Hearing Raises Concerns About Diverting Research Funds to Small Business Grants

By | June 17, 2016

A June 16 hearing of the House Science, Space and Technology Subcommittee on Research and Technology raised concerns about the reauthorization of Small Business Innovation Research (SBIR) and the Small Business Technology Transfer (STTR) programs. Although members of the subcommittee expressed support for both programs, they were troubled by proposals to increase the budget percentage that federal agencies including  the National Institutes of Health (NIH), the National Science Foundation (NSF), and the Department of Energy (DOE) are required to allocate to the SBIR and STTR (the set-aside).

House Science Committee Chairman Lamar Smith (R-TX) noted in his opening statement that the current set-aside has grown from 0.2 percent to 3.2 percent and added, “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.”

Ranking member Eddie Bernice Johnson (D-TX) and Representative Daniel Lipinski (D-IL), the top Democrat on the Research and Technology Subcommittee, both noted that the set-aside increased by 30 percent since SBIR and STTR were renewed in 2011. Representative Lipinski said, “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.”

Officials from NIH, NSF, and DOE presented a united front in opposing any further growth in the amount of money diverted from their extramural budgets to support grants for small businesses.

Commenting on pending legislation (HR 4783) that would raise the set-aside to 4.5 percent by fiscal year (FY) 2022, Pramod Khargonekar, PhD, the Assistant Director for Engineering at NSF, stated, “We believe any future growth in NSF SBIR and STTR programs should be realized through overall extramural R&D budget increases for NSF. In the current budget environment, increases in these programs mean real cuts to the remainder of the extramural budget.”

NIH Deputy Director of Extramural Research, Michael Lauer, PhD, added, “Dedicating a larger proportion of NIH’s extramural research dollars to these two specific programs would threaten the diversity of the research portfolio when the portfolio’s diversity is one of the major keys to its success.”

The DOE witness, Patricia Dehmer, PhD, Deputy Director for Science Programs, testified that funding for SBIR/STTR grants grew by 23 percent from FY 2011 to FY 2016 while the overall budget for the agency’s Office of Science increased by less than four percent. Dr. Dehmer also said, “Additional increases in the set-aside would further reduce the available basic research funding.”

The hearing also featured the perspective of the university community, which was represented by Jilda Garton, Vice President for Research at Georgia Tech University. Similar to Dr. Khargonekar’s testimony, Garton suggested that the best way to grow the SBIR/STTR programs would be to raise “the level of federal funding for all research rather than reallocation within constrained budgets.”

Garton’s statement also cited a letter organized by the Federation of American Societies for Experimental Biology and signed by 76 other scientific and professional societies, higher education associations, universities, and research institutions expressing strong opposition to increasing the SBIR and STTR set-asides. Representative Lipinski requested that the letter be entered into the formal hearing record as well.

The House Science Committee is expected to continue its review of the SBIR/STTR programs through additional hearings later this year. It is not clear if the Science Committee will develop its own reauthorization legislation or consider HR 4783, a bill that was approved by the House Small Business Committee in March.