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I I . THE BUDGET HI STORY A. F.Y. 1981-84: Support for Stabilization Since the initiation of the stabilization policy in F.Y. 1981, the Reagan Administration has submitted budget estimates for approximately 5,000 NIH competing research projects involving increasing dollar amounts each year, with the single exception of F.Y. 1983 when the President's budget included a budget estimate of only 4, 100 such pro jects (Table 1~ . From F.Y. 1981 until F.Y. 1984, congressional appropriations also provided for approximately 5,000 NIH competing pro jects a year (Table 1 ~ . However, Congress appropriated substantial increases in funds over the President's budget for NIH research projects in F.Y. 1983 and 1984--in 1983 to increase the number of projects from 4,100 to 4,971 and in 1984 to restore the amounts' cut by the President's budget ofice--The Office of Management and Budget (OMB)--from the NIH estimates for average project costs. Thus, the stabilization policy initiated for NIH in the F.Y. 1981 budget, with its consequent commitment to ever-increasing dollar amounts because of rising unit costs, appears to have served a useful protective purpose for the NIH programs under the budget circumstances that existed in the first part of the 1980s. His seems especially evident in light of the general policy of the Reagan Administration to effect substantial reductions in the domestic portion of the budget. As it turned out, NIH managed, from F.Y. 1982 to F.Y. 1984, to fund approximately 300 to 400 more projects per year than were estimated for the appropriations--e."., to fund a total of 5,493 projects in F.Y. 1984 compared to the appropriations figure of 5,076 (Table 1~. In F.Y. 1982 and 1983, these increases were achieved primarily through transfers of funds from other line items in the budget--e."., from the research contract line item. However, in F.Y. 1984, the increases resulted primarily from average costs per project being lower than NIH had originally pro jected (3133,200 per grant compared with the appropriation figure of $141,800~#. For ADAMHA, in contrast to the NIH, no stabilization figure was established in the President's F.Y. 1981 budget. In fact, the initial ADAMHA projection of 569 competing projects for that fiscal year was cut back to 284 in President Reagan's revision of the Carter Administration's F.Y. 1981 budget--a figure 46 percent below the actual funded level of the previous year (526 projects). me cut was largely the result of a decision made by the new Administration to eliminate social research projects funded by the National Institute of Mental Health (NIMH) which were not deemed to be relevant to the institute's mission. Congress restored part of the cut--to 345 projects. Since then (F.Y. 1981), the Administration has been persuaded that the allegedly marginal types of proposals would not be funded by the NIMBI and has, as a consequence, agreed to a steady rise in the total number of competing ADAMHA projects to 500 in F.Y. 1984, and Congress has more or less followed suit. *See Part IV of this paper for discussion of such transfers. #As a means of funding an increased number of grants, NIH made efforts to negotiate lower direct costs of awards than those recommended by the study sections. the actual average cost per project in F.Y. 1984 was still significantly higher than that used by OMB ($124,600~. 8
.t - ~ o cr a) ~ :> a) By: P4 a' ~5 :` {Q ~ o 4 Q Hi V . - O C) U] a) ~ cn A a) u' SPA :' O m~ S ~.~ ~ Ed a) ·S O cat to O 3 ~ cc a) Q =: :~ Z ~'0 so :> a) ¢¢ U) O ~ .,, U) O Q ~ O By: Ed ~ zl . ,~ ~ Z ~D a) ~4 U) =~ ·~. ~ O :> a v E 0 ~ ~ ~ · ~ ~ ~ 1 1 ~ O1 01 ~) 1 1 O ~ ~ ~ 1 1 O ~ kD ~ o LC) ~ cn 1 1 /IS ~ ~ ~ ~ 1 1 t.,~ ~r ~ ~1 1 1 ~ d \9 d~ ~ V U~ ~ a~ ~ 1 1 O ~ a) CJ) 1 1 ~1 o ~ d. 1 1 L~ w) u~ U ) 1 1 CO ~ ~ ~ a~ oo kD · e ~ e e I u~ ~1 ~ O1 ~ 1 O I ~I d. ~ 1 V' a, 0 4 O 4 :> a ¢5 ~ o ,0 E | z rl O 4 #¢ P. U] C O oo ~ _~ ~ t_ ·- O ~ oo U~ 0 ~ ~ o ~) 1 ~4 ~ ~ ~ ' ~ 1 r_ ~ ~ o ~ I Q o ~ ~ O u~ ~ ~_ ~ct Q E~ ~: ~ 4 a' ~ ~ ~ ~ ~ I g l_ ~ I_ ~ ~ 1 0 t J, 0 ln 1 ~ U~ ~ d' un (D 1 Z o O kD r~ ~ e e e e e e O d. ~ u~ C~ 6 3 U) ~ C~ ~ kD CD ~ ~ C~ ~ ~ d. ~ ~ C U~ CO ~ ~ ~ ~ ~ CO C~ C~ ~ ~ ~ . U' ~r ~ ~r t17 o o o o o o o o o o o o U~ LO U~ d' ,r, kD co ~ ~ ~ oo co 9 c) r' a) 0 4 0) 4 :> a <: v . o · U~ oo a~ ~ e e e e I I O 0 1~ d' 1 1 O O ~ ~1 1 1 6 . . - U) U) oo ~ ~ ~n ° O ~ ~ ~ C) d' I ~ 1 1 ~ ~ ~ ' 1 1 ~ rn 0 ~ 1O 1 1 a, d. U~ ~ 0, 0 o u~ ul 1 1 0 ~9 a:) 1 1 a) 1 1 C) a 0` ~ ~ d. as 0 0 e e e e e I ~ a' a, ~ ~ 1 O O O Ot ~ 1 U] r~ ~ ~ ~ ~ ~: ~r ~ ~ a~ ~ ~ u' 1 ao d~ 1 ~ ~ ' ' ' ' ' 1 ~ U \9 ~ ~ CO _' 1 C1 a r~ l~ O Z :,: I H H Z Z ~ o :~ ~) 1 ·e ~ kD ~ ~ 1 U) U') 1 a, u' V ~ U) ~ O O U] a, S~ ~i w) ~ 1 0 r 00 ~ d. ~ ~ e e e e e e H <:o ~ a' 0 O O ~ ~ ~ U] U) o u a o ~ ~ o co ~ 0 ao -~ tD ~ ~ ~ ~ · - ~n o~ ~ ~^ a V a ·~! o O o X) kD ·n U~ 0 ~ .o -1 V d ~n k oo :~ ~ 5` H ~C
B. F.Y. 1985-86: An Acute Budget Issue Congressional action for F.Y. 1985 It is apparent from the budget history that congressional action in F.Y. 1985 to increase the NIH program level 30 percent above the President's budge "--i.e., from 5,000 competing projects to 6,526**--and the ADAMHA program level 17 percent above the President's budget--i.e., from 500 to 586 projects--represented an abrupt departure from Congress's own previous application of the stabilization policy. The congressional reasoning on the NIH was set forth in the report of the House Appropriations Committee, which stated that, "while the numbers of new and competing grants in recent years had stabilized at approximately 5,000, the award rates and paylines for these grants have declined and many high calibre investigators have not received funding"25/. The report of the Senate Appropriations Committee contrasted the Administration's F.Y. 1985 budget request, permitting the funding of only about 31 percent of all approved NIH applications and a payline of barely 170, with the F.Y. 1979 award rate of 52 percent and payline of 24026/. A similar line of reasoning was used by Congress in increasing the number of ADAMHA competing projects. It should also be pointed out that, whereas in F.Y. 1984 the appropriations committees added more than $100 million for NIH to restore the cut made by OMB in the average project grant costs projected by NIH, in F.Y. 1985 they were presented with a budget from the Executive Branch that included amounts deemed adequate to fully fund the 5,000 project estimate and thus for that year had more leeway for appropriating funds to increase the program level. Another factor undoubtedly working for program increases was that the F.Y. 1985 appropriations were enacted (and initially approved by the President) in a presidential election year. The President's F.Y. 1986 budget The HHS press release on the President's F.Y. 1986 budget stated that its provisions for eliminating the congressional increases for F.Y. 1985 were consistent with the policy followed on basic biomedical research by the department since 1980 in order to permit such research to flourish in "a stable environment without year-to-year fluctuations"27/. It was also, however, in line with the Administration's general strategy of "freezing" funding for domestic programs to the extent possible. The plan for using the added funds in F.Y. 1985 to forward fund 646 projects through F.Y. 1986 and 1987 and maintaining the 5,000 project level at NIH through both years was designed to reduce the amount of appropriations (budget authority) required in F.Y. 1986 by $538 million#--$307 million by eliminating the need for appropriating funds in F.Y. 1986 to continue an added 1,526 grants started in F.Y. 1985 under the congressional appropriations for that year and the 646 *In comparison with the number of projects actually funded in the previous year (1984), the figure of 6,526 represented a 19 percent increase. **This congressional action increased the total of all NIH research projects, including non-competing projects, from 17,172 in the President's F.Y. 1986 budget to 18,698. See appendix lb for details. #Savings in expenditures (outlays) would be less. The forward funding from F.Y. 1985 appropriations of 646 projects, although avoiding the need for appropriations in F.Y. 1986 to continue them through that year, would nevertheless involve expenditures for these projects in F.Y. 1986. 10
projects forward funded with F.Y. 1985 appropriations and $231 million by avoiding the need for starting another 1,526 new and other competing grants in F.Y. 1986 to maintain the previous year's level of 6,526 such grants--and to avoid similar escalations in funding for the years to follow. (See appendix 1 for details). The proposed use of multi-year (forward) funding was intended to bypass the process of seeking a rescission of budget authority under the Congressional Budget and Impoundment Act of 1974, which would have required the approval of both houses of Congress. Administration attorneys had advised that the use of multi-year funding by NIH and ADAMHA was legal. In any case, there is no question that it was contrary to the intent of Congress and thus an open invitation to a major conflict between the executive and legislative branches of government. Response to the President's F.Y. 1986 budget The reactions from the scientific and academic communities were quick and loud in coming. As an article in Science reported, the Congress was inundated with complaints from biomedical research groups that were "outraged and frustrated by OMB's raid on the budge t"2 . These related not only to the projected decrease in the total number of projects but also to the disruptive effect of a decision coming after the first of the three annual cycles of awards for F.Y. 1985 was already underway; this threatened to subject the awards for the second and third cycles later in the year to requirements that were much more stringent than those for the first cycle*. Proposals for a joint resolution by the Senate and House of Representatives were introduced by Senator Edward Kennedy and Representative Henry Waxman, with a number of co-sponsors, to overturn the OMB action. They stated that the OMB action was in "direct contravention of Congressional intent" and "a blatant evasion of the Congressional Budget and Impoundment Act" and would have "a seriously disruptive impact" on the nation's research capacity29 / . The cudgels were taken up by the chairmen of the appropriations subcommittees in the House and Senate and some of the other committee members. Representative William Natcher, chairman of the House subcommittee, said that he was "really disturbed", that "the people downtown know that they can't do this", and that "we'll get this thing resolved"30/. Senator Lowell Weicker, Jr., chairman of the Senate subcommittee, charged that the Administration was "trying to circumvent the law" and asked the Comptroller General of the United States to determine whether the HHS's refusal to distribute funds for all 6,500 grants "amounts to an illegal impoundment''31/. In response to the initial outcry, a key OMB official stated that "over the last two-three years, we have operated under the impression that there was sort of a treaty out there" between government and researchers for 5,000 competing research grants and that he regarded the congressional action on the F.Y. 1985 appropriation to be "a change in the treaty"32/. However, it soon became clear-that the Administration wanted to avoid a confrontation *The impact on the second and third F.Y. 1985-award cycles of basing the first cycle of awards on the assumption that funding would be available for 6,526 projects rather than 5,000 was reduced by canceling some of the first cycle awards before they were issued. me result was that about 33 percent of 5,000 awards were issued in the first cycle and 21 percent in the second cycle, compared with the customary rates of 30 percent for each. Now, with the final approval of 6,200 projects for F.Y. 1985, a major portion of the year's awards will have to be made toward the end of the fiscal year. 11
with Congress on this issue. In testimony on March 7, 1985 before the House Committee on Appropriations, David Stockman, OMB director, responded to a question from Mr. Natcher by saying that he hoped to persuade the committee of the merits of the Administration's proposal but recognized that, if it was not persuaded by the Administration's case, the committee had "ways of instructing us to do otherwise"33/. The HHS Secretary, Margaret Heckler, in subsequent testimony, agreed to hold up any action on multi-year funding until July 1, 1985. In a letter of March 18, 1985, the Comptroller General replied to Senator Weicker on the legality of the Administration's action. The Comptroller General ruled that multi-year funding of NIH grants was illegal because there was no specific statutory authority for it. Although he also ruled that the Administration's action did not constitute an illegal impoundment of funds, he observed that agencies that ignore the legislative history applicable to the use of appropriated funds do so at the peril of strained relations with Congress34 . The outcome It was evident from the outset that a compromise had to be negotiated. me basic problem confronting the Administration and Congress was that of accommodating increases in appropriations for NIH and ADAMHA within the framework of an attempt to make a significant reduction in the huge federal budget deficit. If Congress were to insist on total restoration of the program level of 6,525 grants that it had approved the previous year in appropriating funds for NIH, it would require the addition in F.Y. 1986 of more than $500 million for this item alone. At the same time, it was clear that some significant reductions in expenditures had to be made in the domestic portion of the budget. Nevertheless, the Senate leadership succeeded in reaching a compromise with the Administration on 6,000 competing research projects for NIH and 540 for ADAMHA--about half of the increase over the F.Y. 1984 levels originally appropriated for F.Y. 1985 by Congress--and these figures were incorporated in the Joint Budget Resolution for F.Y. 1986, which was subsequently passed by the Senate. In addition, an F.Y. 1985 supplemental appropriations bill approved by the Senate provided for (1) using the difference between the estimated dollar amounts required for the originally approved number of 6,526 NIH research projects and those required for the compromise figure of 6,000 in F.Y. 1985 to forward fund a portion of the 6,000 projects (150 to 200 projects) for three years and (2) doing the same kind of thing for ADAMHA research projects. In other words, the bill sought precisely the same method as proposed in the President's F.Y. 1986 budget but would have applied it to a base of 6,000 NIH projects rather than 5,000. The House of Representatives passed a Joint Budget Resolution for F.Y. 1986 but made no reference in it to this issue, and the version of the F.Y. - 1985 supplemental appropriations bill approved by that body as well as the accompanying appropriations report were also silent on it. However, in late July, the House-Senate conferees on this bill reached an agreement to support a total of 6200 competing research projects for NIH and of 550 for ADAMHA in F.Y. 1985*. This agreement prohibited multi-year funding but allowed the unused funds to be carried over to F.Y. 1986. Both Houses subsequently approved this bill, and the President accepted it, although with some reluctance. In signing this legislation, the President said that he was - *The figure of 6,200 new and competing renewal projects for NIH was identical to that approved by the House in its original action on the F.Y. 1985 appropriations bill. (In the original action, the Senate approved 6,800 projects and the House-Senate Conference Committee compromised at 6,526.) 12
"concerned that the act mandates a specific and excessive number of new grants" to be awarded by NIH and added that such requirements "not only undermine the flexibility essential to the continued success of NIH, but also threaten the long gun stability of biomedical research funding". He further stated that "in signing this bill, it is my understanding that Congress will take future appropriations action to restore programmatic flexibility and budget stability to the NIH"35/. Just what this signifies for the F.Y. 1986 appropriations to NIH and ADAMHA remains to be seen. At the time of this writing (August 1985), action on the F.Y. 1986 appropriation bill was still pending in Congress. 13
