Committees at Odds Over Balance of Funding Between Basic Research and Small Business R&D

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Publication date: 
21 June 2016
Number: 
76

Two committees are staking out divergent stances on funding for the Small Business Innovation Research and Small Business Technology Transfer grant programs—with the House and Senate Small Business Committees both advancing bipartisan proposals to increase the fraction of agencies’ extramural R&D budgets allocated to these programs, while the House Science Committee appears united in opposing increases that would take resources away from other R&D programs.

The leaders of the House and Senate Small Business Committees—Reps. Steve Chabot (R-OH) and Nydia Velazquez (D-NY) alongside Sens. David Vitter (R-LA) and Jeanne Shaheen (D-NH)—are championing legislation to increase the fraction of extramural R&D budgets that federal agencies must allocate to the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) grant programs. The proposals (H.R.4783 and S.2812) both cleared their respective committees following hearings on Jan. 28, March 2, and March 8 of this year.

Meanwhile, the House Science Committee held a hearing last week to allow more agency officials to weigh in on the effects of changes to the programs and to give members of the committee an opportunity to air their views. In an uncommon display of unity for a committee that has been marked by partisan debates in recent years, committee members from both parties expressed concerns that increasing the amount set aside for these programs could overly impact agencies’ grant programs focused on more basic research.

Setting set-asides

SBIR and STTR—initially authorized in 1982 and 1992, respectively—provide small businesses with R&D funding to help commercialize new technologies. Under current law, federal agencies with extramural R&D budgets of over $100 million must devote at least 3.2 percent of that budget to SBIR. For STTR, agencies with extramural R&D budgets of over $1 billion must devote at least 0.45 percent.

Currently, 11 agencies contribute to SBIR and five agencies contribute to STTR. The below charts display the amounts that five agencies provided to these programs in fiscal year 2013. 

Contributions of five agencies to the SBIR and STTR programs in fiscal year 2013.

Under the House bill, the set-asides for SBIR and STTR would reach 4.5 percent and 0.6 percent by 2022, respectively. Under the Senate bill, the fractions would rise to 6 percent and 1 percent by 2028. The below charts depict these proposed increases.

Proposed increases to the SBIR and STTR set-asides.

After securing a six-year reauthorization following a period of 14 stopgap extensions between 2008 and 2011, SBIR and STTR are now set to expire in Sept. 2017. Although this means that the programs are safe for another year, the small business committees are pushing to reauthorize both programs early. House Small Business Committee Chairman Chabot advocated for an early reauthorization as follows:

In this era of globalization, making it easier for small businesses to develop and commercialize new, innovative products is essential for America’s competitiveness and national security. This is why programs like SBIR and STTR are so important. … In order to give entrepreneurs stability and predictability, we’re getting a jump start on reauthorizing them before next year’s deadline.

The Senate proposal goes farther than the House’s both in the magnitude of the set-aside increases and in that it authorizes both programs permanently. Shaheen, the sponsor of the Senate bill, argues that the programs’ successes to date warrant making them permanent. “The SBIR and STTR programs have a proven track record of success and have enabled entrepreneurs across the country to engage in the research and development that keeps America at the forefront of innovation,” she said in a statement after introducing the bill. “We should act now to ensure that the SBIR and STTR programs are here to stay.”

House Science Committee trying to put brakes on proposed increases

In contrast, members of the House Science Committee do not appear to share the desire to reauthorize the programs quickly and as proposed. Committee Chairman Lamar Smith (R-TX) implied in his opening statement at the June 16 hearing that the committee intends to hold additional hearings on the subject.

Testifying at the hearing were Pramod Khargonekar, Assistant Director for the Engineering Directorate at the National Science Foundation; Michael Lauer, Deputy Director of Extramural Research at the National Institutes of Health; Patricia Dehmer, Deputy Director for Science Programs at the Department of Energy Office of Science; and Jilda Garton, Vice President for Research at the Georgia Tech Research Corporation.

All witnesses spoke positively of the SBIR/STTR programs and advocated for both to be reauthorized permanently. Dehmer, for example, highlighted the work of Niowave, Inc.—a SBIR-supported company that is developing superconducting linear particle accelerators capable of producing the important medical radioisotope molybdenum-99. A byproduct of Mo-99 is used in over 30 million diagnostic imaging procedures annually, yet the U.S. currently has no ability to produce the material domestically despite accounting for about half of global usage.

However, the witnesses also recommended that Congress keep the set-asides at the fiscal year 2017 levels, instead preferring that increases to the programs be driven by increases to the agencies’ overall R&D budgets. They observed that funding for SBIR and STTR increased by about 30 percent since fiscal year 2011, a much faster growth rate than that provided to the agencies’ top-line budgets over the same period.

Rep. Katherine Clark (D-MA) summarized the witnesses’ sentiments: “I agree with you. I think we need to increase the pie, not reallocate the slices.” Smith also made clear that he is not likely to support increases to the set-asides, referring to them as taxes on basic research:

There are still ways to improve SBIR and STTR and assure taxpayers are getting the greatest return for the investments of their hard-earned dollars. Instances of fraud and abuse continue to be problematic. Objective measurement of results across all participating federal agencies is needed. It is also important to examine if the current funding levels–the taxes on basic research–are hurting fundamental scientific research. Any increases would necessarily reduce our nation’s primary investments in basic research at a time when U.S. global leadership is threatened.

In addition, Rep. Dan Lipinski (D-IL), a strong advocate for programs which encourage commercialization activities such as NSF’s Innovation Corps program, nevertheless seemed hesitant to increase funding for SBIR and STTR at the expense of other agency research:

While the SBIR program has great value, we must look at it in the context of overall agency budgets and missions. Increasing the set-aside for SBIR and STTR as much as has been proposed by some could come at the expense of support for other critical research programs. Perhaps my biggest concern is harm done to the pipeline of STEM talent and innovators by increasingly lower research funding levels. This is a difficult choice in tough budget times because both research and commercialization activities are highly valuable investments.

Lipinski went on to cite a letter from various universities and scientific organizations which opposes raising the set-asides absent a better understanding of the outcomes of the increases directed by the 2011 reauthorization.

With few weeks left in the compressed presidential election year congressional calendar, it is unclear whether the proposals will be taken up by either chamber. However, each could still be appended to other legislative vehicles.

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