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House panel, agencies oppose boost in basic research tax

SBIR helped Lansing, Michigan–based Niowave to develop compact linear accelerators for a variety of uses, including sterilizing medical equipment.

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House panel, agencies oppose boost in basic research tax

The Obama administration and a key congressional committee weighed in today against legislation moving through Congress that would increase the share of federal research dollars going to small businesses. Their stance, at a hearing on the Small Business Innovation Research (SBIR) and the Small Business Technology Transfer (STTR) programs, bolsters the arguments of higher education lobbyists that increasing the set-asides for those programs would erode support for academic research.

Last year, 11 federal agencies spent $2.5 billion on SBIR, begun in 1982, and STTR, its younger, much smaller cousin. Both programs are financed through a tax on agency research budgets that has been rising in recent years and will reach a combined 3.65% in 2017. As a result, the SBIR/STTR pot has grown much faster than the overall research budget of that agency—some 30% since 2011 at the National Institutes of Health (NIH), for example, while NIH research has risen by only 4.5%.

That combined set-aside would rise to as much as 7% by 2028 under bills approved this spring by the small business committees in the Senate and U.S. House of Representatives. A second Senate panel added language to the annual Pentagon spending bill that would make the programs permanent at the Department of Defense, which spends roughly half of all SBIR dollars.

Getting back into the game

The legislation only belatedly attracted the attention of science lobbyists. Looking for allies, they turned to a source that has not been overly friendly to their cause in recent years—the House science committee. But on this issue, the committee appears to see eye-to-eye with the academic community.

“Any increases would necessarily reduce our nation’s primary investments in basic research at a time when U.S. global leadership is threatened,” explained the committee’s chairman, Representative Lamar Smith (R–TX), at the start of this morning’s hearing. “So it is important [that this committee] examine if the current funding levels—the taxes on basic research—are hurting fundamental science.”

Although the science committee has been ground zero in recent years for partisan battles over the value of research, the panel’s top Democrats rushed to agree with Smith. “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 programs,” said Representative Daniel Lipinski (D–IL), a move that he and other legislators believe is a bad idea during tight fiscal times.

Representatives from NIH, the National Science Foundation (NSF), and the science office at the Department of Energy who testified at the hearing agreed wholeheartedly. They testified about the value of SBIR to the U.S. economy by citing companies—Qualcomm and Symantec, among others—that owe their existence to SBIR. But they said the programs’ growth should not distort the larger U.S. research enterprise. “We recommend that the set-aside percentage remain at FY2017 levels,” said Pramod Khargonekar, the outgoing head of NSF’s engineering directorate, which oversees the programs. “We do not see annual increases in the set-asides for these programs as justified, especially at the cost of other programs.”

More for all

Biomedical lobbyists have long been lukewarm on SBIR, asserting that the research is generally of lower quality than the rest of NIH’s portfolio. With success rates on its investigator-driven grants program below 20%, they argue, NIH can’t afford to fund anything that is not of the highest quality.

NIH officials in the past have agreed with that assessment. But in his testimony today, Michael Lauer, head of external research at NIH, avoided making such comparisons and chose instead to argue that there simply isn’t enough money to go around.

“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,” Lauer said. “I think it would be more effective to increase overall R&D budgets, so that all programs benefit.”

That sounded good to Representative Katherine Clark (D–MA). “We need to increase the overall pie, not reallocate the current slices,” she said.

Noting his long-time role as an SBIR cheerleader, Lipinski admitted that it was unusual for him to oppose efforts to help small businesses turn research into products. “This is a difficult choice, because both research and commercialization activities are highly valuable investments,” he said. And there are other ways to bolster federal support for commercialization, he added, suggesting that SBIR agencies adopt NSF’s wildly popular Innovation Corps program to train would-be entrepreneurs that began in 2011.

The hearing was the second piece of good news this week for opponents of higher SBIR set-asides. On Tuesday, the 2017 defense authorization bill passed the Senate without the SBIR program provisions. That removes the most immediate legislative vehicle for SBIR supporters to win changes in the program. The science committee is unlikely to act quickly, since the current SBIR authorization doesn’t expire until September 2017. That could leave things up to congressional appropriators: A post-election free-for-all on the 2017 spending bill would be fair game for all sorts of provisions.