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FYI Number 141: September 28, 2005

NSF Gathers Information on Various Aspects of R&D Funding

NSF's Division of Science Resources Statistics (SRS) serves to "provide a central clearinghouse for the collection, interpretation, and analysis of data on scientific and engineering resources," according to its web site. Among its products are periodic short reports, entitled "InfoBriefs," on various aspects of the U.S. science and engineering enterprise. In June and July, SRS released InfoBriefs on university research space, academic R&D funding, and use of the R&E tax credit. Some highlights of these reports are provided below. The complete text of these InfoBriefs and others can be found on the SRS web site at: http://www.nsf.gov/statistics/showpub.cfm?TypeID=5&Year=2005.

I. "Universities Continue to Expand Their Research Space With the Largest Increase Since 1988; Data Reported for Networking Capacity" (NSF05-314, June 2005): A census of 465 colleges and universities that grant science and engineering (S&E) degrees and spent at least $1 million in R&D funds in FY 2002 showed that the respondents have increased their amount of research space by 11 percent between FY 2001 and FY 2003, to a total of approximately 173 million square feet. While research space has been growing at a rate of about 4 percent biennially for the past 15 years, according to the InfoBrief, this is the greatest two-year increase over that period.

The census found that research space was increased for all S&E fields except agricultural sciences. Biological and medical sciences continue to have the largest amount of space, the report says, at 36 million and 35 million net assignable square feet, respectively. The report found that mathematics, with the smallest amount of space of the fields surveyed, experienced the largest relative increase from FY 2001 to FY 2003, at 50 percent.

During FY 2002 and FY 2003, the responding institutions "reported an investment of at least $7.6 billion for the construction of new research space started during FY 2002 and FY 2003," according to the report. Biological and medical sciences and engineering accounted for "about 70 percent of the new construction started." In FY 2003, 11.8 percent of the research space, and 10.4 percent of new research space construction funding, was designated for physical sciences.

For the first time, the census gathered information on institutions' computing and networking infrastructure. It found that the "large majority of connections (71 percent) was at the two lowest connection speeds" of 1.5 or 45 megabits, although doctoral-granting institutions have "a substantially greater percent of their connections at a speed of at least a gigabit" than other institutions. The report says that the responding institutions "expected a 5 percentage point increase in the number of connections at the faster speeds of at least a gigabit or more by the end of FY 2004, an 80 percent increase in the number of connections at that speed." It also found that "colleges and universities are moving toward greater institutional coverage by wireless. A large majority (67 percent) of institutions had 20 percent or less of their building areas covered by wireless at the end of FY 2003."

II. "Academic R&D Doubled During Past Decade, Reaching $40 billion in FY 2003" (NSF05-315, July 2005): In fiscal years 2002 and 2003, academic R&D experienced "the fastest growth rate reported for any 2-year period since FY 1985-86," according to another NSF InfoBrief. NSF relied on data from 630 universities and colleges that grant S&E degrees and expended at least $150,000 on S&E research and development in 2003 to report that university R&D expenditures grew 10.2 percent between FY 2002 and 2003 to $40.1 billion, "double the $20.0 billion expended in FY 1993."

The report found that "Federal funding has fueled most of the recent growth," growing by 13.1 percent in FY 2003, to $24.7 billion. The "federal share of the academic R&D support total (61.7 percent) is at its highest level since FY 1985," the report says, while non-federal R&D expenditures increased by only 5.7 percent, to $15.3 billion. Universities and colleges themselves are the largest source of nonfederal R&D funding at $7.7 billion, while the report notes that "support from the industrial sector declined slightly for the second consecutive year" to approximately $2.2 billion.

Of the total academic R&D expenditures of $40.1 billion, the medical and biological sciences accounted for the largest percentage of funding, "combining for one-half" of all R&D and slightly more than one-half of federally-funded R&D. The physical sciences accounted for 8.2 percent of all academic R&D funding, and 9.5 percent of federal funding.

The report found that "academic R&D remains highly concentrated in the largest research institutions." Of the institutions surveyed, the report says, "the top 100 institutions in terms of total R&D expenditures accounted for 80 percent of all R&D dollars in FY 2003."

III. "The U.S. Research and Experimentation Tax Credit in the 1990s" (NSF05-316, July 2005): The research and experimentation (R&E) tax credit to corporations is one of the policy tools used by the federal government to foster industrial R&D. According to an NSF InfoBrief issued in July, "U.S. corporate claims for the R&E tax credit totaled an estimated $6.4 billion in 2001.... From 1990 to 2001 the annual dollar amount of R&E tax credit claims grew twice as fast as company and other nonfederally funded R&D expenditures" after adjustment for inflation.

The R&E tax credit was established in 1981 and has been extended repeatedly. Most recently, it was renewed through December 31, 2005 by the Working Families Tax Relief Act of 2004. According to the InfoBrief, the federal government uses incentives such as the R&E tax credit to encourage industrial R&D because the "new knowledge that results from R&D and other innovation activities...is often intangible and may benefit its users without fully compensating its producers. In such cases, private incentives for R&D are diminished, resulting in levels of R&D that may not maximize potential economy-wide or social benefits."

Information for this report came from the IRS's Statistics of Income and NSF R&D funding data. According to the report, "R&E tax credit claims reached an estimated $6.4 billion in 2001...compared with a high of $7.1 billion in 2000." Between 1990 and 2001, such claims grew at an average annual rate of 11 percent. The data also show that, since 1998, "corporate tax returns classified in five industries have accounted for 80 percent or more of R&E tax credit claims." Those industries are: computer and electronic products (26 percent); information, including software (16 percent); chemicals, including pharmaceuticals and medicines (16 percent); transportation equipment, including motor vehicles and aerospace (12 percent); and professional, scientific, and technical services, including computer services and R&D services (10 percent).

Audrey T. Leath
Media and Government Relations Division
American Institute of Physics
fyi@aip.org
301-209-3094

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