The federal deficit will have a significant impact on the extent to which R&D funds will be available within the overall category of discretionary spending. The massive unforeseen expenditures associated with the war in Iraq and hurricane relief programs have put a major squeeze on almost all aspects of the budget.

The continued trend toward the globalization of R&D will have a significant impact on the U.S.

The global war on terror continues to impact federal R&D, but the majority of funds directed toward it will be concentrated on the development, rather than the research, side.

A projected shortfall of people in the future generation of scientists, engineers, and researchers remains an area of concern that is exhibited in trends in the industrial market as well as in the federal government.

While this "education gap" is not deemed critical at the present time, Duga said, "If commitments are not made now, the future strength and vitality of the R&D enterprise and the ability to set the R&D agenda will be at risk."

Federal outlook

Funding is basically flat for 2006 with the exception of a few special initiatives such as expanded space exploration and energy development activities.

Federal support of R&D has undergone significant changes in both content and direction over the past few years, especially with respect to programs related to the global war on terror. However, the initial increases in R&D following the Sept. 11 attacks have not been sustained. Areas that are seeing sustained impact are the broadening and deepening of technology capabilities related to threat identification and amelioration, as well as the reorganization of existing programs such as those of the Department of Homeland Security.

The anticipated across-the-board reduction in federal support for R&D "does not bode well for the support of initiatives that have been touted to return the U.S. to prominent positions in different areas of science and technology," Duga said.

The greatest short-term impact to basic research funding had been the doubling of the budget for the National Institutes of Health. A similar budget increase was proposed and authorized for the National Science Foundation, but has not occurred.

The long-term impact of reduction in basic research funded by the government is raising concerns because industrially funded research generally does not satisfy the same criteria or have the same long-range impact on the technological strength of the country.

Industrial outlook

Surveys covering anticipated industrial funding indicate a slowly-increasing optimism relative to total commitment to R&D. However, a trend of note is the difference between how much industrial support will increase and how it is distributed between domestic and foreign performers. Major increases in the funding of off-shore R&D performance, coupled with the expansion of off-shore facilities, will have an impact on the U.S. R&D enterprise.

While earlier data showed a favorable "balance of trade" in the funding of R&D--with foreign company support of R&D performed in U.S.-located facilities outdistancing the amount of R&D funded abroad by U.S. companies--the gaps had been narrowing over the past few years. Recent studies reveal that the total amount of foreign direct investment is shifting heavily toward India and China, and that the R&D component of this investment is increasing as well. In addition, Eastern Europe is expected to be a growing actor in this field.

Competition for qualified researchers will increase markedly over the short term.

Miscellaneous trends

• State governments have assumed a more aggressive role in supporting targeted research areas and investing in the associated university infrastructure. Several states--such as California, Arizona, Iowa, Ohio, New York and Texas--have proposed significant new funding for a variety of R&D programs in an effort to promote research and an environment for economic development. A great deal of this investment has been in the biosciences, but states are also investing in other emerging technology areas such as nanotechnology
• Judging from recent behavior in industrial expenditures on R&D, it is expected that several sectors will continue their traditional roles as leaders in funding and in growth of funding. In particular, the broad areas of pharmaceuticals, automotive and information technology may expect continuous expansion in R&D efforts
• While the growth in academic participation is expected to be slower than usual in the forthcoming year, it is expected that this will be only a short-term disruption in a most important element of the overall R&D structure
• The forecast emphasizes, in particular, that the long-term future health of the U.S. R&D enterprise, and the benefits that accrue, can be significantly impacted by the near-term decisions related to funding, education, and globalization.

Battelle has been issuing the R&D funding forecast for 36 years, the last 10 in conjunction with R&D Magazine. It relies on a variety of primary and secondary sources including documents and data from the federal budget, the American Association for the Advancement of Science (AAAS), and the Industrial Research Institute.

The full report of the 2006 R&D Funding Forecast will be printed in the January issue of R&D Magazine in late January. Reprints will be available then by contacting Battelle's Jean Hayward at (614) 424-7039 or at haywardj@battelle.org.

Battelle is a global leader in science and technology. Headquartered in Columbus, Ohio, it develops and commercializes technology and manages laboratories for customers. Battelle, with the national labs it manages or co-manages, oversees 19,000 staff members and conducts $3.4 billion in annual research and development. Battelle innovations include the development of the office copier machine (Xerox), pioneering work on compact disc technology, medical technology advancements, and fiber optic technologies.

For more information, visit www.battelle.org or contact National Media Relations Manager Katy Delaney at (410) 306-8638 or at delaneyk@battelle.org.