Originally published May 17, 2023 in Brookings.
The legislative accomplishments of the previous session of Congress have given advocates of more robust innovation and industrial development investments much to be excited about. This is especially true for the bipartisan CHIPS and Science Act (CHIPS), which committed the nation not just to compete with China over industrial policy and talent, but to advance broad national goals such as manufacturing productivity and economic inclusion while ramping up federal investment in science and technology.
Most notably, CHIPS authorized rising spending targets for key anchors of the nation’s innovation ecosystem, including the National Science Foundation (NSF), the Department of Energy’s Office of Science, and the National Institute of Standards and Technology (NIST). In that regard, the act’s passage was a breakthrough—including for an expanded focus on place-based industrial policy.
However, it’s become clear that this breakthrough is running into headwinds. In spite of ongoing rhetorical support for the act’s goals from many political leaders, neither the FY 2023 Consolidated Appropriations Act nor the Biden administration’s FY 2024 budget request have delivered on the intended funding targets. This year’s omnibus funding remained nearly $3 billion short of the authorized levels for research agencies, while the 2024 budget request undershoots agency targets by over $5 billion. And with the debt ceiling crisis coming to a head this month—and House legislation on the table that would substantially roll back federal spending—it’s even harder to be optimistic about the odds of fulfilling the CHIPS and Science Act’s vision of resurgent investment in American competitiveness.
Instead, delivery on the CHIPS and Science Act paradigm can only be fractional as of now, with a $3 billion (and growing) funding gap for research and less than 10% of the five-year place-based vision funded to date.
All of which underscores how much work remains to be done if the nation is going to deliver on the promise of a rejuvenated innovation and place-based industrial strategy. Leaders need to make an energetic and bipartisan reassertion of the CHIPS vision without delay if the government is to truly follow through on its bold promises.
Recently, Rep. Frank Lucas (R-Okla.), chair of the House Committee on Science, Space, and Technology, rightly pointed out that the “science” portion of the CHIPS and Science Act (i.e., separate from its subsidies for semiconductor factories) will be “the engine of America’s economic development for decades to come.” One way the act seeks to achieve this is by creating the Directorate for Technology, Innovation and Partnerships at NSF, and focusing it on an evolving set of technological and social priorities (see Tables 1a + 1b). These won’t just drive NSF technology work, but will guide the development of a more concerted whole-of-government strategy.
In light of these priorities, it’s no mistake that Congress placed the NSF, the Energy Department’s Office of Science, NIST, and the Economic Development Administration (EDA) at the core of the “science” portion of the act. The first three agencies are major funders of research and infrastructure for the physical science and engineering disciplines that undergird many of these technology areas. The EDA, meanwhile, is the primary home for place-based initiatives in economic development.
Meanwhile, in keeping with the larger strategy of countering the nation’s science and technology drift, Congress adopted five years of rising “authorizations” for these core innovation agencies. However, it bears remembering that these authorizations are not actual funding, but multiyear funding targets that, if fully funded year by year, would result in an aggregate budget doubling. In short, Congress has declared that the national budget for science and technology should go up, not down, over the next five years.
It’s also worth noting that the act seeks to boost investment in many different areas, including:
The upshot: Supporters are not wrong in seeing the CHIPS and Science Act as a major moment of aspiration for U.S. innovation efforts and ecosystems.
Yet for all the act’s valuable programs and focus areas, not all is well. As of now, there have been two rounds of proposed or adopted funding policy for CHIPS research agencies—and the results are mixed to disappointing as details a new funding update on the CHIPS and Science Act from the Federation of American Scientists.
The first funding round was the FY 2023 omnibus package Congress adopted last December. There, the aggregate appropriations for the NSF, Office of Science, and NIST amounted to $2.7 billion—a 12% shortfall below the aggregate FY 2023 target of $22.4 billion.
Table 2: Major research agency appropriations vs. CHIPS authorizations
|CHIPS FY23 Authorizations||FY23 Omnibus Appropriation*||Difference ($M)||Difference (%)||CHIPS FY24 Authorizations||FY24 OMB Budget||Difference ($M)||Difference (%)|
|National Science Foundation||$11,897||$9,874||($2,023)||-17.0%||$15,647||$11,314||($4,333)||-27.7%|
|DOE Office of Science||$8,902||$8,100||($802)||-9.0%||$9,542||$8,800||($742)||-7.8%|
|National Institute of Standards & Technology||$1,551||$1,654||$103||6.6%||$1,652||$1,632||($20)||-1.2%|
|Dollars in millions||*FY23 omnibus figures include NIST earmarks and supplemental NIST and NSF spending for CHIPS and Science activities|
Then, in March, amid what was already a yawning funding gap, the White House released its FY 2024 budget proposal. That proposal would have the three CHIPS research agencies falling further behind: $5.1 billion, or 19% below the act’s authorization.
In both the omnibus and the budget, NSF funding was the biggest miss. This can be divided into a few segments:
With these shortfalls at NSF and other agencies, it will be difficult for federal science and innovation programs to have the transformative impact that CHIPS envisioned.
In addition to decreased agency support, actual funding for what we call the “place-based industrial policy” in the CHIPS and Science Act is also coming up short, by even greater relative margins. Where the agency research funding gaps are a substantial restraint on innovative capacity, the diminished place-based funding is an out-and-out emergency.
These programs are important because after years of uneven economic progress across places, CHIPS saw Congress finally accelerating large-scale, direct investments to unlock the innovation potential of underdeveloped places and regions. Thanks to some of those investments, including several new challenge grants, scores of state and local leaders across the country have thrown themselves headlong into the design of ambitious strategies for building their own innovation ecosystems.
Yet for all of the legitimate excitement and interest of stakeholders in literally every state, the numbers that permit actual implementation are not all good. Looking at several of the most visible new place-based programs, the funding news is so far mixed to outright disappointing.
Table 3: Placed-based innovation authorized in CHIPS and Science Act
|Program||What It Does||CHIPS and Science Authorizations||Appropriation So Far||FY24 OMB Budget||Percent of Authorization Funded To Date|
|EDA Regional Technology and Innovation Hubs||Planning grants to be awarded to create regional technology hubs focusing on technology development, job creation, and innovation capacity across the U.S.||$10 billion over five years||$500 million||$48.5 million discretionary; $4 billion mandatory||5%|
|EDA Recompete Pilot Program||Investments in communications with large prime age (25-54) employment gaps||$1 billion over five years||$200 million||$200 million||20%|
|NSF Regional Innovation Engines||Up to 10 years of funding for each Engine (total ~$160 million per) to build a regional ecosystem that conducts translatable use-inspired research and workforce development||$3.25 billion* over five years||$200 million||$300 million||6%|
|NIST Manufacturing Extension Partnership||A network of centers in all 50 states and Puerto Rico to help small and medium-sized manufacturers compete||$575 million||$188 million||$277 million||68%|
|NIST Manufacturing USA||Program office for nationwide network of public-private manufacturing innovation institutes||$201 million||$51 million||$98 million||53%|
|Totals (including MEP and M-USA FY23 authorizations)||$15 billion||$1.1 billion||8%|
|* The NSF Regional Innovation Engines is assumed to have received 50% of a $6.5 billion CHIPS and Science Act provision that also authorized the Translation Accelerators program|
Besides these new CHIPS programs, two established mainstays of place-based development in the manufacturing domain are also facing funding challenges.
Overall, the current and likely future funding shortfalls facing many of the nation’s authorized place-based investments appear set to diminish the reach of these programs.
The CHIPS and Science Act establishes a compelling vision for U.S. innovation and place-based industrial policy, but that vision is already being hampered by tight funding. And now, the looming debt ceiling crisis is only going to make the situation worse.
Nor are there any silver bullets to resolve the situation. Somehow, Congress has to keep in sight the long-term vision for U.S. economic and military security, and find the political will to make the near-term financial commitments necessary for U.S. innovators, firms, and regions.
But it’s not just up to Congress. As we’ve seen, the White House budget also contains sizable funding shortfalls for research agencies. Federal agencies and the Office of Management and Budget will be formulating their FY 2025 budgets this summer in preparation for release next year. As they do so, they should prioritize long-term U.S. competitiveness across strategic technology areas and geographies more so than they have to date.
Lastly, while the mandatory spending proposal mentioned above for the Regional Technology and Innovation Hubs program may not get anywhere this year, mandatory funding as a mechanism for science and innovation investment is not a bad idea in principle. Nor is this the first time policymakers have pitched such an idea: The Obama administration attempted to make aggressive use of mandatory spending to supplement its base research and development requests, and congressional leaders have also floated the idea in recent years. Given the long-term nature of science and innovation, sustained and predictable support would be a boon, and a mandatory funding stream could provide much-needed stability.
Given all this, the moment may be approaching try again to leverage mandatory funding of innovation programs. With caps on discretionary spending on the horizon but bipartisan support for the CHIPS technology agenda still in place, the time to consider a mandatory funding measure may have arrived. Such a measure—structured by, say, a “Critical Technology and National Security Fund”—would go a long way toward ensuring more sustained, stable support for critical technologies in economic and military security. This is exactly the kind of support that CHIPS provides for the semiconductor industry, which is far from the only advanced technology sector subject to global competition.
In short, as we enter the summer months and face down a looming budget crisis, Congress should do for the “science” part of its watershed bill what it did with the “chips” part. Leaders in Washington must move now to ensure that we can deliver on the commitments set forth in the CHIPS and Science Act—all of them.
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The CHIPS and Science Act establishes a compelling vision for U.S. innovation and place-based industrial policy, but that vision is already being hampered by tight funding.
Here’s how CHIPS and Science funding is shaping up in the battle over the federal budget.