at this point has been avoided only by the device of budget "summit" meetings at which top Administration leaders and the leadership of both parties in Congress hammer out a new "bipartisan budget agreement" and both branches agree to accept its constraints in the current and succeeding budget cycles. As discussed earlier, the acrimonious and confused deadlock on the FY 1991 budget was resolved by such a "budget summit" in October 1990, and the resulting bipartisan budget agreement was codified in the Budget Enforcement Act of 1990 (BEA). With such discipline in place, the final actions on appropriations bills can proceed without the traumatic threat of a major deadlock. Political battles between Congress and the Administration can be localized in the individual appropriations bills, and are subject to the discipline that if total appropriations exceed the prescribed limits in any of the discretionary categories, there will be automatic percentage cuts in all appropriations in that category. As long as the agreements like those embodied in the BEA are honored by both Congress and the Administration, the congressional appropriations process can be expected to function in a relatively orderly fashion. e. Congressional Controls. Congressional participation in the budget process does not end with the passage of the appropriations acts. There are often provisions in appropriation acts or committee reports that call for committee review or approval of actions the agencies propose to take in executing their budgets. Thus, most R&D agencies have such limitations on their flexibility for major reprogramming within an appropriation without the blessing of their appropriations committees. Requirements for congressional approvals short of enactment of new legislation, which the President has the opportunity to veto, have been declared unconstitutional by the Supreme Court. However, this has not deterred the appropriations committees from levying "controls" on the agencies, and the agencies seldom consider it prudent to defy them. The agencies naturally prefer informal committee requirements which may be negotiable to the alternative of detailed statutory limitations in their appropriation acts. But in any case they cannot afford to antagonize the committees on which they must depend for support year after year. 2.4.2 Congressional Perspectives a. Congress and the Budget. Congress sees the budget from many different perspectives. It is seen differently by the leadership in each party, by the budget, authorizing, and appropriations committees and their staffs, and by individual members and their staffs. All have their own political agendas and seek to advance them. Each committee has its own conception of its role and its own turf to protect. There are, however, some general congressional perspectives on the budget and the budget process. There is frustration with the intractable problem of the deficit and with the spending caps in the BEA that foreclose possible major new congressional initiatives. There is always reluctance to cut politically popular programs or raise taxes. Each member is motivated to secure approval of projects that channel budget dollars into his or her state or district or are of special interest to significant constituencies. Another general perspective in Congress is mistrust of the Executive branch. Inherent Executive-Legislative tensions, fueled by the Vietnam war, Watergate, Irangate, and the budgetary frustrations of recent years, have led to a situation where Congress routinely rejects many Administration proposals in the budget and works out its own. Decisions on the budget are made in an atmosphere more of confrontation than cooperation. This situation has been aggravated by the longstanding division of party control of the Presidency and Congress. But it seems clear that in any case Congress will insist on asserting its independent role in the budget process. b. Congress and R&D. All the foregoing perspectives come to bear in congressional consideration of budgets for R&D. As we have emphasized, R&D budgets are handled in Congress in the same manner as all discretionary budgets. For the most part, Congress has been supportive of R&D budgets, although usually cutting back proposed major increases and sometimes levying reductions comparable to those applied to other discretionary parts of the budget. Budgets for a few major R&D projects, like the MX, B-1, B-2, and SDI ("Star Wars"), have been major targets in Congress. In some areas of R&D where Administration budgets have sought to make sharp reductions, Congress has regularly come to the rescue and restored higher levels of funding (e.g., NIH, NOAA, and some DOE). There has been little or no congressional "bashing" of R&D as unnecessary or ridiculous in recent years. Basic research, even in pure science with no foreseen applications, has been accepted as a legitimate, even essential field of federal expenditure. When reductions have been made, the problem has not been hostility to R&D as such but disagreement with specific proposals or simply that they cannot squeeze everything needed and desirable into an acceptable total budget. R&D is not immune to the political aspects of the congressional budget process. Lobbying by representatives of industry, universities, and scientific and professional groups is a major shaper of R&D budgets in Congress. Congress has found a fertile fields for pork barrel politics in some R&D appropriations. The appropriations committees are able to "earmark" funds in the appropriations bills for specific projects at specific locations. Sometimes this is the result of direct lobbying by universities, agencies, or other special interests. In other cases the initiative has been taken by members of the committee, on their own behalf or to oblige a colleague. 2.5 A Summary Assessment We have seen in some detail how the budget process makes its way through the cycle, taking the many separate R&D budgets with it. We have seen that the process is overlaid with politics, of both the partisan and the Congress vs. Executive varieties, which can lead to stalemates in the spring over the allocations under the budget resolution and in the fall over the final actions on the appropriations bills. Nevertheless, the basic framework of the process is sound. In the Executive branch the process of budget preparation in the agencies and review by OMB is well established and works well. The President's budget provides the vehicle for a comprehensive consolidated view of the entire budget and an excellent opportunity for Presidential leadership each year. The concept of the congressional budget process of first setting "macrobudget" guidelines in the budget resolution and then filling in the details in the appropriation process, is likewise sound. The authorization process, even though often not fully integrated into the appropriation process, provides a useful link between legislative oversight and the budget process. It is clear, however, that the budget process requires the discipline of a bipartisan budget agreement between the Administration and Congress in order to function effectively in a period when Congress and the Presidency are controlled by opposing political parties. If the limitations in the BEA are suspended or repealed, the process seems destined to face deadlock each year, as happened in the fall of 1990. Another "budget summit" meeting and a new bipartisan budget agreement will be needed. Up to this writing (December 1991) the BEA limitations have held. One of the prime purposes of the BEA was to put off another confrontation on the budget at least until after the 1992 elections, and neither Congress nor the Administration has wanted to face the political consequences of reopening the bipartisan budget agreement. It appears, however, that in 1992 worsening economic conditions could force some relaxation of the present BEA limitations. Nevertheless, it seems almost certain that BEA- type limitations on discretionary spending will be a part of any new budget agreements and that R&D will continue to be under some type of overall constraints for the foreseeable future. There is much dissatisfaction with the budget process. Even when it stays on course and avoids deadlock, it is widely criticized from various standpoints and with varying degrees of justification. Some fault it as ineffective in controlling the deficit or for failing to meet national needs. Others see it as unnecessarily complex and overly political. Concerns with the effectiveness of the process are really more with the decisions made in the process than with the process itself. Decisions to curtail the deficit or to meet more or different national needs can be made within the existing process if there is a consensus on what to do and the political will to do it, changing the limitations of the BEA if necessary. The plain fact is that at this point no one has come forward with a credible plan for effecting major reductions in the deficit. The concerns with complexity are well justified. The continual preoccupation with budget matters it requires of the top leadership of the agencies and of officials all down the line detracts from their ability to attend to the other requirements of their jobs. Many of the complexities of our budget process stem from the structure of government established by the Constitution. The needs for a congressional budget process and separate budget reviews in the House and Senate result from the Constitutional separation of powers and the division of Congress into two houses. One might consider streamlining in various ways the three-pronged budget review process in Congress. However, as we have seen, three different functions are being performed: sizing and shaping the overall budget (budget committees), legislative authorization and oversight of programs and policies (authorizing committees), and detailed approval of appropriations (appropriations committees). Vesting these functions in a different committee structure would not necessarily result in significantly less complexity. Criticism of the budget process as overly political is justified when the process gets used as a political football to score partisan political points. It is also justified when appropriations are "earmarked" in Congress for projects of blatant self-interest. These are clearly abuses of the budget process, but it is hard to see how restraints to curb them could be imposed on the political process without violating Constitutional rights and prerogatives of the Executive and Congress. Self-restraint cannot be legislated. It has to be remembered that the budget process is, in fact, essentially a political process. It is where the decisions are made each year on what the government will do. Legislation sets policies and authorizes programs, but is the appropriations that implement them. Therefore, it has to be expected that all the concerned political and special interests will converge on the budget process to pursue their own agendas. The root cause of the many dissatisfactions with the budget process, in our view, is the intractable nature of the basic problem of the federal budget: how to reconcile all the national needs for federal spending with the need somehow, sometime, to reduce the federal deficit. Ineffectiveness, complexities, and political turmoil in the budget process can be understood, if not entirely forgiven, as symptoms of the frustrations of a democratic decision process confronted by problems with no obvious answers. R&D budgets are caught up in the overall problems of the budget process along with all the rest. There are also some special concerns with the treatment of R&D in the budget process. Some of these will be discussed below in Chapter 3.0 of this report. Endnotes [1] Willis H. Shapley, Research and Development in the Federal Budget: FY 1977, American Association for the Advancement of Science, Washington, D.C., 1976. [2] Willis H. Shapley et al., Research and Development: AAAS Report VII, American Association for the Advancement of Science, Washington, D.C., 1982. 3.0 R&D CONCERNS 3.1 Introduction Having described the budget process and how R&D budgets are handled in it in some detail in Chapter 2.0, we will now consider some of the concerns expressed in the science and technology community about the process as it affects R&D and attempt to assess the future prospects for R&D in the budget process. We will begin by considering concerns with priority setting for R&D in the budget process and related questions of "balance." We will first examine critically the concepts of priorities and balance in the budget and see the essential arbitrariness of their application to R&D and other budget directed at different goals. Then we will identify and discuss several types of contexts in which R&D priorities can be set in the budget process. The next section considers some concerns with the data available on R&D budgets and the ways they are presented in the budget process. We first review the types of data that are now available for detailed budget reviews and for "macrobudget" decisions on the overall size and composition of the federal budget. We then discuss two specific suggestions for improvement. One is a proposal for the establishment of a comprehensive comparable database on R&D budgets, which appears to present many difficulties. The other is an idea for a new report on "R&D in the Budget," which might be useful in presenting the R&D issues involved in macrobudget decisions. We will then recognize some concerns with the impact of the budget process on stability and continuity in R&D programs. We will address specifically concerns with the annual nature of the appropriations cycle and the advisability and possibility of a two-year appropriation cycle. The last concerns to be discussed relate to the fragmentation of responsibility for R&D budgets among different review groups in OMB and Congress and to the aggregation of R&D with unrelated non-R&D activities in the review process. We will see that these problems are not as serious as they may appear and that, on the other hand, separate aggregations of R&D budgets could be detrimental to R&D. The final section is a summary assessment of the treatment and prospects of R&D in the budget process. We will look in general terms at the outcomes of the process for R&D in recent years and then discuss the strengths, weaknesses, and vulnerabilities of R&D in the budget process. In conclusion, we will offer a few thoughts on the difficult problems and uncertain prospects R&D budgets face in the years ahead. 3.3 Priorities And `Balance' 3.3.1 The Concerns There are many concerns about priorities and balance in the budget and a widespread feeling that the budget process needs to deal better with them. With respect to R&D, the main thrusts of the concerns can be summarized as follows: - The budget does not provide adequately for important national priorities, such as the priorities that should be given to R&D in general, to support for R&D in particular areas of national importance, or to support for basic research. - The "balance" between various types of programs in the budget does not reflect the proper priorities. For example, there are concerns with the "balance" between R&D and other parts of the budget, between different sorts of R&D, and within budgets for R&D. - The process does not provide adequately for making choices on a priority basis among R&D projects and initiatives. For example, the need for mechanisms to make choices among "megaprojects" like the Superconducting Super Collider and the Human Genome project is often cited. These concerns stem in part from dissatisfaction with past outcomes of the budget process and in part from the feeling that the process should somehow be able to help assure a better ordering of priorities and better "balance" in the budget. What would be "better" depends, of course, on the viewpoint of the critic. Our discussion will not embrace a particular viewpoint, but we will be mindful of typical R&D viewpoints as we consider the problems of priorities and "balance" in the budget process and how they affect budgeting for R&D. We will first clarify and critique the concepts of "priorities" and "balance" as they relate to the budget and the budget process. Then we will consider the implications for R&D budgets and discuss ways in which R&D priorities may be set in the budget process. 3.2.2 Priorities in the Budget There are two different senses in which priorities are relevant to the budget and the budget process. In one sense, a "budget priority" is a goal or program identified in the budget process for special attention and advocacy, and usually for increased funding. A priority program in this sense is not necessarily regarded as more important than other items in the budget, nor is its priority necessarily intended to mean that other items should be cut back in its favor. It is presented as a "must do" item, without facing questions of budget limitations. In every budget there are many such "priorities." They are usually not ranked, but are advocated separately, in parallel. A current example is the "priority" given to R&D in the FY 1991 and FY 1992 budgets. The importance of R&D and of increased funding for some R&D programs is stressed, but not to the point of suggesting that funding for R&D should be at the expense of other discretionary programs in the budget, many of which are accorded parallel high priorities -- for example, education reform, protecting the environment, and the war on drugs. "Priorities" in a second and much more critical sense may be involved when choices among programs are made to meet a budget limitation. Each such limitation can be said to establish a trade-off area within which decisions on competing budgets have to be made. As we have seen, decisions within budget limitations are made at many points in the budget process. They must be made whenever decision makers at some level are confronted with budget decisions by higher authority that have been made on a top-down or level-of- effort basis. Thus, decisions within limitations have to be made by OMB and by the budget and appropriations committees in Congress to comply with the statutory BEA limitations on discretionary budgets. The appropriations subcommittees have to make decisions within their "602(b)" allocations. Agencies have to make such decisions whenever OMB or Congress make undistributed cuts in their appropriation requests. These decisions may or may not be made on a priority basis. They may be dictated or constrained by external circumstances. The decision makers may elect to make across-the-board percentage cuts or other level-of-effort decisions instead of choosing among the competing programs, thereby passing responsibility for specific choices to lower levels. Ultimately, however, choices are made, and the final decisions can be said to reflect the priorities that the process as a whole has applied, implicitly if not explicitly, in each trade-off area. Making priority choices within a budget limitation does not require ranking all the programs in the trade-off area in a priority order. In a real sense there are only two budget priorities for discrete projects: "In" or "Out." Level-of-effort programs can be squeezed without ranking their component programs at the time the squeeze is applied. In priority setting, the crucial decisions to be made are not at the top end of the priority scale but at the bottom: it has to be decided what to cut out of the budget to meet the limitation. Higher priority programs have to be assessed not just on their own relative merits but also against the consequences of cutting back or eliminating lower priority programs. When faced with this choice, decision makers often find that programs of low priority are nevertheless essential and must be supported. When priorities are to be considered explicitly, decisions must be made on the criteria against which the priorities are to be assessed. For programs directed at the same goals, acceptable criteria can usually be defined in a relatively straightforward manner. In some cases it may even be possible to use quantitative cost-benefit or cost-effectiveness measures to assign priorities. The criteria and assessments are always to some degree arbitrary, and may be controversial, but the process, done fairly, can have a defensible objective basis. When the programs have different goals or multiple goals, however, priority setting gets much more difficult and much more arbitrary. One has to attempt to prioritize the different goals as well as the contribution of each program to them. When the different goals are related, it may perhaps still be possible to define meaningful criteria for assigning priorities. But when the goals are independent, there is no objective way to assign priorities. The priority decisions are essentially arbitrary. For these reasons, the budget process cannot be expected to provide a method or even an analytic framework for setting the major priorities in the budget. The goals of federal programs are simply too diverse. There are no common criteria for setting priorities among the nation's goals in defense, health, transportation, social welfare, and economic development, to give some examples. The problem is the same for setting priorities among R&D programs directed at different national goals. The arbitrary decisions necessary in priority setting, especially when diverse goals are involved, are, of course, essentially political in a broad sense. Although they are ultimately arbitrary, they may have strong justifications within a particular framework of political and social values. The budget does, however, ultimately reflect the priorities determined in our democratic processes. The budget decisions are not made in a vacuum but in the context of annually recurring debates in the budget process. The past- and current-year budgets reflect the existing priorities and serve as the base for proposing and debating changes. Priority setting in the budget process is mostly a matter of incremental changes in current priorities. 3.2.3 `Balance' in the Budget As we have noted, concerns about budget priorities are often expressed in terms of "balance." This concept requires critical analysis. Questions of "balance" are usually invoked in a context of advocacy, from a particular standpoint. Funding for the program of interest, regarded as inadequate, is cited as "out of balance" with larger amounts for programs of less interest. The "imbalance" is urged to be remedied by increasing the poorer program, not by simply cutting the richer. Advocates of programs that already have large budgets do not complain about "balance." Apart from advocacy, however, there is a feeling that priorities can be measured by dollars in the budget, and that the "balance" between the dollar amounts for programs in the budget reflects their relative priority. This has led to the further notion that "balance" as shown in budget statistics is a way of assessing priorities and that it should be used as a factor in budget decisions. In the case of R&D, interest in statistical analyses of the budget has been fueled by the abundance of statistics available. The OMB "Special Analysis," the AAAS annual reports, and the many NSF publications on R&D funding provide a wealth of data on R&D budgets. It is hard to resist the temptations of statistical analysis and easy to overinterpret the results. Many useful insights can be gleaned from analyses of budget statistics, including statistics on budgets for R&D. But when it is proposed to use statistics for determining or assessing priorities or "balance" in the budget, there are serious objections. The basic objection is to the presumed relationship between budget dollars and priorities. From a theoretical economics standpoint it can perhaps be said that the amounts budgeted for various programs should generally be in proportion to their priorities and that the amounts allocated to the various programs in the budget can therefore be taken as a measure of the priorities given to them. But in the real world of budgeting this doesn't necessarily hold. High-priority programs can be less costly than those of lower priority. The cost of a program is what it takes to get the job done, regardless of its priority. Some programs are inherently more or less expensive than others. Pouring more money into top-priority programs is not always a wise decision. Maintaining continuity and capabilities in a lower- priority area, even at considerable cost, may be a prudent thing to do. In R&D, for example, theoretical science is inherently less costly than experimental, and space science missions are inherently more expensive than most laboratory science. But their relative cost tells nothing about the value of the work or what the relative priorities are or should be. For these reasons, one should not look to budget statistics as determinants or measures of relative priority in the budget process. One has to go behind the numbers, relate them to the work to be accomplished, and face the questions of priorities directly in substantive terms. Another serious objection to "balance" as a criterion for budget priority decisions is the fuzziness of the concept itself. There are many questions. In discussions of "balance," especially in advocacy contexts, it is usually implied that "balance" means equal dollar amounts in the budget, which in turn is taken to mean equal priority. But we have just seen that budget dollars do not necessarily equate to priorities. For similar reasons, dollars also do not necessarily equate to other criteria of value, sometimes not even to level of effort. In any case, one must ask: Why should the dollar amounts be equal? Why should they bear any particular numerical relation to each other? If "balance" doesn't mean equal funding, how does one determine when programs and budget are in or out of "balance"? In determining "balance," by whatever formula, what aggregations of programs are to be weighed? Should amounts in closely related areas be included or excluded? These are troubling questions if "balance" is to be regarded as a meaningful concept in budget decisions or analysis. "Balance" is often discussed in terms of the percentage of the budget that goes for one program area as compared to another -- for example, the percentage for social programs versus the percentage for defense or the percentage for basic research versus the percentage for development. Such comparisons are perhaps useful in understanding the composition of the budget and can sometimes be effective in advocacy contexts. But as meaningful indicators of "balance," the percentages suffer the same shortcomings as the budget numbers on which they are based. The objections we have cited lead to the conclusion that "balance" measured by the relative amounts budgeted for different purposes is not a valid concept in the budget process. It may be useful in advocacy and debate, but neither "balance" nor other statistical comparisons can properly be taken as measures of relative priority or as the basis for budget decisions. As we have seen, one must go behind the figures and face questions of priority on a substantive basis. 3.2.4 The Implications for R&D Our discussion has shown three main points: (a) that the problems of priority setting in the budget center on the composition of the trade-off areas within which the programs and budgets are to be prioritized; (b) that priority decisions among programs are essentially arbitrary except when their goals are similar enough to provide acceptable criteria for prioritizing them; and (c) that budgetary statistics are not a valid tool for setting or measuring priorities in the budget process. What are the implications for R&D? First we will point out two conclusions that follow from the fact that federal R&D is directed at many independent goals. Then we will identify and discuss five types of cases where R&D is directed at the same or closely related goals and show that in these cases the establishment of meaningful trade-off areas for setting priorities may be possible. a. Independent R&D Goals. It is obvious that the major federal R&D programs have different and largely independent goals. Thus, for example, the goals of R&D for defense, health, energy, space exploration, promotion of science, protection of the environment, and so on, are fundamentally independent of each other. If they are put in the same trade-off area, their relative priorities can be set only by arbitrary decisions. The budget decisions on R&D in each area depend primarily on the relationship of the R&D to its goals, not on its relationships to R&D in other areas. Thus, decisions on defense R&D are based on assessments of the needs of national defense, and decisions on biomedical research are based on assessments of the needs and opportunities in that field. The two sets of decisions are independent of each other. There is no common criterion for setting priorities between the two areas of R&D. Two significant conclusions follow: - The total amount for R&D in the budget does not constitute an appropriate trade-off area within which priorities should be set. It should not be regarded as an "R&D Budget." Our account of the budget process showed that R&D as a whole is not actually used as a trade-off area, either by OMB or in Congress. However, there is a feeling among some observers of the process that R&D in the federal budget should be dealt with as a whole. An "R&D Budget" as such is seldom advocated, but the idea that there should be "better balance" among federal R&D programs, which implies that R&D funding be treated as a trade-off area, is often put forward. We have seen that there are basic flaws in the concept of "balance" and that priority judgments between R&D for different purposes are necessarily arbitrary. There is no need to regard federal R&D as a whole as a trade-off area in the budget process. - There is no reason why R&D projects directed at different purposes should be expected to compete only with each other for funding in the budget. Thus, for example, there is no reason why the Superconducting Super Collider, Space Station, and Human Genome projects should be taken as a trade-off area within which choices have to be made. Each of these projects is directed at entirely different objectives, and should be considered on its merits in competition with projects of all sons in the budget, not just with other R&D projects up for consideration. If there are to be priority trade- offs, they should be with other programs having the same general objectives. The same logic can be applied to R&D projects directed at different goals when they are supported by the same program or agency. Thus there is no reason in principle why cancer and dental research should have to compete with each other in the NIH budget or why biology should have to compete with astronomy in NSF. The fact that they do results from the political decisions establishing the broader goals of health research and general support of science as trade-off areas in the budget process. b. R&D Priority Trade-offs. We have seen that arbitrary and basically political decisions are unavoidable in making priority choices between R&D programs directed at different goals. Now we will consider some contexts in which R&D is directed at the same or similar goals and it is possible to consider R&D priorities in a less arbitrary and more structured fashion. The following sections discuss five types of trade-off areas in which R&D priorities may be set. (1) R&D and Related Non-R&D. In many areas the federal budget includes funds for both R&D and other types of activities directed at the same goal. In such cases it may make sense to consider questions of priority between R&D and the other types of costs within in an overall limitation. A major example is in the acquisition of defense systems. Here priority judgments may be made between R&D and procurement when budgets for R&D and procurement are considered in the context of overall limitations on the defense budget. This is not a simple matter because it involves prioritizing procurement to meet near-term needs against R&D to meet longer- term future needs, as well as many other complications. But the goals of R&D and procurement in particular areas are similar enough to make their combined budgets a reasonable trade-off area. Another example is HIV-AIDS, where the budgets for research can be considered in the context of the total amounts budgeted for research, treatment, prevention, income support, etc. Other relevant trade-off areas could cover research and treatment in other health areas and the wide range of activities -- research, treatment, interdiction, etc. -- involved in the "war on drugs." Formal budget limitations may not be desirable for these and similar trade- off areas. But questions of the relative priorities of R&D and other types of costs are significant when there are overall budget limitations, and they can be addressed in the decisions on the budgets for R&D and the related programs. (2) Research vs. Development. In federal programs responsible for both research and development, trade-offs frequently have to be made between the "R" and the "D." When the overall program also includes procurement, operating or other expenses as well as R&D, the relative priorities of research and development can each be considered in a more inclusive trade-off area, as discussed above. The potential very long term benefits of research must be compared to the nearer term benefits of development as well as the still nearer term benefits other elements of the program may have. The goals of the overall program can provide the criteria for priority setting. When the program consists only of research and development, priority setting between them is more complex. In most cases, the overall program has several different goals (e.g., NASA) or a broad general goal like the support of scientific research (e.g., NSF). Here trade-offs between research and development may perhaps be guided by general policies and by assessments of the technical situation in each field, but arbitrary judgments are likely to be required. (3) Level of Effort Areas. In our account of the budget process we noted the widespread use of level-of-effort decisions, both in formulating budget estimates and in subsequent OMB and congressional actions. In these cases, the decisions are based on the expectation that the selection of the specific items to be funded will be made on a priority basis. Each level-of-effort decision in effect establishes a trade-off area. As we have noted, level-of-effort budgeting in R&D can have the desirable effect of leaving specific technical decisions to the technical managers rather than to budget reviewers. It can also provide a meaningful framework for priority setting if the elements subsumed are directed at the same or similar goals. On the other hand, if the elements are diverse -- as when a level of effort decision is made on the total research budget of NSF, for example -- then the priority decisions the agency is forced to make have to be generally arbitrary. (4) R&D "Cross-Cuts." In our review of the budget process we saw that each year OMB, in cooperation with OSTP, requires the agencies to make special submissions of the amounts in their budget requests for certain designated areas of R&D. Each of these areas is then given special attention in the budget review process and the approved amounts are highlighted in the President's budget documents. These "cross-cuts" contribute to priority setting in both of the senses we noted above. They serve to identify, highlight, and provide an advocacy focus for R&D considered to have special importance. They also provide trade-off areas for setting priorities within the cross-cut area. Examples of R&D cross-cuts in the FY 1991 and FY 1992 budgets include global change research, high-performance computing, Arctic research, and development of advanced technologies infields like robotics, semiconductors, advanced imaging technologies, and superconductivity. The Director of OSTP has announced his intention to expand this list in future years. R&D cross-cuts are intended to be more than a tool in the budget process. Their basic purpose is to see that there is a well-planned and coordinated overall program that harnesses separate R&D activities in different agencies to work together for an important national goal. Their effectiveness depends on several factors: - General acceptance of the goal of the R&D as a priority to be supported in the budget - Careful advance planning done on a realistic basis, not just an open-ended campaign for more funds - Acceptance by all the agencies of the leadership of a lead agency or some other designated mechanism (e.g., an interagency committee or OSTP) - Active support and participation of OMB, including acceptance of the goals and cooperation among the examiners assigned to the various agencies involved - Full cooperation, at both working and top levels, of all the agencies involved - The ability and willingness of congressional committees to address the cross-cut area in a coordinated manner in their decisions on the budget The "U.S. Global Change Research Program" is the best example to date of an R&D cross-cut in which most of these conditions appear to have been met. The program is developed by an interagency Committee on Earth Sciences of the OSTP's Federal Coordinating Committee for Science and Technology (FCCST). Since FY 1990, cross-cut estimates have been prepared at alternative total budget levels prescribed by OMB and reviewed and acted upon by OMB on a consolidated basis. Cross-Cuts clearly can have great utility for priority setting and coordination in areas where multi-agency R&D activities are directed at important goals. However, there are several potential problems that can limit or condition their effectiveness: - Priorities set in a cross-cut may conflict with other essential priorities. Cross-cuts do in fact "cut across" the existing pattern of agency trade-off areas. Thus, when an agency sustains a substantial general reduction, it has to consider the effects on its other programs of maintaining its commitments to the cross cut area. - Trade-offs within the cross-cut may depend on external factors. For example, multipurpose R&D may have a low priority with respect to the cross-cut goals but still be essential for goals and reasons outside the scope of the cross-cut. - Lines of management responsibility may become confused. It may be difficult for the designated lead agency, interagency committee, or OSTP official to exercise the leadership necessary in the cross-cut area without impinging on the regular lines of authority and accountability in the agencies. - Agencies and scientific coordinating groups may yield to the temptation to overload a cross-cut with marginally related programs of special interest to them and thereby undercut the credibility of the whole cross-cut. Sustaining the integrity of the cross-cut package in Congress is difficult. The various elements of a cross-cut typically go to several different appropriations subcommittees, any one of which can upset the coordinated program. Experience to date, as on Global Change in the FY 1992 budget, indicates that, even when they are sympathetic to the goals of the program, the subcommittees do not hesitate to take independent actions on the details and financing of its elements. In conclusion, it seems clear that these problems, and those involved in meeting the conditions for success listed earlier, place a fairly low limit on the number of R&D areas in which formal cross-cuts are appropriate. This does not detract from the value and importance of their use in cases where they can usefully and successfully be applied. To place cross-cuts in perspective, it should be recognized that they are not the only and not necessarily the best way for the budget process to promote proper coordination and priority setting in R&D areas in which two or more agencies are involved. Many coordinated multiagency R&D programs and budgets are developed and prioritized by the agencies themselves, both by informal cooperation of agency program managers and by more formal interagency committees or working groups. At OMB, the examiners often review related programs of different agencies jointly, without a formal cross-cut. The most effective way to ensure proper coordination and priority setting usually is to place a single agency in charge of the entire program. This is often not feasible because pieces of the program can have essential relations with other responsibilities of the agencies and there may be legal constraints or other overriding objections. The next best way usually is to assign formally to the agency with primary interest in the area "lead agency" responsibility for coordination and priority setting, subject to OMB review and agency reclaims. To the extent possible, the budget process should rely on agency and decentralized interagency mechanisms for priority setting and coordination of R&D. Centralized mechanisms always have the tendency to create additional layers of bureaucratic structure. Applied selectively to high- priority multiagency areas where the need and advantages are apparent, R&D cross-cuts can, with proper leadership, resist this tendency and make a major contribution in the budget process. (5) R&D and Supporting Costs. A final category of trade-off areas that can be meaningful for R&D priority setting is the combination of direct costs of R&D and the indirect and other supporting costs the R&D requires. The indirect and supporting costs of R&D are handled in different ways in budgets for R&D. Thus, R&D grants and contracts include amounts of institutional overhead in various ways. Institutional overhead for federal laboratories and other R&D installations are usually budgeted separately, as are funds for construction and repair of facilities and for general-purpose equipment. In most agencies all federal personnel, including both direct and indirect personnel working on or in support of R&D, are also budgeted in an agency-wide separate account. It is clearly necessary to provide adequate indirect and support funding for the R&D programs to be carried out. When there are overall funding limitations, trade-offs may have to be made between funds for direct and supporting costs of R&D. This trade-off is generally made by each agency. However, its flexibility to optimize its program within an overall limitation is sometimes constrained by lack of authority to transfer funds between appropriation accounts for direct R&D costs and separate accounts for supporting costs and government personnel. Whenever trade-offs must be made between direct and supporting costs, there is always great pressure to maximize the amounts for direct performance of R&D. There is an understandable predisposition to absorb budget cuts by trimming back amounts for maintenance of facilities and modernization of equipment, rather than by cutting back directly the R&D work to be done. As a result there has built up over the years a fearsome budgetary backlog for deferred maintenance and replacement of worn-out and obsolete equipment. This situation seems to be deteriorating to the point that the R&D community both in government and universities will be under increasing pressure to accept less in direct R&D funds to provide catch-up funding for essential support costs. Separate accounts for direct R&D and support costs may mask the need for such trade-offs in some cases, but at the agency total level and above it must be faced. There is no escape from the logic of this trade-off area. 3.3 Budget Data And Presentations Various concerns have been expressed and suggestions made with respect to the data available on R&D budgets and the ways they are presented in the budget process. In this section we will first discuss the data now available to meet each of the two main needs for data in the budget process: (a) the data needed for detailed budget decisions and (b) the data needed for "macrobudget" decisions on the overall size and composition of the federal budget. We will then address two concerns that have been expressed and the suggestions that have been made for dealing with them. One is a perceived need in the process for comprehensive comparable data covering all federal R&D budgets. The other is a suggestion for a new overall report on R&D in the Budget that might be published by OSTP and OMB at the time the President's budget is sent to Congress. 3.3.1 Data for Detailed Budget Decisions As our account of the budget process showed, the details of R&D and other budgets are generally decided at three points in the process: by the agencies in their initial estimates and in later revisions required during the process, by OMB in its "passbacks" to the agencies, and by the appropriations subcommittees in their reports. Decisions on specific R&D projects are occasionally made by the President or by legislative actions in Congress, but these cases are exceptional. Presidential budget decisions and those by the budget committees are generally top-down limitations on the levels of effort of R&D. The agencies, OMB, and the appropriations subcommittees each determine what data they need for their budget decisions and prescribe the formats in which the budgets and supporting data are presented to them. Agencies are obliged by law, regulation, and self-interest to comply with OMB and appropriations committee directives and requests for budget data. The official "budget books" submitted to OMB and, revised as necessary, to Congress generally contain narrative explanations and justifications for each program element in each account, with breakdowns of the amounts requested and comparable figures for the current and prior fiscal years. Special analyses, projections of future costs, and responses to specific OMB or committee concerns may be included or submitted separately. The details of the types of data to be presented and the formats of the budget books and other presentations to OMB and Congress are determined by agreements between their professional staffs and the agencies. In working out these agreements, the reviewing staff has to strike a balance between having enough data for the reviews and being flooded with too much. Less detailed data may suffice for programs with which the reviewers are already familiar from prior-year budgets or from reviews they have conducted outside the formal budget cycle. This method of determining data and presentation requirements for detailed review of R&D budgets is self-correcting in the sense that the reviewers can always request more data or changes in format they believe are needed. It seems to work well enough for the parties directly involved. It also seems to meet the needs of the congressional authorizing committees, which generally work with the same "budget books" and such additional data as they may request from the agencies. 3.3.2 Data for Macrobudget Decisions Our review showed that "macrobudget" decisions on the large-scale composition of the budget are made at several stages in the budget process. In the regular cycle they are first made by OMB and the White House in structuring the President's budget, then by the budget committees in preparing the budget resolution, and again by the appropriations committees in making their 602(b) allocations. In recent years, as we have seen, the controlling macrobudget decisions have been made outside the regular process at "summit" meetings of top leaders in the Administration and Congress. The Budget Enforcement Act of 1990 (BEA) in effect enacted a pattern of macrobudget decisions into law. Macrobudget decisions are also of major concern outside the budget review process. They are a central concern of economic policy, within the government and in the business and financial communities. They are the primary focus of public and media attention to the budget. The needs for data and presentations for macrobudget decisions are very different from those for decisions on the specific details of the budget. Macrobudgeting requires summary data that will clearly explain to the decision makers (a) the major components of the budget, (b) current and projected future trends, and (c) the major budgetary options available. Program details do not need to be addressed. The aim is to arrive at top- down decisions on the major components of the budget in order to provide the framework for subsequent decisions on the details of the budget. There is an abundance of such data available. The President's budget document contains tables and explanatory statements analyzing the total budget from many different standpoints. The annual CBO report gives an independent critical analysis. The budget committees and CBO can generate additional macrobudget analyses from the data in the President's budget or the computer tapes provided by OMB. These sources include abundant data for macrobudgeting decisions on R&D. The Administration's R&D policies and major proposals are highlighted in the narrative statements and in many of the summary tables in the budget document. There are separate tables summarizing the amounts for R&D in "cross-cut" and other areas of special interest. There are summary tables showing the total funding for R&D in the budget. Other sources of summary information on R&D in the President's budget are an annual NSF report entitled "Federal R&D Funding by Budget Function" and the report on R&D published each year by the American Association for the Advancement of Science (AAAS) and an intersociety working group. On the congressional side, the annual CBO report on the overall budget includes analyses of the major R&D budgetary and policy issues. Further supporting data on R&D programs may be made available at the budget committee hearings usually held with the major agencies. 3.3.3 Some Concerns and Suggestions a. A Comprehensive R&D Budget Database? One concern that has been voiced is that there is a need in the budget process for comprehensive comparable data on the R&D budgets of all agencies. This concern was discussed in a 1988 report of the Senate Budget Committee.[1] That report proposed the establishment of a "comprehensive set of mission categories to examine the allocation of resources to science and technology and identify gaps in funding." These categories would provide the framework of an "information base" covering all federal agencies which would be "used by both the Executive branch and Congress as a method for reviewing program contents and strategies and in determining organizational priorities for science and technology." These proposals seem to have been based in large measure on two conceptions which we discussed critically in the previous section. One is the view that it is necessary or would be useful to consider all federal R&D budgets together in relation to each other, as a sort of "R&D Budget." The other is the idea that comparisons of the amounts budgeted for various categories of R&D can and should be used in determining priorities. Our earlier discussion explained that since federal R&D is pointed at many independent goals, the total of the amounts for R&D in the budget is not an appropriate trade-off area for priority setting and there is no compelling need to consider R&D as a whole in the budget process. We also showed that there are serious fallacies in the use of budget numbers for R&D programs as a measure of priorities in budget decisions on R&D. For these reasons, it seems clear that the utility in the budget process of the proposed comprehensive R&D database would be considerably less than envisaged in the Senate report. It is not necessary to consider R&D as a whole either for macrobudgeting or for detailed decisions on the budget. To make appropriate decisions on related R&D programs in different agencies does not require a comprehensive database covering all R&D in the federal budget. Nevertheless, comprehensive information on R&D budgets of the sort proposed, if it were available, could be useful in some more limited ways. For example, it could serve as a reference "directory" for identifying to reviewers which agencies are engaged in what kinds of R&D and could provide a basis for substantive questions on the programs, their relationships, and needs for coordination. But the conceptual and practical problems of producing in the budget process a database of the sort envisaged in the Senate report, even for the more limited objectives suggested, are formidable and seem to this writer to be insuperable. Efforts to define an acceptable comprehensive set of "mission categories" for federal R&D run into problems immediately. Mission categories overlap, and much R&D serves more than one mission. If the budgets in the various categories are to add up to the budget totals, each program has to be force- fitted into just one category, thereby distorting the validity of the resulting tabulations. If the data are to be used to identify R&D that contributes to each of the specified mission goals -- for "cross-cut"-type analyses, for example -- one has to accept the need for overlapping categories and the fact that the category totals will not add up to the overall budget total. Then there are the problems of applying the standard set of categories to the agency R&D budgets as they exist. More force-fitting will be necessary, and each agency will have to decide how to handle indirect and supporting costs of R&D. Recasting $75 billion of R&D budgets into the standard format and providing "crosswalks" to the official budget submissions would be a new massive undertaking to be added to the already overloaded budget cycle at the peak workload time of producing the President's budget document and the congressional budget books. The practical problems would be eased and some of the potential benefits still realized if the production of the data were decoupled from the budget process. The general composition of federal R&D budgets does not change drastically from year to year. Major changes receive due attention in the budget process in any case. Therefore, comprehensive data based on prior- year budgets could still be useful to the Executive branch and Congress for the general "directory" type of information on R&D budgets we mentioned above. Some comprehensive data of this sort is already produced regularly by the National Science Foundation (NSF). If OSTP, OMB, or cognizant committees in Congress believe that such a new comprehensive database on R&D budgets, with the inherent shortcomings discussed above, is indeed worth the effort, the NSF experience in this area would provide a starting point. b. An "R&D in the Budget" Report? We now raise a concern that although there is an abundance of macrobudgeting data in the President's budget document and elsewhere, the data on R&D could be packaged in a way that would more clearly present the issues on R&D that should be considered by Congress in its decisions on the composition of the overall budget. The suggestion is that a brief separate report on "R&D in the Budget" be published jointly by OMB and OSTP at the time the President's budget is sent to Congress. The aim would be to help ensure that the needs of R&D are fully recognized in the debates and decisions on the overall size and composition of the budget. The target audiences would be primarily the Congress (especially the leadership, the budget committees, and the appropriations committees), the media, and the interested public, i.e., all who should understand the needs of R&D as they take their positions on the overall problems of the budget. The report would identify the principal amounts for R&D in the budget and classify them by the discretionary and functional categories used by the budget committees and by the Section 602(b) categories used by the appropriations committees. The report would focus on the major dollar amounts for R&D and the major changes in them that are large enough to affect decisions o