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FY24 Budget Outlook: Department of Defense

AUG 24, 2023
Early-stage defense R&D programs are facing significant budget cuts in fiscal year 2024, though Senate appropriators are seeking to boost basic research funding. Meanwhile, House appropriators are pushing a major initiative in commercial technology acquisition built around a vastly expanded Defense Innovation Unit.
Will Thomas
Spencer R. Weart Director of Research in History, Policy, and Culture

The limits placed on the Department of Defense budget for the coming fiscal year are less stringent than the ones on non-defense agencies. They will nevertheless check recent growth in Research, Development, Test, and Evaluation (RDT&E) spending, which at $144 billion is more than double its fiscal year 2016 level. Now, House appropriators are seeking a 4% increase and Senate appropriators a 2% increase.

Within the RDT&E topline, funding is set to plunge for DOD’s three budget categories covering early-stage R&D: Basic Research, Applied Research, and Advanced Technology Development. The Biden administration proposed a 20% cut from their current combined level of $22.3 billion, and the House and Senate proposals call for cuts of 13% and 9%, respectively. However, the Senate proposal for Basic Research bucks the general trend, aiming for a 10% increase to $3.23 billion.

The administration’s request is detailed in DOD’s budget justification documents, and Congress’ proposals are detailed in reports by House and Senate appropriators. Summary figures are collected in FYI’s Federal Science Budget Tracker .

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Chart of budget proposals for DOD

Basic research and STEM education

Basic Research. The Senate proposal’s boost for Basic Research is unevenly distributed across the military service branches, with the Navy and Air Force accounts both in line for the largest increases, amounting to about $100 million each. Funding for DOD-wide programs would actually decline overall under the Senate proposal, from $927 million to $862 million, which is still considerably more than the $761 million the administration requested. In the current fiscal year, the Space Force is for the first time administering a Basic Research budget, which the Senate proposal would increase from $55 million to $185 million. However, both the administration and the House proposal would discontinue it.

DURIP. In recent years, Congress has provided well more funding than requested for the Defense Universities Research Instrumentation Program, which draws on the Basic Research budgets from across the service branches to provide universities with grants to acquire scientific instruments. The Senate proposes a further increase, from $163 million to $250 million, while the House proposal only adds $10 million onto the administration’s $50 million request.

Minority-serving institutions. For years, Congress has provided funding well exceeding the requested amounts for a DOD program that supports Historically Black Colleges and Universities and other minority-serving institutions. Now, the administration has significantly raised its request, seeking steady funding of $100 million. The House proposal would meet the request and the Senate proposal would provide $121 million. The Senate proposal also includes $10 million for a “Hispanic-serving research cohort” within a separate Basic Research account.

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Howard University President Wayne Frederick speaks at an event on Jan. 23, 2023, marking the establishment of a DOD-funded University Affiliated Research Center at Howard focused on tactical autonomy. Behind him are Defense Secretary Lloyd Austin, center, and Air Force Secretary Frank Kendall. Howard University is the first Historically Black College or University to host a UARC.

(Eric Dietrich / U.S. Air Force)

National Defense Education Program: NDEP funding increased almost $30 million this fiscal year to $174 million but is now poised for a retreat, with the administration proposing $160 million, the Senate $162 million, and the House $139 million. Within NDEP, the administration is seeking to increase the budget for the SMART scholarship-for-service program from $104 million to $132 million to increase the number of fellowships awarded. The program awarded 468 scholarships this year with an award rate of 15%.

MURI. The administration plans to increase funding from $211 million to $234 million for the Multidisciplinary University Research Initiative, which awards multi-year grants to university-based teams. Neither the House nor the Senate proposal directly addresses the program.

Other university initiatives. The administration seeks an increase from $41 million to $48 million for an account that funds the Laboratory University Collaboration Initiative (LUCI), which supports joint projects between DOD lab scientists and DOD-funded academics, and the Vannevar Bush Faculty Fellowship program. DOD states it is working to restore LUCI to “robust and consistent” activity and to fund international partnerships similar to those funded through MURI. DOD funded one such project in 2018 through a pilot program called the Bilateral Academic Research Initiative. As with MURI, neither the Senate nor the House proposal directly addresses the account.

Selected innovation initiatives

Defense Innovation Unit. After Congress more than doubled DIU’s budget to $112 million in the current fiscal year, the House proposal now aims to multiply it to $1.03 billion to start building a portfolio of commercially acquired technologies that could be deployed within one to three years. The administration is also preparing for the “next phase” of the unit’s work and recently elevated it so that it reports directly to the defense secretary, but is still requesting a steady $120 million budget for it. The Senate proposal would provide $122 million. These figures all include the budget for National Security Innovation Capital, which funds early-stage hardware startups, but not the National Security Innovation Network, an organization under DIU’s umbrella that builds connections between DOD, academia, and startups.

Mission Acceleration Centers. Congress added $50 million to the current $29 million National Security Innovation Network budget for establishing Mission Acceleration Centers, which are regional hubs for facilitating engagement between DOD, venture capital firms, and startups. NSIN established the first such center in Seattle in 2021. The Senate proposal would add another $50 million in fiscal year 2024 for creating and operating centers, while the House proposal allocates $65 million for the same purpose, except within DIU’s budget rather than NSIN’s. The administration and House and Senate proposals all agree on a base budget of about $22 million for NSIN.

Strategic capital. The administration requested $99 million for DOD’s new Office of Strategic Capital, which reports directly to the defense secretary and plans to use loans and loan guarantees to partner with private investment firms to support companies as they scale up production of new technologies. The House proposal includes that amount, but the Senate proposal rejects the request, arguing DOD has not sought the authorization needed for the office to employ loan mechanisms. The Senate proposal instead includes $20 million for a new “Advanced Defense Capabilities Pilot” that would be authorized through this year’s National Defense Authorization Act and use a public-private partnership model to provide loan guarantees to companies or invest in their equity. The administration, House, and Senate proposals all agree that National Security Innovation Capital should receive steady funding of $15 million.

Selected technology programs and initiatives

DARPA. The Biden administration seeks to increase the budget for the Defense Advanced Research Projects Agency from $4.06 billion to $4.38 billion, but the House and Senate proposals would provide smaller increases, to $4.12 billion and $4.09 billion respectively.

Electronics Resurgence Initiative. The administration seeks to keep funding for DARPA’s ERI effort steady at $710 million, and the House and Senate proposals do not specify total amounts for it. However, whereas the administration sought $206 million within ERI for the Next Generation Microelectronics Manufacturing program, down slightly from $218 million, the House proposal would reduce its funding to $56 million, citing “execution risk,” and the Senate proposal includes $131 million, citing a desire to reduce year-to-year carryover of funds. DARPA recently selected 11 organizations, including contractors and universities, to participate in the program’s “phase 0,” which entails foundational research leading toward the establishment of a center for fabricating 3D heterogeneously integrated microsystems. Such systems involve stacking chips with different semiconductors and materials into a single package, with the promise of significantly improving functionality and performance.

Other microelectronics programs. The administration initially requested an increase for its Trusted and Assured Microelectronics accounts from $897 million to $1.11 billion. However, the House and Senate proposals indicate the figure has been lowered by $100 million, and they would respectively provide $901 million and $964 million. In fiscal year 2024, DOD will also receive the second installment of the $2 billion it is receiving over five years via the CHIPS and Science Act to establish a Microelectronics Commons. The Commons is a planned network of prototyping and demonstration facilities that would provide access to capabilities that are generally unavailable to universities and small and mid-size companies.

Quantum devices. The administration has requested $75 million for a new account focused on near-term applications of quantum information science. Of the total, $45 million is for maturing quantum inertial sensors, gravity sensors, atomic clocks, and quantum electro-magnetic sensors and for transitioning them into acquisition programs. The remaining $30 million is for building up supply chains of components needed for quantum devices, including quantum computers. The House proposal would meet the request but transfer $40 million of the total to the Defense Innovation Unit, which it argues could leverage a broader industrial base. The Senate proposal rejects the request, citing a “lack of acquisition strategy.”

Quantum R&D at AFRL. Congress has provided funding in recent years significantly exceeding requested amounts to build up quantum R&D efforts at the Air Force Research Lab site in Rome, New York. In the current fiscal year, it provided an additional $90 million, and the House proposal would add $65 million for fiscal year 2024, while the Senate proposal would add $29 million.

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Sen. Kirsten Gillibrand and (D-NY) and Senate Majority Leader Chuck Schumer (D-NY) attend a ribbon-cutting for the new Extreme Computing Facility at the Air Force Research Lab’s site in Rome, New York, on Aug. 8, 2023. The facility will house laboratories dedicated to quantum information science, networking and security, and neuromorphic computing.

Bioindustrial manufacturing. Congress provided DOD with $300 million this fiscal year to establish new biotechnology manufacturing institutes. A year ago, the administration announced plans for DOD to spend $1 billion over five years on bioindustrial manufacturing infrastructure and requested no further funding for institutes in fiscal year 2024, but the House proposal includes an additional $100 million. The budget request states that, using already-appropriated funds, the existing BioMADE Manufacturing Innovation Institute is preparing to establish a network of pilot-scale facilities to conduct R&D to “improve the ability of the industrial base to assess, validate, and scale new, innovative bioindustrial manufacturing processes for the production of chemicals, materials, and other products.” Other new facilities will address gaps in bioindustrial infrastructure and assist in transitioning laboratory-scale research results into pilot-scale production. DOD released a biomanufacturing strategy in March.

Mobile nuclear reactors. DOD received $168 million in the current fiscal year, or $37 million more than requested, for an ongoing effort known as Project Pele to develop mobile nuclear power supplies. Most of the funding is for a reactor prototype being built by the company BWXT. However, Congress directed DOD to allocate $20 million of Project Pele’s fiscal year 2023 budget to advancing another prototype, and DOD has since indicated the second reactor would operate at a higher power and have lower costs per unit of energy at the expense of decreased mobility. DOD aims to begin testing the first reactor at Idaho National Lab in fiscal year 2025 and is requesting $85 million for the project in fiscal year 2024. The House proposal includes an extra $42 million and encourages DOD to work with other agencies to consider how such reactors could be used in natural disaster response efforts.

Nuclear spacecraft propulsion. The administration seeks to ramp up funding from $45 million to $82 million for DARPA’s DRACO (Demonstration Rocket for Agile Cislunar Operations) project, which is developing a spacecraft propelled using nuclear fission. The Senate proposal would provide $69 million while the House proposal does not directly address the project. NASA and DARPA announced early this year that they would combine efforts on DRACO, with NASA responsible for developing the spacecraft’s nuclear thermal engine. Last month, the agencies announced that Lockheed Martin will be DRACO’s prime contractor, that BWXT will develop the engine’s reactor, and that they are aiming to conduct an in-space test as soon as 2027. NASA has agreed to contribute up to $300 million to the project.

Missile-tracking satellites. The administration proposes ramping down funding for the Next-Generation Optical Persistent Infrared (Next-Gen OPIR) missile-warning satellite constellation from $3.35 billion to $2.62 billion, and the House and Senate proposals respectively include $2.58 billion and $2.21 billion. The project’s large budget reflects a focused effort by DOD and Congress to push it rapidly through to launch. The first satellite in the constellation is scheduled for launch in 2025, though it is facing the possibility of a delay.

As proposed, the full constellation comprises three geosynchronous satellites and two polar-orbiting satellites. However, DOD has already determined that in the future it should move toward a more distributed satellite architecture for missile warning and tracking that employs numerous satellites in low and medium Earth orbits to minimize vulnerability against attack. In its request, DOD proposed to cut one of Next-Gen OPIR’s geosynchronous satellites and ramp up funding for the new, more distributed architecture from $1.19 billion to $2.31 billion. The House and Senate proposals respectively include $2.27 billion and $2.20 billion for the new system.

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