Ask the Scholar
Document scope · 1 page
Scholar
Ask about this object, its catalog metadata, its source description, or the page inventory.
For page-specific OCR and visual context, open one of the page chats.
Scholar Source Context
Document identity
localId
1554480
label
FY 1977 - 12/75 - Fifty Issues (1)
core
doc
dtoType
document
citationUrl
pageCount
1
Source metadata
id
1554480
sourceUrl
contentType
document
title
FY 1977 - 12/75 - Fifty Issues (1)
citationUrl
collections
White House Special Files Unit Files
Budget Review Decision Papers
subjects
Federal budget
thumbnailUrl
largeImageUrl
imageCount
1
hasImages
yes
source
import
hasTranscription
no
Source extras
naId
1554480
coverageEndDate
logicalDate
1975-12-31
month
12
year
1975
coverageStartDate
logicalDate
1975-12-01
month
12
year
1975
levelOfDescription
fileUnit
recordType
description
ocrSource
nara-archive
Single page context
seq
1
pageIndex
0
type
document
mediaId
041256aa88f3de52
ocrText
The original documents are located in Box 10, folder "FY 1977 - Fifty Issues (1)" of the
White House Special Files Unit Files at the Gerald R. Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
Digitized from Box 10 of the White House Special Files Unit Files at the Gerald R. Ford Presidential Library
THE PRESIDENT HAS SEEN
INDEX
FIFTY ISSUES
NATIONAL DEFENSE
1. Overall Summary
2. Program Increases
3. New Items in FY 77
4. Restraints in Support of Reduced Federal Spending
5. Proposed Adjustments in Military Compensation
6. Strategic Improvements
7. Army Combat Power and Readiness
8. Twenty Six Air Force Tactical Wings
9. Shipbuilding costs
10. Projections of Future Defense Program
11. Selective Service
INTERNATIONAL AFFAIRS
12. Foreign Aid
13. Export-Import Bank
GENERAL SCIENCE, SPACE, AND TECHNOLOGY
14. NASA
15. Government Research and Development
16. National Science Foundation
NATURAL RESOURCES, ENVIRONMENT, AND ENERGY
17. Outdoor Recreation and Wildlife Programs
18. Water Resource Development Program
19. National Energy Programs
20. Synfuels
21. EIA
22. Outer Continental Shelf Oil and Gas Leasing Program
23. Environmental Protection Agency
AGRICULTURE
24. Agriculture Issues
COMMERCE AND TRANSPORTATION
25. Business Assistance
FORDO & LIBRARY
Small Businesses
Minority Businesses
Postal Service
-2-
COMMERCE AND TRANSPORTATION (continued)
26.
Transportation
Highways
Mass Transit
Washington D.C. Metro
Rail Passenger Service
Northeast Corridor Rail Service
Rail Freight in the Northeast
Aviation
Waterways
Merchant Ship Construction
COMMUNITY AND REGIONAL DEVELOPMENT
27. Community Development Grants
28. HUD Comprehensive Planning Assistance (701) Program
29. Public Works to Combat Unemployment
EDUCATION, TRAINING, EMPLOYMENT, AND SOCIAL SERVICES
30. Higher Education
31. Financial Assistance for Elementary and
Secondary Education
32. Impact Aid
33. Programs for the Unemployed
34. Summer Youth employment
35. Financial Assistance for Community Services
36. Department of Labor
HEALTH
37. Medicare Improvements of 1976
38. Financial Assistance for Health Care
39. Public Health Service Hospitals
40. Occupational Safety and Health Administration
INCOME SECURITY
41. Housing
42. Simplification of Income Maintenance
43. Child Nutrition Reform
44. Allied Services
VETERANS BENEFITS AND SERVICES
45. VA Cemetery and Burial Benefits
46. VA Medical Care
47. VA Educational Benefits
-3-
LAW ENFORCEMENT AND JUSTICE
48. Federal Prisons
49. US Attorneys and Marshals
50. Antitrust Enforcement
51. Gun Control
52. Illegal Aliens
53. FBI
54. Customs
55. Administratively Uncontrollable Overtime
56. State and Local Assistance
GENERAL GOVERNMENT
57. Internal Revenue Service
58. Executive Office Employment
REVENUE SHARING AND GENERAL PURPOSE FISCAL ASSISTANCE
59. General Revenue Sharing
60. New York Seasonal Financing Fund
REGULATORY AGENCIES
61. (one paper combining all ten agencies)
GOVERNMENT-WIDE ISSUES
62. Federal Pay
63. Federally Administered Retirement Systems
64. Drug Abuse
65. Efforts to Increase Operating Efficiency
(in Government Agencies)
66. Tax Policies
67. Indian Programs
68. Trends in Federal Civilian Employment
6% Emproving Federal management
FY 1977 Defense Budget
Overall Summary
Background: The 1977 Budget provides a real increase of $7.4 billion
in total obligational authority in defense spending to buy new
weapons systems, improve readiness of existing forces, and increase
selected combat forces. At the same time, the Budget proposes
actions to increase the efficiency of the Defense Department by
reducing programs that do not affect combat capability, including
adjustments to civilian personnel and compensation levels. Many of
these proposals will require new legislation.
Actions Proposed in Budget: The 1977 Budget continues the effort,
begun in 1976, to reverse a seven-year decline in defense purchasing
power. The new upward trend is planned to continue into 1981.
Defense Total Obligational Authority
($ Billions)
1968
1975
1976
1977
1979
1981
Constant 1977 Dollars
150.2
100.7
105.3
112.7
115.9
121.9
Current Dollars
75.6
87.9
98.3
112.7
130.0
149.7
Program Increases
The Budget proposes to strengthen U.S. forces to offset steadily
expanding Soviet military capabilities. This will be accomplished
in two ways:
- Selected increases are provided in combat forces within
constant military personnel levels, by shifting people from
support to combat functions.
- Increases are provided to improve force modernization and
readiness through the procurement of new systems and through
better maintenance of existing equipment.
Efficiencies
In order to limit the increases in Defense spending to those absolutely
essential for our national security, the Department of Defense is also
sharing in the general restraint upon which the President's overall
spending proposals are based. Particular emphasis has been placed
on reducing personnel costs.
The average pay of military and civilian personnel has more than
doubled since 1968, as shown in the following table:
Index of Average Annual Cost Per Person (1968 = 100)
1968
1975
1976
1977
Military
100
198
206
214
Civilian
100
181
194
207
Faced with increasing pay costs, every effort has been made in recent
years to reduce personnel levels. Military strengths have declined
by about 40% between 1968 and 1976 while civilians, during the same
period, declined by 25%. Further reductions in civilian personnel
are proposed in 1977 as a result of consolidations in the Defense
base structure and headquarters and support activities.
Defense Manpower (in Thousands)
&
FORD
1964
1968
1975
1976
197T
1977
GERAL#
Military
2,685
3,547
2,127
2,087
2,102
2,101
Civilian
1,035
1,287
989
962
967
942
In addition to personnel adjustments, a number of initiatives are
proposed to reduce defense costs without adversely affecting force
readiness or capability. These include adjustments to military
benefits, operating efficiencies, and an austere level of military
construction.
Funding
The total Defense budget increases from $98.3 billion in 1976 to
$112.7 billion in 1977. After adjusting for inflation, the
increase expressed in constant 1977 dollars is over $7 billion.
In the following table these changes are shown by appropriation.
constant
Department of Defense
(Total obligational authority in billions of dollars)
1976
1976 Program
1977
Aproved
at 1977
Budget
Program
Prices
Request
Military personnel
25.6
27.3
26.5
Retired pay
7.3
8.0
8.4
Operation & maintenance
28.9
31.1
32.4
Procurement
21.4
22.9
29.3
RDT&E
9.5
10.2
11.0
Military construction
2.4
2.6
2.3
Family housing
1.3
1.4
1.2
Civil defense
.1
.1
.1
Revolving & management funds
.1
.1
.4
Military Assistance
1.5
1.6
1.2
Total
98.3
105.3
112.7
Constant dollars
1977 Defense Budget
Program Increases
Background: The 1977 Defense budget is being increased in real terms
based upon a careful assessment of the international situation and
the contingencies we must be prepared to meet. In conjunction with
our allies, we must be able to:
Maintain a worldwide military balance and thus reduce the
threat of war.
Deter any attack against the United States, or its allies.
Protect the sea lanes that are vital to our national security
and economic strength.
If we are to be effective in reducing international tensions through
negotiations, our forces must remain second to none.
Actions Proposed in Budget:
Protect combat force strength and readiness.
- Provide increases of $7.2 billion in constant 1977 dollars to
develop and procure new and more capable combat equipment.
- Continue the force expansion initiated last year to achieve 16
Army combat divisions.
- Provide improved force readiness by increases in maintenance,
overhaul and repair activities. The operation and maintenance
appropriations, which finance the immediate readiness of our
forces, increase by over $1 billion in constant 1977 dollars.
Strengthen the capability of our strategic forces.
Strategic program funding has been as follows in recent years:
1974
1975
1976
1977
TOA (constant 1977 $ billions)
8.5
8.2
7.8
9.4
The program for 1977 will provide for:
- Start of production of the B-1 bomber. If cost and performance
goals are achieved, full-scale production will be initiated in
FY 1977.
- Increases for procurement of Trident. This advanced sea-based
strategic missile system is longer range and less vulnerable
than the current Polaris-Poseidon system.
2
- Development of a variety of strategic force improvements which
can be deployed if necessary in light of Soviet actions.
These include: a new intercontinental ballistic missile,
long-range cruise missiles for aircraft, submarine, or surface
ship deployment, and increases in the yield and accuracy of
ballistic missile warheads.
Modernize general purpose forces.
General purpose forces funding has been as follows in recent years:
1974
1975
1976
1977
TOA (constant 1977 $ billions)
34.1
31.9
35.7
40.2
The 1977 program will provide for:
- Increased production of equipment for the Army and Marine Corps,
primarily tanks and attack helicopters as shown below:
1975
1976
1977
M-60 Tanks (incl. Marines)
573
814
927
Attack Helicopters
6
52
105
This equipment will be used to arm the new combat units in the
Army, and to build up our stockpile of weapons in Europe.
- An improved tactical air force capability through continued
procurement of the Navy F-14 and the Air Force F-15 fighters,
and the Air Force A-10 aircraft for close support of ground
forces. New air combat fighters are under development for both
the Air Force and Navy with initial production of the Air Force
F-16 scheduled in 1977. The following aircraft production is
provided for:
1975
1976
1977
F-14
50
36
36
F-15
72
108
108
A-10
22
53
100
F-16
-
-
16
-
Increases in the size and capability of naval forces. Of the 16 new
ships, 15 will be procured for the general purpose forces in 1977
including three nuclear attack submarines, eight guided missile
frigates, and a new destroyer which will carry an advanced
missile system to protect the fleet from hostile aircraft and
missiles. In addition, several support ships will be procured.
FY 1977 Defense Budget
New Items in FY 1977
Background: Supporting programs such as construction, operating,
and personnel costs have been reduced to make room within budget
constraints for high priority new systems.
Actions Proposed in Budget: Funding is proposed to begin buying the
B-1 Strategic Bomber and the new Trident strategic missile. The F-16
fighter aircraft, the UTTAS utility helicopter, the new Carrier on
Board Delivery (COD) aircraft and the CH-53E Super Stallion Helicopter
are among the principal new General Purpose Force items. The Non-
Nuclear LANCE and the new shoulder-fired STINGER weapon system are
also programmed in FY 1977 for initial procurement.
The Navy's shipbuilding program includes the lead ship Aegis class
destroyer, one Destroyer Tender, one Fleet Oiler and one Submarine
Tender. Ongoing programs include three more nuclear attack submarines
and one Trident submarine.
The construction program includes $437 million for the Aeropropulsion
Systems Test Facility, a new wind tunnel for testing aircraft engines.
This will provide by 1985 a capability for testing new generations
of high performance turbine engines in environments similar to those
experienced in actual flight. Current wind tunnels permit us to test
engines only in isolation from surrounding aircraft structures and
thus do not provide direct information on how the aircraft and engine
interact. The new facility will avoid costly flight testing and the
need for post-flight engine and structural modifications. It will
be used for new commercial as well as military engine development.
1977 Defense Budget
DOD Restraints in Support of Reduced Federal Spending
Background: While Defense spending must be fully adequate to assure
the national security of the United States, every effort has been
made to minimize defense expenditures without affecting combat
capability. Defense programs, in addition to those of civilian
agencies, have been critically examined with the goals of constrain-
ing Federal spending in 1977 and achieving a balanced budget in
the future.
Actions Proposed in Budget: To provide necessary program increases
within a constrained budget total, the efficiency of the defense
establishment must be increased by reducing costs in areas that
do not contribute directly to combat capability. The budget
proposes actions that will result in program savings of about $2.8
billion in 1977. In addition to moderating the pace of research
and development, the following specific actions are included in
the budget.
- Adjustments in military compensation: Proposed actions
to adjust fringe benefits and to correct inequities in the current
military compensation system will save over $200 million in 1977
and $400 million in 1978. (Details are discussed in a separate
paper on Proposed Adjustments in Military Compensation). In
addition, there are savings of about $.8 billion in 1977 from
adjustments in pay increases for Government employees.
- Civilian Personnel Reductions: Civilian manpower will be
reduced by 25,000 spaces below the September 1976 level of 967,000,
continuing the downward trend in civilian personnel levels from
a high of 1.3 million in 1968. This will be accomplished by
transfer and consolidation of functions that permit base realign-
ments and by reductions in headquarters staffing. Estimated
savings are $100 million in 1977 and $400 million in 1978.
- Travel: The Department of Defense spends over $2 billion
a year for travel costs. This includes temporary travel to meetings
and conferences, movements of military personnel to overseas
assignments without their families, and the cost of moving military
personnel and their families. This last category, called Permanent
Change of Station travel, is being reduced by a number of policy
changes which will reduce the number of moves required by: (1)
permitting dependents to remain at a home base while the military
member is away on an unaccompanied short tour of duty overseas;
(2) assuring achievement of the full time period of overseas tours;
and (3) treating assignments to Hawaii as regular domestic tours
rather than as overseas duty.
4
Other types of travel will be reduced by limiting the number of
participants and frequency of travel on official visits. Program
savings from all of these actions are estimated at $244 million
in 1977.
- Military Construction and Family Housing: Construction
programs for 1977 have been limited to those considered essential
for mission performance. As shown by the following table, the
funds requested in 1977 are below the amounts appropriated in 1976:
($ billions)
1975
1976
1977
Military Construction
1.8
2.4
2.3
Family Housing
1.2
1.3
1.2
The 1977 budget will reduce construction of family housing units
and government leases of quarters for military personnel, reflecting
a policy of increasing reliance on the use of available housing in
the local community:
1975
1976
1977
Units of Family Housing
approved for construction 6,800 2,778
1,054
Leases Approved
25,000
24,741
22,418
- Petroleum Consumption: Efficiencies are proposed in training
and proficiency flying programs, including expanded use of simulators
and smaller aircraft for a greater portion of flight training.
Estimated savings in 1977 are about $200 million. In addition,
fuel consumption will be reduced from 190 million barrels in 1975
to 187 million barrels in 1977.
- Enlistment Bonuses: Favorable 1975 recruiting experience
permits lower levels in future enlistment bonuses.
The following table shows proposed funding for this program:
($ millions)
FY 1975
FY 1976
FY 1977
59
73
29
During 1975, all of the military services exceeded their recruiting
objectives. The percentage of recruits who are high school
graduates increased from 66% in 1974 to 72% in 1975 while higher
mental group categories increased from 90% in 1974 to 94% in 1975.
This favorable recruiting trend has continued into 1976. Personnel
shortfalls in several occupational skills have been significantly
eased, permitting further reductions in the use of new enlistment
bonuses.
1977 Defense Budget
Proposed Adjustments in Military Compensation
Background: Defense payroll costs are continuing to increase both
in direct salary and in related personnel support and benefit costs.
In these circumstances, it is essential to ensure that further
increases in personnel costs are held to the minimum needed to
assure a strong defense.
Historically, military personnel have received a significant propor-
tion of their total compensation in fringe benefits rather than in
salary. These benefits were a partial offset for a low basic salary.
However, Federal employees, including military personnel, are
now compensated at rates comparable to non-Federal workers.
In recent years, military compensation adjustments have
increased regular military compensation (which includes
basic pay, allowances for quarters and food which are not taxable,
and tax advantage) to levels comparable with civilian compensation.
This comparability has now been achieved and certain fringe benefits
intended
are no longer required to offset low salaries.
to
be
In addition to proposals affecting special military personnel
benefits that are no longer required, the 1977 Budget also proposes
revisions to certain pay practices relating to the guard and reserve,
to retired pay, and to pay of cadets in military academies. These
revisions will reduce costs and correct inequities in the present
with
R.
FORD
pay system.
Actions Proposed in Budget:
GERALS
- Seek legislation to phase out the subsidy of direct labor
in commissaries over a three year period. At present $300 million
in annual direct labor costs to operate military commissaries is
fully subsidized by the Federal Government. At the same time,
direct labor costs in military exchanges are paid by the customer.
The proposed legislation would eliminate this taxpayer support to the
commissaries and would bring the commissaries under the same policy
as the exchanges. Commissary prices are expected to rise by three
percent in each of the next three years as this subsidy is phased out.
Savings of $94 million would occur in 1977.
There is no attempt in this proposal to close commissaries.
In fact, commissaries will still enjoy savings of 10-12 percent due
to free rent, no State or local taxes, no advertising or insurance
costs and no profits. In addition, overseas commissaries will
receive a subsidy of $88 million in transportation costs to assure
that military personnel overseas can continue to buy food which is
comparable in price and quality to that available in the United
States.
5
- Begin to convert the Defense housing system to a fair
market rental system. Today, military personnel receive housing
directly by occupying government quarters or they are paid a cash
housing allowance when quarters are not furnished. A recent appraisal
of family housing indicates a wide range of disparity between the
value of government housing and the rental allowance paid by the
occupants. As a first step in remedying this situation and bringing
housing allowances in line with their value, one-quarter of the next
pay raise will be applied directly to the quarters allowance of all
military personnel. Estimated 1977 savings will be $44 million.
- Support legislation which has been submitted to Congress but not
yet enacted to restructure the current military retirement system, to
correct existing inequities, and eventually to slow the dramatic rise
in annuity costs.
Five major changes in the nondisability retirement system are
proposed.
Increased retirement benefits for extended periods of
service.
Some reductions in retirement benefits for those who retire
with less than 30 years of service.
Use of a one-year salary base for computing retirement
income instead of the pay base on the final day of service.
Integration of military and social security retirement
benefits at age 65 as is the case with most private
retirement plans.
Severance payments for voluntary separations after ten
years of service and for involuntary separations after
five years of service.
Savings from the new system would begin in the 1980's and are expected
cumulatively to exceed $10 billion by the year 2000.
- Introduce legislation to eliminate dual compensation for
Federal employees who serve in the Guard and Reserve. An estimated
150,000 Federal employees serve in the National Guard or the Reserves.
When these employees take military leave to participate in their
annual Reserve training program, they receive their full Federal
salary plus an average $400 in military pay. Private employers
generally follow the practice of granting military leave and provid-
ing pay, but only to the extent necessary to assure no loss of pay
to the Reservist. The proposed legislation would adopt this practice
for Federal employees and would result in annual savings of $45 million.
- Propose legislation to adjust the compensation of cadets and
midshipmen. Cadets and midshipmen at the nation's military academies
receive a high quality education, free room and board, and a salary
equivalent to 50 percent of the basic pay of a second lieutenant.
These "salary" funds are held by the academy which deducts expenses
for books, uniforms, laundry and dry cleaning, etc., and provides
the cadets with pocket money. The proposal would substitute a
reduced monthly allowance of $125 rather than the current $333, while
continuing to provide education, room and board, and non-personal
expenses. This would bring direct compensation to cadets more in
line with that provided to ROTC students. The new system would be
phased in beginning with the classes entering the academies in 1976.
Savings would be $2 million in FY 1977 and would reach $24 million
after full implementation in four years.
- Introduce legislation to eliminate dual compensation for
Federal employees who serve in the Guard and Reserve. An estimated
150,000 Federal employees serve in the National Guard or the
Reserves. When these employees take military leave to participate
in their annual Reserve training program, they receive their full
Federal salary plus an average $400 in military pay. Private
employers generally follow the practice of granting military
leave and providing pay, but only to the extent necessary to
assure no loss of pay to the Reservist. The proposed legislation
would adopt this practice for Federal employees and would save
$47 million in 1977.
1977 Defense Budget
Strategic Improvements
Background: Strategic nuclear forces are the foundation of overall
deterrence. Our policies, plans and programs must not permit any
fundamental weaknesses that might undermine that deterrent. We
must therefore maintain a broad-based program to sustain deterrence
and enhance strategic stability. These programs are essential to
assure that:
-- There is no real or perceived advantage from a Soviet "first
strike" nuclear attack on the U.S., and conversely, U.S.
forces do not appear to have the capability for a disarming
first strike on Soviet forces;
- There is no real or perceived advantage in overall strength
and capabilities favoring the Soviet Union;
-- A clear capability exists to increase deployments and accelerate
force improvements if it should become necessary to counter
possible Soviet actions that would upset the military balance
and strategic stability;
- U.S. strategic forces conform to the provisions of all strategic
arms agreements, and to the extent consistent with other U.S.
security objectives, U.S. plans avoid provoking additional
deployments by existing nuclear powers as well as any nuclear
testing or deployments by other countries.
While our current strategic forces are highly effective and surviv-
able today, Soviet deployment of strategic missiles and their
development efforts in other strategic areas could lead to a
significant reduction in the future deterrent value of our forces
without continued force improvements. Thus, if we are to maintain
a strong deterrent posture, we must maintain a well diversified
mix of modern strategic offensive forces consisting of the triad
of land-based ballistic missiles, sea-based systems and manned
bombers and their supporting command, control and communications
systems.
Actions Proposed in Budget: The Administration is requesting $9.4
billion to cover the direct cost of our strategic forces in 1977.
The increase of $2.1 billion over the 1976 request is due primarily
to phasing into production of the B-1 bomber and increases in the
Trident missile and submarine program. In addition, the 1977 program
continues:
- Ballistic missile accuracy and yield improvements;
- Development of cruise missiles for launch from a variety
of platforms;
- Development of a large intercontinental ballistic missile
that may eventually replace currently deployed land-based
missiles.
- Improved command, control, surveillance and warning systems;
- Research and development on anti-ballistic missile technology.
1977 Defense Budget
Army Combat Power and Readiness
Background: Last year the Army initiated a program to expand its
combat forces from 13 to 16 divisions within current manpower levels.
The 16 divisions are now in being but the new divisions are still in
the early stages of organization. During 1977 additional personnel
and new equipment will be added to these divisions to bring them
up to full strength.
Actions proposed in Budget: Two combat brigades, totaling over
6,000 soldiers, will be activated in FY 1977 to complete the
16 division program. Units of the Reserve and National Guard will
also continue to receive priority in training and equipment.
The Army procurement budget in 1977 is 40 percent higher than 1976 to
provide equipment for the new forces and to restore stock levels of
combat equipment in Europe which were depleted as a result of the
Middle-East conflict. The following table indicates the quantities
of Army tanks and armored personnel carriers (APC's) which will be
purchased:
1975
1976
1977
Army tanks
439
662
886
APC's
111
845
1,200
7
1977 Defense Budget
Shipbuilding Costs
Background: Shipbuilding budgets have been increasing sharply (up
26% in FY 1976 and 60% in FY 1977) to reach a level of $6.3 billion
in FY 1977.
Actions Proposed in Budget: Of $6.3 billion requested in FY 1977,
$1.6 billion is for cost increases on FY 1975 and prior programs.
Sixteen new ships are funded in FY 1977, the same number as in FY 1976.
During the coming year DOD will, as a matter of priority, review
future shipbuilding requirements in terms of fleet size, composition
and effect on projected DOD resources.
A summary of the planned shipbuilding program for 1975-77 follows:
1975
1976
1977
Quantity by Ship Type
Trident Ballistic Missile Submarine
2
1
1
Nuclear Attack Submarines
3
2
3
Nuclear Guided Missile Curiser
1
Guided Missile Destroyer
1
Destroyer
7
Guided Missile Ocean Escort
3
6
8
Patrol Hydrofoil
4
1
Repair Ships
1
1
2
Fleet Oiler
1
2
1
Fleet Tugs
3
Total Ships
22
16
16
Funding of New Ships (in billions)
Cost of Above Ships
$2.7
$2.3
$4.5
Misc. programs
.3
.2
.2
Inflation and Cost Increases (1975 and
.1
1.4
1.6
prior)
Total Program Cost
$3.1
$3.9
$6.3
8
1977 Defense Budget
Projections of Future Defense Program
Background: Long range spending projections are required by the
Executive Branch and Congress for fiscal planning, and by agencies
to evaluate proposed programs.
Actions Proposed in Budget: The 1977 Budget projects Military and
Military Assistance programs rising - in constant 1977 dollars -
to $121.9 billion by 1981. This increase includes an allowance for
annual real growth in defense purchases in 1978 and beyond for
modernization of current forces. Defense purchases provide for
basic military programs exclusive of military and civilian pay,
military retired pay and funding to cover shortages in prior-year
shipbuilding programs. Real growth in purchases is needed to cover
the additional costs associated with technological improvements and
increased numbers of modern U.S. weapon and support systems.
The efficiency reductions proposed in the 1977 Budget are also
reflected in the 1978 through 1981 projections. Civilian and
military pay levels will again be made comparable to the private
sector after 1977.
The projection should be understood as a benchmark against which
requirements can be measured, neither as a ceiling on Defense nor
a commitment to finance programs regardless of their merit and
importance.
Actual Defense recommendations for 1978 through 1981 will be
determined from a review of individual proposals
Long Range Projections
Total Obligational Authority
($ in billions)
1977
1978
1979
1980
1981
Current $
112.7
120.6
130.0
139.8
149.7
Constant 1977 $
112.7
113.2
115.9
118.9
121.9
10
1977 Defense Budget
Twenty-Six Air Force Tactical Wings
Background: The Air Force in the past year reorganized its tactical
air forces from 22 into 26 active wings within the current total number
of active aircraft.
Actions Proposed in Budget: The Air Force will simultaneously modernize
the total force through the introduction of new production aircraft
including F-15 long-range fighter aircraft, the lower-cost F-16 air
combat aircraft and the A-10 aircraft for close support of ground
troops. A summary of the 1975-77 procurement plan for these aircraft
is shown below:
1975
1976
1977
F-15
72
108
108
F-16
-
-
16
A-10
22
53
100
94
161
224
Concurrent with modernization of the active fighter force, we are
pursuing modernization of reserve forces. By 1980, the 10-wing
reserve fighter attack force will consist of F-4's, A-7's, and A-10's
which will effectively complement the active force in the event of
a mobilization.
1977 Budget
Selective Service
The Administration proposes to eliminate the requirement chat young
men 18 years of age and older register for the draft in pracetime.
Elimination of the annual registration will mean that young men
born in 1959 or later years will not have to register for the draft.
Prior to arriving at the decision to end annual registration, a
review was made of likely Department of Defense manpower require-
ments in the event of a sudden major conflict. That review resulted
in the determination that annual registration could be eliminated
without risk to the nation's security.
In World War II the Selective Service grew from a small planning
activity in the War Department. Without pre-registration, the
first inductees were delivered to training centers within 50 days
of mobilization.
The Selective Service will retain responsibilities for Reserve
training and mobilization planning. Ending annual registration
will save over $20 million in 1977 and each year thereafter. The
resulting system will cost $6 million annually and will employ
about 100 people compared to the 1,939 employed in December of
1975.
FOREIGN AID
Foreign aid programs, including both military assistance and
foreign economic and financial assistance will total $5.8 billion
in budget authority for 1977. Budget authority declines by $762
million from the 1976 budget request now pending before the Congress.
This reduction results largely from: the tight 1977 budget policy;
underlying trends in military assistance; and, the timing of
international agreements on multilateral development assistance.
Despite the reduction in 1977, budget authority will be almost
one-fourth higher than Congress provided in 1975. Much of this
increase is due to the provision of large-scale aid to help achieve
a durable peace settlement in the Middle East. The increase also
results, however, from the failure of Congress to appropriate the full
amount requested in 1975; the appropriation request for 1976 is
still pending.
Key 1977 Budget Decisions
- Limit military assistance by reducing or terminating a
number of grant military aid programs.
- Continue the high level of economic aid to Middle East
countries at about the 1976 level.
- Support new multilateral development assistance initia-
tives as an outgrowth of the UN Seventh Special Session.
- Reduce the initial Administration legislative request
for bilateral development aid, thereby permitting only
slight growth over 1976.
- Maintain U.S. food aid at about two-thirds of the world-
wide target of 10 million tons of food.
The highlights and explanation of these categories of foreign
assistance are explained below.
12
2
Foreign Aid
(In millions of dollars)
Budget Authority
1975
1976
1977
Military assistance*
1,379
1,230
785
Economic and financial aid:
Security related aid
1,195
1,923
1,836
Multilateral development
758
1,505
1,205
Bilateral development
791
1,030
1,127
Food for peace
778
1,090
1,169
Other
181
195
123
Proprietary receipts**
-104
-412
-446
Total foreign aid
4,979
6,562
5,800
Outlays
Military assistance*
1,879
1,037
739
Economic and financial aid:
Security related aid
892
1,247
1,431
Multilateral development
685
1,183
1,109
Bilateral development
960
1,118
1,054
Food for peace
936
1,209
996
Other
192
195
146
Proprietary receipts**
-104
-412
-446
Total foreign aid
5,440
6,578
5,029
* Net of offsetting receipts
** Repayments of Economic Assistance Loans
3
MILITARY ASSISTANCE
Military assistance, which is included in the National Defense
function, is an integral part of the U.S. foreign aid program.
The basic philosophy underlying the current budget request is to
hold military assistance to the minimum level necessary to enable
friendly countries to meet their self-defense needs and to facili-
tate the achievement of U.S. foreign policy objectives.
The geographic focus of the military assistance program has
shifted rapidly from Southeast Asia to the Middle East and the
primary form of assistance has changed from Military Assistance
program grants to credits under the Foreign Military Sales program.
Almost half of the 1977 program is intended for the Middle East and
fully two-thirds of the value of the program is in the form of
credits which will be repaid eventually by recipient governments.
The largest recipient of military assistance credits will be Israel.
The $495 million reduction in budget authority from 1976 reflects
the continued downward trend in grants, increases in collections
from prior year loans and increased reliance on credit guarantees
rather than direct loans. Credit guarantees, which insure loans
made by the Federal Financing Bank, require only a 10% guarantee
reserve charge against budget authority and do not result in
budget outlays.
FOREIGN ECONOMIC AND FINANCIAL ASSISTANCE
There are four major components of economic and financial assistance:
- security related economic aid;
- multilateral development assistance;
- bilateral development assistance; and
- food for peace.
1. Security related programs. Security supporting assistance,
$1.8 billion in budget authority, is proposed for 1977 and is the
largest single component of economic aid. This program provides
grants and loans to countries of particular importance to U.S.
security interests. The funds help meet the recipients' budget
and balance-of-payments needs.
4
More than 90 percent 0⁴ the 1977 supporting assistance will be
provided to Israel, Egypt, Jordan, and Syria in order to support
economic progress and facilitate movement toward an overall
political settlement in the region. This assistance is being
maintained approximately at 1976 levels, with the reduction of
$87 million from the 1976 supporting assistance request level to
be taken in the smaller programs to countries outside the Middle
East.
The Middle East Special Requirements Fund will be reduced from
$50 million requested in 1976 to $35 million in 1977, primarily
because the initial costs of setting up the U.S. Sinai Support
Mission, which will monitor military movements in the Sinai
passes, will have occurred in 1976. The Special Requirements Fund
will still be available to meet unforeseen contingencies.
2. Multilateral development assistance. Slightly more than
half of the $1.2 billion in 1977 budget authority proposed under
this heading for 1977 is to carry out U.S. commitments to provide
loan funds for the International Development Lending Institutions--
the World Bank Group and the Inter-American, Asian, and African
Development Banks. A smaller portion, $178 million, will provide
voluntary contributions to United Nations organizations and the
Organization of American States mainly to finance technical
assistance and humanitarian relief activities. In addition,
budget authority is requested for new initiatives stemming from
U.S. proposals at the UN Seventh Special Session.
(Budget Authority in $ millions)
1975
1976
1977
International Development Lending
Institutions
619
1,076
985
International Organizations
(UNDP, OAS)
139
230
178
International Finance Corporation (IFC)
--
--
42
International Fund for
Agricultural Development
--
200
--
Total
758
1,505
1,205
5
In recent years, the United States has significantly increased
its support for the multilateral development banks, although
congressional action has cut back Administration budget requests.
The United States has found it advantageous to channel a growing
portion of development aid through these multilateral insitutions
because they encourage other donors to match U.S. contributions
and because of the institutions' technical expertise.
In addition to payments on existing pledges, the budget provides
up to $42 million for the first payment on an increase in the
capital of the International Finance Corporation, which supports
private sector involvement in the development programs of the
poorer countries. Also, up to $200 million is included in the
1976 budget for a contribution to the new International Fund for
Agricultural Development. The Fund will be established upon
completion of international negotiations now underway. Contribu-
tions from the industrialized countries and the OPEC countries
will be used to finance agriculture-sector growth in developing
countries.
Both of these latter programs were part of a package of initiatives
proposed by Secretary Kissinger in a speech to the Seventh UN
Special Session. The speech also included proposals, which have
subsequently been accepted, for a special trust fund managed by
the International Monetary Fund (IMF) and an increase in IMF
lending to countries experiencing sudden export shortfalls. The
IMF proposals will have no budgetary impact.
3. Bilateral development assistance. $1.1 billion in budget
authority is requested for the Agency for International Develop-
ment (AID) to finance concessional development loans, technical
assistance and humanitarian relief grants, and operating costs.
Bilateral development assistance is currently focused on the
problems of agricultural production, population growth, and
education.
The budget authority request for AID programs in 1977 is $97
million above the 1976 request now pending before Congress, but
it is $105 million below the amount initially sought for 1977 by
the Administration in authorizing legislation proposed last year.
In terms of the program level, the reduction from the originally
planned level for 1977 is primarily in development loans, which
will be held at about the 1976 level, while grant programs will
be permitted to increase by 17 percent. Loan programs have been
reduced in part because some of the economically stronger
developing countries are less in need of highly concessional AID
lending. Moreover, increases in multilateral lending, supported
6
by the United States, should be able to fill much of the gap
caused by a decrease in the bilateral program. Grant technical
assistance programs will provide critical assistance in overcoming
particular development bottlenecks, especially in the poorest
countries such as those of Sahelian Africa.
AID Program Level
(in $ millions)
1975
1976
1977
Development loans
453
531
518
Development grants
314
403
472
Operating expenses
162
175
176
Disaster and other
211
30
33
Total, Program
1,140
1,139
1,199
The bilateral assistance category also includes the insurance,
guarantee and loan activities of the Overseas Private Investment
Corporation, and the grants of the Inter-American Foundation to
private organizations in Latin America. No additional budget
authority is needed for these agencies in 1977.
4. Food for peace. Neither budget authority nor outlays
adequately measure trends in the Food for Peace program under
Public Law 480. Outlays, which measure the costs of actual
shipments, have been affected by the wide fluctuations in food
prices starting in 1973, and the PL-480 program can exceed budget
authority in any given year because legislation permits extensive
use of Commodity Credit Corporation funds.
In terms of the amount of food stuffs actually provided, the
1977 budget anticipates shipments of approximately 6.2 million
tons. This is about the same size as the 1976 program but costs
are estimated to be lower because of changes in the commodity mix
and possible price reductions. This level represents a
substantial U.S. commitment toward the world food aid target of
10 million tons set at the World Food Conference in Rome in November
1974.
7
PL-480 Commodity Shipments
(in millions of metric tons)
1975
1976
1977
Title I credits
3.5
5.1
4.9
Title II grants
1.2
1.3
1.3
Total
4.8
6.4
6.2
The PL-480 program in 1976 and 1977 is more than 25 percent
above the 1974 program which was held to 4.8 million tons because
of world food shortages and the depletion of the formerly large
U.S. grain stocks which initially gave rise to the PL-480
program. Because of the need to rebuild U.S. stocks and meet
a variety of commercial demands for food, and because of the
relatively improved agricultural situation in some food aid
recipient countries, the program has been held below the 9
million ton shipment level of the late 1960s and early 1970s.
Title I shipments, which are financed on concessional credit
terms will decrease slightly in 1977. Title II people-to-people
grant donations will remain at the 1.3 million ton level mandated
by law.
EXPORT-IMPORT BANK OF THE UNITED STATES
The Export-Import Bank supports exports by providing direct
loans, discount loans, and guarantees and insurance. Eximbank's
direct loan program is designed primarily to finance the purchase
of major capital goods requiring repayment terms of five years
or longer. Under the discount loan program, Eximbank stands
ready to finance medium-term (five years or less) export credits
through loans made to commercial banks. Eximbank's guarantee
and insurance programs are aimed at increasing private capital
participation by insuring banks and exporters against commercial
and political risks involved in export transactions.
Key Budget Decisions
-
Revise the 1976 direct loan ceiling to $3.0 billion
based on lower estimates of likely loan authorizations
and increase it to $4.0 billion in 1977.
- Reduce the discount loan program to $1.0 billion in 1977,
pending probable termination of the program next year.
- Hold guarantees and insurance ceiling at the $8.8
billion level of 1976.
Export-Import Bank Authorizations*
($ in millions)
1976
Budget
1977
1972
1973
1974
1975
Amend.
Request
Direct loans
2,296
2,414
3,981
1,701
3,050
4,075
Discount loans
989
1,640
924
1,112
1,400
1,000
Guarantees and
insurance
3,945
4,460
4,194
4,502
8,850
8,850
TOTAL
7,230
8,514
9,099
8,315
13,300
13,925
Net Outlays
184
548
1,228
1,504
1,358
1,306
*
Eximbank's program activity subject to annual limitation,
calculated on a net basis, is shown in the attachment.
2
Discussion
Background--Budget decisions concerning the Export-Import Bank
were based on an analysis of Government export credit support
from two perspectives: (1) the U.S. credit market and (2) the
international economic environment.
As with other credit programs, the budget decision was based
partly on the need to avoid pre-empting the private credit
market. Accordingly, the budget request reflects estimates of
the need for export credit financing to overcome various
imperfections in financial markets (for example, the lack of
long-term credits for exports, or excessive risk premiums) while
trying to avoid simply substituting Federal programs for private
lending.
Some substitution for private credit is unavoidable, however,
because Eximbank must provide direct credits at interest rates
below those available in the private market in order to counteract
the credit subsidies offered by foreign governments to support
their exports. The extent of foreign subsidies appears to be
increasing as governments include export financing in fiscal
plans designed to promote economic recovery. Negotiations are
now underway on an agreement to limit the self-defeating
escalation of subsidized export credits. The 1977 budget decisions
are intended to signal U.S. willingness to enter into such an
agreement while allowing Eximbank adequate leeway to meet foreign
competition until an agreement is reached.
1976 Direct loan re-estimate--The pending 1976 budget request
was amended downward from $4.0 billion to $3.0 billion in order to
provide outlay estimates that are consistent with current estimates
of program activity. Authorizations will fall below initial
estimates larely because of the continuing economic recession in
many countries. This amendment is not expected to affect Eximbank's
actual 1976 lending level.
Discount loans--The 1977 budget level for the discount loan
program is designed to significantly tighten the program pending
probable termination of the program the following year.
The primary objective of the program is to encourage the provision
of export credits at fixed rates. The program also provides
export incentives to small and medium-size exporters and banks
and counters the effects of similar programs offered by European
and Japanese export credit agencies. The 1977 budget decision was
3
based on the judgment that the objective of assuring fixed-rate
credits is not of sufficient importance to warrant the continua-
tion of a sizeable Federal credit program.
Guarantees and insurance--The decision to continue guarantees
and insurance at the $8.8 billion level is based on an estimate
of 1977 program usage. The funding level will allow substantial
growth since 1976 authorizations will probably fall short of the
ceiling due to the effects of the recession. These programs do
not result in budget outlays, except in the unusual instance of
loan defaults.
Attachment
Export-Import Bank
Limitation on Program Activity
The Eximbank's annual limitation on program activity is based on:
1.
Direct and discount loan authorizations net of
cancellations.
2.
Guarantees and insurance authorizations at 25 percent
of face value, less cancellations, repayments, and
expirations.
3. Interest payments and non-administrative expenses.
Congress also enacts a sub-limitation on equipment and services
loans within the overall program limitation. The Bank has
normally fallen well below its limitation in terms of actual
activity.
Program Activity Subject to Limitation
($ in millions)
1976
Budget
1977
1972
1973
1974
1975
Amend.
Request
Direct loans
2,223
2,336
3,872
2,592
3,000
4,000
Equipment and
services
(2,139)
(2,261)
(3,790)
(2,508)
(3,000)
(3,875)
Discount loans
839
1,436
807
920
1,260
900
Guarantees and
insurance
459
333
261
220
823
718
Interest and non-
administrative
expenses
186
215
325
453
537
716
TOTAL, actual or
estimated
3,707
4,320
5,265
4,185
5,620
6,334
LIMITATION set
by Congress
7,324
7,324
7,650
6,403
5,620
6,334
FY 1977 Budget
National Aeronautics and Space Administration
FY 1976
FY 1977
Percent
Outlays
Percent
Outlays
Percent
Change
Program Activities
($ millions)
of Total
($ millions)
of Total
1976-1977
Manned Space Flight
(i.e. Space Shuttle)
1,734
49%
1,865
51%
+ 8%
Space Science, Appli-
cations and Technology
(e.g., Viking Mars
lander, Landsat earth
resources satellite)
1,118
32%
1,125
31%
+ 1%
Aeronautical Research
and Technology
330
9%
339
9%
+ 3%
Supporting Activities
(e.g. operation of
tracking network)
335
10%
347
9%
+ 4%
Total NASA
3,517
100%
3,676
100%
+ 5%
Major Budget and Program Highlights (FY 1977)
The 1977 budget strategy for NASA is to:
- seek to maintain a "balanced" program (i.e., unmanned satellite
projects as well as continuing space shuttle development) across
all space activities.
- hold to the space shuttle development schedule. Through 1976
about $3 billion will have been invested in the program. A
major slippage in the schedule could add an estimated $350-
500 million to the out-year costs of completing the program.
(The current development cost estimate for the shuttle at
completion is $6.6 billion in FY 1977 dollars.)
- the 1977 Budget also seeks to maintain a constrained total
dollar level for space programs. While there are many
projects that are technically feasible in space, the cost
of exploiting what is feasible must be balanced against
other national priorities.
Almost all of the $159 million NASA increase in 1977 (over
1976), is related to the orderly buildup of activity in the
space shuttle development program.
14
2
Space Shuttle development will be moving forward toward
"roll-out" of the complete first space shuttle orbiter
in September 1976:
- the shuttle is planned to begin a series of approach and
landing tests in the atmosphere during 1977.
- initial manned space flight is scheduled for mid-1979.
Two new satellite projects will be initiated in FY 1977:
- Solar Maximum Mission (total project cost of $83 million)
to make important scientific measurements of the Sun during
the next peak of solar flare activity expected to occur in
1978-1980, the only time in the next decade that this
opportunity will be available.
- Magnetic Field Satellite (total cost of $20 million) to be
launched in 1980 which will make precise measurements of the
earth's magnetic field--expected to contribute to energy-
related mineral exploration activities as well as providing
scientific information about the earth's crust and internal
structure.
In keeping with the President's energy objectives, the NASA
aeronautical R&D program (totalling $339 million in 1977) will
give priority attention to technology for the achievement of
more energy-efficient future air transports--overall technology
goal is to reduce fuel consumption of new airplanes by about
half by 1985.
- NASA will be working to obtain cost-sharing and heavy involve-
ment of the private sector in the development and demonstration
of advanced aircraft technologies (particularly in the area
of composite materials).
Construction will begin on a new wind tunnel at Langely Research
Center, Virginia (total cost of $65 million), expected to have
wide application as an R&D tool for development of future military
and civilian aircraft.
- The wind tunnel will have advanced capabilities to provide
measurements of certain air-flow characteristics of aircraft
operating near the speed to sound which were previously not
obtainable.
3
Major Deferrals and Reductions in 1977
Program reductions and deferrals will be made in several areas
of the NASA budget in order to achieve the President's objective
of constraining the total Federal budget. These reductions are
not expected to impair NASA's overall ability to carry forward
a productive program in aeronautics and space technology.
- Defer procurement of a 3rd (production version) space shuttle
orbiter and selected development efforts--FY 1977 saving is
$90 million.
- Defer initiation of Space Telescope flight project--FY 1977
saving is $4 million. (Total project cost is $350-400M.)
- Reduce general support for NASA's research and development
activities in aeronautics and space (e.g., research at NASA
laboratories and universities). FY 1977 saving is $28 million.
- Defer modifications to a wind tunnel and other proposed con-
struction projects--FY 1977 savings is $9 million.
- Reduce NASA civil service employment levels (500 positions)
and related support contractor manpower at NASA installations
as the result of an assessment undertaken by NASA to increase
efficiency and productivity at the NASA centers- FY 1977 saving
is $15 million.
1977 Budget
Federal Research and Development
Obligations ($Millions) % Change
1976
1977
1976-1977
Conduct of R&D
Defense
9,879
11,198
+ 13
NASA
3,473
3,573
+ 3
ERDA
2,812
3,573
+ 17
HEW
2,369
2,570
+ 8
NSF
628
726
+ 17
Agriculture
483
507
+ 5
Other
1,694
1,609
- 5
Total, Conduct of R&D
21,338
23,465
+ 10
R&D facilities
909
1,215
+ 34
Total, all R&D
22,247
24,680
+ 11
Included in total funds for the conduct of R&D are Federal support
for both -
Basic research (in Government
labs, universities, and
industry)
2,380
2,640
+ 11
Grants and contracts to
universities for both basic
and applied (e.g., medical)
research
2,460
2,614
+ 9
SERAL FORD LISTED
Overall Strategy for R&D
- The Government invests in R&D largely to develop new products or
processes. It is not a separately budgeted activity of the Federal
Government and should not be viewed as an "end-in-itself." Rather
it is a means whereby agency or national goals can be achieved more
effectively or more efficiently.
R&D on new weapons systems can improve the Nation's defense.
R&D on the space shuttle can improve our ability to work in outer
space.
15
2
R&D on the liquefaction of coal can improve our ability to
use coal rather than rely on imported oil.
R&D on new varieties of wheat can increase agricultural
production to meet domestic needs and sales to foreign
countries.
Federal R&D covers a wide variety of activities. In varying
degrees agency R&D programs include:
Basic research (to develop fundamental new knowledge);
Applied research (to apply new knowledge to specific
applications);
Development (to do the engineering for new devices or
systems);
Demonstration (to build experimental new devices or systems
to see how well they work and what they cost to build and
operate at full scale).
-
Private industry, foundations, universities, and others also
invest in R&D. The private sector accounts for nearly half
of the national investment in R&D. The Federal Government
seeks to encourage -- through its R&D programs, as well as
through its tax policies -- continued and expanded private
investment in R&D so that overall national goals may be better
met through science and technology.
The Federal Government focuses its R&D investment in three
broad areas to meet:
Direct Federal needs, where the Government has full responsi-
bility, such as in space and national defense.
General economic and human welfare needs, where the Federal
Government assumes major responsibility because there are
not sufficient incentives for the private sector to invest
enough to meet national needs, such as in basic research,
medicine, environment, and agriculture.
Specific national needs, where Government shares responsibility
and uses Federal funds to accelerate and augment the efforts of
private sector because of the overriding national interest,
and there is a need to provide the Nation with technological
options for the future, such as in energy.
3
Constraints must be exercised and priorities set for R&D,
not only because of overall budget limitations, but also to:
Avoid overtaking private sector responsibilities to produce,
market and utilize technical advances, such as technologies
to conserve energy in industrial manufacturing where there
is a strong incentive for private industry to do the job.
Encourage cost-sharing with private sector for technologies
ready for commercial demonstration, such as oil-shale
development.
Avoid investing in technology currently seen to have future
questionable benefits, such as:
- A large space station
- Expensive high-speed trackless trains operating on
cushions of air
Budget and Program Highlights (FY 1977)
-
In defense
Overall obligations increase by 13% over 1976 with significant
increases in basic research, in ballistic missile warhead
improvements, and in providing options for a new inter-
continental ballistic missile system.
Funding will decrease in the Trident long-range submarine
and missile system because these systems are entering.
procurement.
In space
Continue development and testing of the space shuttle
Defer procurement of a third space shuttle in recognition
of budget constraints
In other civilian agencies
In the Energy Research and Development Administration:
Increase research and development to assure the
availability of safe and reliable nuclear power; continue
development of fusion technology and the nuclear breeder
demonstration program; expand research to make better and
more environmentally acceptable use of fossil fuel through
gasifying or liquefying coal; assist industry in advanced
energy conservation technology and technologies involving
solar and geothermal energy.
4
In the Department of Health, Education and Welfare:
Augment research on immunology, aging, and environmental
health.
In the National Science Foundation: Increase efforts
in basic research including emphasis on physics, engineer-
ing, chemistry, and materials.
In the Department of Agriculture: Expand research on the
basic biological processes underlying agriculture production,
and development of additional sources of usable vegetable
protein.
In other agencies: Obligations decline in total for the
conduct of R&D in those other agencies with less than $.5 billion
each in R&D. This reflects the impact of a few agencies,
such as the Environmental Protection Agency and the
Department of Commerce, where some R&D efforts have been
completed or postponed, or where there were usually high
obligations in 1976.
In facilities: Increase obligations by 34% to provide the
necessary plant and equipment for scientists and engineers
to conduct their research and development. Key increases are:
An aircraft test complex for the Department of Defense
A wind tunnel for the National Aeronautics and Space
Administration
A variety of development and demonstration projects for
the Energy Research and Development Administration, primarily
in fossil, fusion, and fission energy technologies.
-
In universities and colleges: Increase grants and contracts
for basic and applied research in health, energy, and science
in general - by 9%.
-
In overall support of basic research:
In the National Science Foundation: Increase basic research
funding by 19% to strengthen its key role in support of
such research.
In other agencies: Strengthen basic research in support
of their mission.
5
Provide an overall Federal increase of 11% for basic
research.
In addition, strengthen the competitiveness of U.S.
research in high energy physics by starting, in 1977, a
new machine (a "colliding beam" facility) to develop
and test new theories on the ultimate nature of matter.
Fiscal Year 1977 Budget
National Science Foundation
FY 1976
FY 1977
Budget
Percent
Budget
Percent
Percent
Authority
of
Authority
of
Change
($ Millions)
Total
($ Millions)
Total
1976-1977
Basic research (e.g.,
biology, math, chemistry
geology, astronomy)
$523
71%
$625
77%
+ 20%
Applied research (e.g.,
Earthquake resistant
structures)
$110
15%
$ 90
11%
- 18%
Science education (e.g,.
fellowships, curriculum
improvement)
$ 65
9%
$ 65
8%
--
Other (e.g., international)
science programs, admin-
istrative expenses)
$34
5%
$ 32
4%
- 6%
Total NSF
$732
100%
$812
100%
+ 11%
Basic Research: The primary responsibility of NSF
The major responsibility of the National Science Foundation (NSF)
is support of basic research.
- Basic research may be defined as the intensive study of natural
laws and phenomena or human behavior for the purpose of learning
or increasing knowledge.
- Basic research is generally free from practical needs to meet
immediate objectives, but it is regarded as the foundation for future
applications of science to improve our national defense, our
economy, and our human welfare.
16
2
The NSF uses its funds to complement the funding of other
agencies (which support basic research to serve their specific
mission needs). Thus, NSF aids in assuring
- that enough basic research is conducted in this country to
meet the Nation's need for new fundamental knowledge to
support future advancements in technology.
- that Federal support is "balanced" across the many disciplines
of basic science, and
- that highly innovative ideas, which other agencies cannot
support in relation to their missions needs, are pursued.
The importance of this responsibility to NSF is indicated by
the budget where 77% of the NSF funding is for basic research
in 1977.
- NSF finances 20% of the Federal effort in basic research.
Responsibility for the other 80% is divided among several
Federal agencies, which fund basic research oriented toward
their mission.
These include chiefly the
- Department of Defense
-- National Aeronautics and Space Administration
-- Energy Research and Development Administration
-- Department of Health, Education, and Welfare (particularly
the National Institutes of Health).
The Federal effort in support of basic research is predominant
in the Nation because the benefits of basic research generally
accrue to all of society.
- Federal efforts account for about 70% of the national activity
in basic research. Other support for basic research comes
from non-profit organizations, private industry, and some States.
- Industry as a whole does not make a major investment in basic
research because the results of such research cannot generally
be patented and therefore industry cannot readily "profit"
from basic research.
Individual judgments will certainly vary about the worth of
particular basic research projects. Nevertheless, some examples
should help understand the type and range of activities supported
by NSF in fulfilling its responsibility for strengthening basic
research.
3
- Discoveries of fundamental particles that make up the nucleus
of atoms and molecules (discoveries like this one, in the
past, have led to the major advances in chemistry, and
electronics that we have seen in recent years);
- Studies of changes in the Earth's magnetic and volcanic
forces (to develop ways to predict the timing and location
of earthquakes);
- Development of advanced techniques for modeling and analyzing
the national economy (which may provide the basis for
improved future management of national growth);
- Identification of the functioning of chemical and biologicical
catalysts (which are essential for improved chemical industrial
processes);
- Investigation of the novel properties of metals at extremely
low temperatures (which is providing the basis for major
technological advances in computing, measurement and other
electronic systems).
Other significant responsibilities of NSF
The Foundation supports a limited amount of applied research which
is focused on important national problems not addressed by other
Federal agencies. This is chiefly through the RANN program
(Research Applied to National Needs) which was, for example, the
program that initially supported Government efforts in solar and
geothermal R&D (now transferred to ERDA).
NSF as part of its responsibilities also supports the U.S. Antarctic
Program for scientific research using the logistic support of the
Departments of Defense and Transportation. This program which
supports important overall U.S. interest in the Antartic will
total $45 million in FY 1977.
Science education programs of NSF provide for both the
training of scientists and engineers and the development of new
approaches for teaching science.
4
Budget and Program Highlights (FY 1077)
Overall budget authority for NSF will increase by 11%, from
$732 million to $812 million, because of the need to strengthen
Federal support of basic research in the national interest.
Budget authority for basic research will increase by 20%, from
$532 million to $625 million.
- Nearly, all fields of basic research will share these increases
including programs in biology, chemistry, physics, engineering,
math, and astronomy.
- These increases are balanced with increases for basic research
provided in the 1977 budget in other agencies, particularly
the Department of Defense, the Energy Research and Development
Administration, the Department of Agriculture, and the
Department of Health, Education and Welfare.
- Along with increases in NSF support, total Federal support will
grow from $2.38 billion in 1976 to $2.64 billion in 1977,
an increase of 11%.
Increases for basic research in NSF and other Federal agencies
will help reverse a decline that has taken place in the last
several years in terms of real spending on basic research.
Because inflation has been at a higher rate since 1967 than
the Federal increases in funds for basic research, the level of
scientific work supported by the Federal Government has decreased.
The program of Research Applied to National Needs (RANN) will
be reduced reflecting a shift of responsibilities in applied
energy research (particularly for solar and geothermal power)
from NSF to the Energy Research and Development Administration.
The science education program does not grow because evaluations
are being conducted on the need for and effectiveness of some
of these programs.
Program Operations
All NSF research projects are carried out through grants and
contracts. The large majority of the awards are made with
scientists and engineers at colleges and universities. Over
$500 million in the 1977 NSF budget will be awarded to these
institutions. Grants and contracts are also awarded to private
firms, non-profit organizations, and State and local governments.
Awards are made on the basis of merit, through competition,
and after intensive review of the research topic, project
design and potential usefulness of the research results.
Jan. 17, 1976
FY 1977 Budget
Outdoor Recreation and Wildlife Programs
Department of the Interior
Budget Summary:
1976
1977
%
Program Activities
Outlays
% of
Outlays
% of
Change
$ in M
Total
$ in M
Total
76-77
1. Land and Water
Conservation Fund
300
34
329
34
+10
2. Bureau of Outdoor
Recreation
6
--
6
--
3. National Park Service
368
41
390
41
+6
4. Fish and Wildlife
Service
225
25
233
25
+4
Total
899
100
959
100
+7
Budget Policy Highlights:
- The Land and Water Conservation Fund is fully funded
at $300 M.
- An increase of $21 M is provided for the operation of
the National Park System.
- An increase of 400 park rangers and other park employees,
effective immediately, is provided to augment National
Park operations for the Bicentennial.
- A new national wetlands inventory will be initiated.
Specific Budget Decisions:
1. Land and Water Conservation Fund.
Program:
- Fund provides grants to States for acquisition of
recreation lands and development of recreational
facilities. About 1.5 million acres of land have
been bought to date and $720 M used for development
of facilities.
- Fund also provides for acquisition of recreation
and conservation lands by the National Park Service,
Forest Service, Fish and Wildlife Service, and Bureau
of Land Management.
17
2
Budget:
- The Fund will be "fully funded , requesting appro-
priation of $300 M providing -
-- $176 M for grants to States to support some
2,500 recreation projects.
-- $118 M for Federal land acquisition with priority
given to congressionally authorized areas such
as Big Cypress and Big Thicket National Preserves.
-- $6 M for administrative costs.
2. Bureau of Outdoor Recreation.
Program and Budget:
- The Bureau administers the Land and Water Conservation
Fund, assesses national outdoor recreation demand and
supply, reviews recreation policy, and conducts studies
of potential recreation areas.
3. National Park Service.
Program:
- 29.3 million acres are managed in the National Park
System to protect natural, scenic, and historic
resources and to provide visitor services.
Budget:
- The Park Service total of $390 M includes an increase
over 1976 of $21 M for the operation of the National
Park System. Funds for routine maintenance of park
facilities, as an element of park operations, will
increase substantially in 1977.
- 400 more rangers and other permanent NPS employees
are provided in 1976 for Bicentennial work and will
be retained in 1977.
Budget restrictions:
- National Park Service construction levels will drop
from $110 M in 1976 to $41 M in 1977, mostly because
of the completion in 1976 of a large number of Bicen-
tennial facilities. The 1977 program will include
3
construction of sewage treatment facilities, some
initial development of new park areas, and some
construction and rehabilitation of facilities at
older park areas.
- As a part of the reduced road construction program,
a rescission is proposed of $58.5 M of contract
authority provided by the Federal Aid Highway Act
of 1973 for road construction. This is authority
that will not be used in 1976 and will lapse.
- Historic preservation activities (largely grants
to States for planning and historic preservation
projects) will be reduced from $25 M to $15 M by pro-
viding $10 M more to finance higher priority activ-
ities within the National Park Service.
4. Fish and Wildlife Service.
Program:
- The Service manages 33.6 million acres of wildlife
refuges to conserve migratory waterfowl, endangered
species and other wildlife.
- It operates hatcheries for the propagation of fish.
- The Service also conducts research and provides
biological services to other agencies.
- Grants are provided States for fish and wildlife
restoration, financed mostly from excise taxes on
sporting equipment.
Budget:
- $233 M are provided for the Fish and Wildlife
Service, an increase of $7.6 M over 1976.
- The increased funding is for wildlife habitat pres-
ervation, for grants to States, and for starting a
survey of wetlands which are important wildlife habitat.
Reductions:
- Construction will be reduced some because of the
higher than usual level in 1976.
4
- $12 M is estimated to be available from the sale
of "duck stamps" for the purchase of migratory
waterfowl habitat - the same level as in 1976.
An additional $7.5 M were provided through direct
appropriations in 1976 for habitat acquisition.
No direct appropriations are requested in 1977
because the Administration supports the concept
that wildlife land acquisition should be fully
supported by current sales of stamps. The Admin-
istration supports proposed legislation to provide
the Secretary with authority to raise the price
of stamps above the $5 level set several years
ago to - provide additional funds for habitat
acquisition.
- No funds are requested in 1977 for Endangered
Species grants to States ($2 M appropriated in
1976) since some $90 M of other State grant funds
are estimated to be available for this purpose.
FY 1977 Budget
Water Resources Development Program
(Outlays in Millions)
FY 1976
FY 1977
Percent
Percent
Percent
Program Activities
$
of Total
$
of Total
Change
Corps of Engineers
2118
70
2151
68
+2
Bureau of Reclamation
648
21
751
24
+16
Soil Conservation
Service
199
7
187
6
-6
Tennessee Valley
Authority
73
2
67
2
-8
Total, Water Resources
Programs
3038
100%
3156
100%
+4
Program Summary
-- The Corps of Engineers constructs, operates and
maintains dams, canals, levees, and other structures
for flood control, navigation, hydropower, and
related purposes under a wide variety of cost-sharing
arrangements. The Corps also has spent substantial
funds in recent years to conduct flood emergency work
in the Lower Mississippi Valley and elsewhere in
the Nation.
-- The Bureau of Reclamation constructs dams, canals,
and related facilities in the 17 Western states,
Alaska and Hawaii primarily for irrigation, but with
substantial hydropower, municipal and industrial
water supply, and related purposes.
The Soil Conservation Service conducts a cost-
sharing grant program to help finance the
construction of small dams, canals, and similar
facilities for flood control, drainage, and related
purposes. The water program is limited largely to
rural areas in upstream small watersheds. Outlays
in 1977 show a slight reduction from 1976 primarily
because of non-recurring emergency work in 1976.
-- The TVA constructs dams, navigation locks, and
related facilities in the 7 state Tennessee Valley
area for power, flood control and other purposes.
TVA's water program is phasing out as most of the
potential hydropower dams have been built, and the
water programs shown above are now only a small
part of the agency's total program.
18
2
Water Policy Highlights
-- Water projects represent investments in physical
facilities for development of communities; for economic
development of regions; and for assistance to
specific sectors of industry.
-- Rate of progress on most of these projects is
controllable -- it can be speeded up or slowed
down, within reasonable limits, according to the
availability of investment funds in each year.
-- The upper limit of controllability is determined
by physical limits on the amount of construction
activity that can be conducted on all sites simul-
taneously, and the lower limit by the amount of
funds necessary to meet construction contracts
previously entered into.
-- Starting many new projects and contracts in one
year will raise the lower limit of funds required
in following year.
-- Care must be taken to balance the program with (1)
investment funds available this year and (2) expected
availability of investment funds in future years.
-- The 1977 construction appropriations of $2.0 B for
direct (Corps, BuRec, TVA) construction will provide
one year's funding for about 260 projects underway,
for which $18 B must be appropriated in future
years to complete construction.
Specific budget decisions are:
-- No ongoing contracts will be cancelled for budgetary
reasons and no projects will be terminated for
policy reasons.
-- Planned schedules for starting generation of
electricity at hydropower projects underway will
be met.
-- New construction starts added by Congress to the
1976 budget request are financed with follow-on
funds in 1977.
3
-- The construction of the Bacon Siphon of the Bureau
of Reclamation's Columbia Basin project is budgeted
in 1977 contingent on agreement being reached on
a satisfactory repayment contract.
-- Budget level in 1977 will be constrained to
contribute to Administration budget objectives.
o Rates of progress on some ongoing projects
will be slowed down.
o No new construction projects are proposed to
be started in fiscal year 1977.
o Construction schedules for Corps and Reclamation
will be adjusted to reflect completion dates
based on future funding projections in the
1977 budget.
-- Amounts budgeted for specific projects appear on
Pages 301-310 (Corps), 435-446 (BuRec), 162 (SCS),
796-799 (TVA).
Rescissions and Deferrals
-- $2.5 M for 1976 and $1.1 M for 1976T was added by
Congress to the 1976 Public Works bill for the
relocation of Route 209 in Pennsylvania as part of
the Tocks Island Lake project. These funds are
proposed for rescission because the Governors of
the affected states have withdrawn support and the
reservoir project has been recommended for
deauthorization. Therefore, the relocation is
unnecessary.
-- $700 K in unbudgeted 1976 funds for design of 3
hopper dredges will be deferred until the private
dredging industry has had an opportunity to
demonstrate whether it can meet the need for
additional hopper dredges. The dredging industry
presently has several hopper dredges in various
stages of design or construction.
PRESIDENT'S
NATIONAL ENERGY PROGRAM
FY 1977 Budget
(outlays in millions of dollars)
FY 1976
FY 1977
Percent
Program Activities
$
%
$
%
change
°Domestic energy resource
5,516 69.4%
7,259 70.0%
+31.6%
development, conservation
and petroleum storage (e.g.,
FEA, Energy Independence
Authority, TVA & power ad-
ministrations, uranium
enrichment)
°Energy research, develop-
2,194
27.6%
2,858
27.6%
+30.3%
ment and demonstration
(e.g., ERDA, Interior, NRC)
°Regulation (FEA, FPC, MESA,
234
3.0%
244
2.4%
+4.3%
NRC)
Total outlays
7,944 100.0% 10361 100.0% +30.4%
Less:
Receipts (TVA, NPR,
-3,385
- 4355
+28.7%
uranium enrichment)
Net outlays
4,559
6,006
+31.7%
Approach
Growing dependence on foreign oil makes the United States
vulnerable to foreign petroleum price increases and threats
of embargo by foreign suppliers. Oil is fundamental to the
workings of our economic system and it is therefore essential
to assure an adequate continuous supply. The Nation's energy
situation illustrates the magnitude of the problem.
Domestic crude oil production peaked in 1970 and since
then has declined by more than one million barrels per
day. Production is now at a nine-year low.
Oil imports are about 37% of U.S. oil consumption and are
expected to rise to more than 50% of consumption or 12
million barrels per day by 1985 if no new actions are
taken.
Includes on-budget and off-budget (EIA, REA) program
activities.
19
2
Because of our increasing import dependence, our payments
to foreign producers for imported oil have increased from
less than $3 billion in 1970 to about $25 billion in 1974.
Domestic natural gas production peaked in 1973, declined
by 6% in 1974 and dropped another 8.5% during the first
half of 1975, leading to curtailments of service in many
parts of the country.
The Nation has undeveloped reserves of coal, oil, gas and
uranium. There are also many opportunities to conserve energy.
A solution to the dependence problem can be achieved with a
longer term effort directed toward increasing domestic energy
supplies and achieving greater conservation. The President's
national energy program is a comprehensive approach designed
to achieve a capability for energy independence by 1985. The
program includes both short-term and longer term initiatives
but places basic reliance on the private sector to carry out
expanded domestic energy supply production and conservation,
and by developing a strategic storage petroleum system that
will be capable of easing the impact of any embargo.
The 1977 budget outlay estimates reflect the President's
strong emphasis on domestic energy production, conservation
and petroleum storage programs and massive R&D efforts to
develop new energy technologies.
Domestic Energy Resource Development, Conservation and Storage
Development and conservation of energy resources are essential
to achieving greater independence from foreign petroleum
suppliers. These programs encourage the development of oil,
gas, coal and uranium reserves, energy production, strategic
petroleum storage, and more energy efficient processes. High-
lights contained in the FY 77 budget include:
Energy Resource Development, Production, Conservation
- Energy Independence Authority - Proposed establishment
of an Energy Independence Authority with $100 billion in
equity and funding authority to provide assistance (mainly
loans and loan guarantees) to the private sector to en-
courage the development of energy projects using conventional
technology (e.g., fossil and nuclear power plants) and
emerging technologies (coal to gas plants, oil shale to
oil). The Authority will also work to shorten the time
required for energy projects to obtain clearances and
permits from Federal regulatory agencies. (Refer to
description of EIA, Tab B.)
3
- Natural Gas Deregulation - Proposed deregulation of well-
head price of new domestic natural gas in order to
encourage greater production and minimize shortages.
- Federal Leasing - An expanded Federal leasing program
carried out by Interior for nine Outer Continental Shelf
(OCS) oil and gas lease sales and to increase on-shore
leasing to encourage increased future production of oil
and gas.
- Uranium Enrichment - Uranium enrichment is one of the
processes required to convert uranium ore into usable fuel
for nuclear power plants. At the present time, this
activity is carried out in three Government-owned produc-
tion facilities originally built for defense purposes.
-- In order to relieve the taxpayer of the financial
burden of funding the construction of additional
uranium enrichment facilities and to assure the
availability of fuel for nuclear power plants, the
President has proposed legislation required to foster
the creation of a private competitive uranium enrich-
ment industry in the U.S.
-- To produce a large enough stockpile to meet potential
future needs, the FY 1977 budget will provide a
substantial increase for (a) the production of enriched
uranium and (b) the continuation of the previously
approved expansion of the capacity of the current
ERDA plants. However, the Administration believes
that future expansion of enrichment capacity should
be financed by the private sector with necessary
Government cooperation and temporary assurance under
the proposed Nuclear Fuel Assurance Act.
- TVA - Outlays of $2 billion to support electric power
development for TVA, the water resource agencies, and
the power administrations.
- Rural Electrification - Continued support by Agriculture
for rural electrification financial assistance. $2 billion
in authority for new loans and loan guarantees is requested
for electric power development.
- Energy Conservation - Conservation proposals to: provide
$55 million in financial assistance to low-income home-
owners for insulation, establish thermal efficiency
standards for new residential and commercial buildings,
4
encourage appliance manufacturers to improve energy
efficiency and to label appliances, and encourage auto
manufacturers to increase fuel economy. The Energy Policy
& Conservation Act makes the appliance labeling and auto
fuel economy standards mandatory.
- Energy/Environment - Amendments to the Clean Air Act to
provide a needed balance between environmental and energy
goals.
- Energy Tax Expenditures - Tax expenditures to encourage
energy resource development and production. A $1 billion
incentive will encourage the exploration and development
of new oil and gas resources by allowing these costs to
be treated as current expenses rather than being depre-
ciated over a number of years. A $1.6 billion incentive
will encourage oil and gas production by allowing per-
centage depletion rather than actual cost depletion. A
proposed package of tax aids will provide $800 million to
help utility generating facilities which use alternatives
to oil and gas as fuels.
Strategic Petroleum Storage
This program is designed to provide for the storage of a
large quantity of petroleum in salt domes, tanks, mines, in
reserve to be used to minimize the adverse affects caused
by embargos by foreign oil suppliers. The stored petroleum
along with standby plans for mandatory conservation of energy
use and allocation will provide a means for dealing with the
adverse affects of embargos providing protection to the U.S.
against such actions. The 1977 budget provides for $100
million in new funding authority for FEA to plan for and
begin development of a strategic storage program. While the
storage program will take time to construct and fill, an
important step is being taken in 1977 to proceed with
development. This program will be financed mainly by
revenues from the sale of oil produced at the Naval Petroleum
Reserves. Legislation establishing this special fund is
now pending before the Congress.
The Energy Policy and Conservation Act mandates a faster
rate of development of the storage program than provided
for in the President's budget. A budget amendment will
be necessary in 1977 to meet this accelerated schedule.
5
Energy Research, Development and Demonstration
The Energy Research and Development Administration,
proposed by the Administration, was established in
January 1975 to be the major Federal agency for the
conduct of energy research and development. In
FY 1977 ERDA will provide 83% of the total Federal
funding for energy R&D. It also provides a central
Federal agency for the planning and coordination of
Federally sponsored energy research and development.
The following table summarizes the energy research,
development, and demonstration program for ERDA and
other Federal agencies:
(outlays in millions of dollars)
FY 1976
FY 1977
Percent
Program Activities
$
olo
$
%
Change
ERDA, total
1412
64
1975
69
+ 40
Non-Nuclear, total
( 519)
(24)
( 710)
(25)
(+ 37)
Fossil
333
15
442
15
+ 33
Solar
86
4
116
4
+ 35
Geothermal
32
2
46
2
+ 44
Conservation
56
2
91
3
+ 63
Environmental Control
12
1
15
1
+ 25
Nuclear, total
( 893)
(40)
(1265)
(44)
(+ 42)
Fusion
224
10
304
11
+ 36
Fission
521
23
709
24
+ 36
Fuel Cycle/Safeguards
59
3
144
5
+144
Enrichment R&D
89
4
108
4
+ 21
EPA (Environmental
Control)
87
4
75
3
- 14
NRC (Safety Research)
94
4
116
4
+ 23
DOI (Mining)
52
2
64
2
+ 23
Other
14
1
9
--
- 36
Total Direct Energy R&D
1659
75
2239
78
+ 35
6
(outlays in millions of dollars)
FY 1976
FY 1977
Percent
Program Activities
$
olo
$
%
Change
Supporting R&D
ERDA
373
17
403
14
+ 8
EPA
40
2
47
2
+18
NSF
93
4
139
5
+50
Total Supporting R&D
506
23
589
21
+16
Energy Related:
DOI (Mine health/
safety)
29
2
30
1
+ 3
GRAND TOTAL*
2194
100
2858
100
+30
* In addition, the FY 1977 Budget identifies funds
to accelerate the commercialization and demon-
stration of energy technologies through loan
guarantees: Geothermal Resources Development
Fund, FY 1977 outlays of $4.4 million; and
Synthetic Fuels Commercial Demonstration Fund,
FY 1976 outlays of $3.0 million.
Overall Energy R&D Budget Strategy
- Accelerate energy research and development programs
directed at achieving greater long-term energy
independence.
-- Expand efforts to assure the safety, reliability,
and availability of commercial nuclear power plants
by increasing R&D on the long-term storage of
radioactive wastes, fuel reprocessing, and safe-
guards against theft of nuclear materials.
-- Place greatest funding on technologies with the
highest potential payoff in terms of recoverable
resources (i.e., nuclear and fossil).
-- Continue to expand the investigation of other
technologies where they can make significant
contributions to meeting the long-term energy
requirements of the U.S. (i.e., solar, geo-
thermal, and conservation R&D)
7
- Encourage cost-sharing with private industry (e.g.,
coal liquefaction demonstrations) and avoid under-
taking shorter term R&D more appropriately the
responsibility of the private sector (e.g., in
areas of conservation technology).
- Support the commercial demonstration of synthetic
fuel production from coal, oil shale, and other
domestic resources by providing loan guarantees
during FY 1976 (upon enactment of the Energy
Independence Authority legislation in FY 1977,
transfer these projects to EIA)
Non-nuclear Energy R&D
- Balance between nuclear and non-nuclear energy R&D -
the table of direct ERDA spending indicates more
effort on nuclear than non-nuclear energy R&D. However,
direct ERDA spending is not a true measure of the total
national effort on non-nuclear energy R&D and greatly
understates the effort being made to develop and
commercialize non-nuclear energy technologies.
-- Although specific data is not available, private
industry is known to be spending much more on non-
nuclear energy R&D than on nuclear energy R&D
(which has higher technical and regulatory un-
certainties).
-- The Administration plans to support legislation
which is expected to provide about $6 billion of
loan guarantees in FY 1976-78 to enable industry
to construct facilities for producing synthetic
fuels.
-- About $50 million per year will also be provided
for loan guarantees for geothermal production
projects.
- Fossil energy development - Accelerate the develop-
ment and demonstration of technology to (a) enable
plentiful domestic coal resources to be substituted
for increasingly scarce supplies of oil and natural
gas; (b) increase the efficiency of the use of
fossil fuels through advanced power conversion
systems; and (c) increase the recovery of oil
and natural gas from fields in the U.S.
8
- Solar energy development - Increase the develop-
ment and demonstration of solar energy applications,
including 226 units to demonstrate solar heating
and cooling in residential and commercial buildings
and acceleration of technology for the conversion
of solar energy to electricity.
- Geothermal energy development - Expand R&D required
for the utilization of U.S. geothermal resources
including improving the capability for defining the
extent and availability of such resources, developing
advanced engineering techniques and building pilot
plants. Provide $50 million in FY 1977 for loan
guarantees to enable industry to proceed with geo-
thermal production projects which would otherwise
not be undertaken because of current technical and
economic uncertainties.
- Conservation R&D - Provide an expanded program to
improve technology and encourage conservation of
energy in buildings, industry, and transportation.
Nuclear Energy R&D
- Fusion - Continue research to determine the scientific
feasibility of obtaining virtually unlimited power for
the long-term (beyond the year 2000) from the controlled
thermonuclear fusion reaction. In FY 1977 continue
contruction of the $215 million Tokamak Fusion Test
Reactor at Princeton, N.J., which will represent a
major milestone for the development program.
- Fission - Increase funding for the Liquid Metal
Fast Breeder Reactor (LMFBR) which is a proven
technological concept for greatly extending supplies
of uranium fuel for nuclear power plants. The in-
crease is primarily for the continued construction
of the $1.95 billion LMFBR demonstration project.
- Fuel Cycle and Safeguards - Improve the use of current
commercial nuclear reactors (refer to description of
Nuc Power, Tab) :
-- Commercial waste management - Greatly accelerate
the conduct of R&D to provide the technology for
the terminal storage of radioactive wastes from
commercial power plants by demonstrating this
technology at several sites.
9
-- Nuclear fuel reprocessing - Assist industry by
conducting R&D on the technology for reprocessing
and reusing spent nuclear fuel discharged from
commercial nuclear power plants.
-- Safeguards - Demonstrate techniques for safe-
guarding nuclear materials against theft.
- Uranium enrichment R&D - Develop and demonstrate
improved techniques for uranium enrichment which
offer the promise of more efficient production and
cheaper electricity for consumers.
Other Direct Energy R&D
- Significantly increase outlays for the Nuclear
Regulatory Commission's safety research program
and the Department of the Interior's mining R&D
program.
- Reduce outlays for the Environmental Protection
Administration's development of environmental
control technology because of the completion
of portions of major contracts and the increasing
responsibility of other agencies in this area.
Supporting Energy R&D
- Continue the FY 1976 level of effort on programs
to (a) determine the biomedical and environmental
effects of nuclear and non-nuclear energy sources
to assure development of safe energy technologies
and (b) solve fundamental scientific and engineering
problems tht constrain the development of energy
technologies.
Synthetic Fuels
- Support legislation to provide $2 billion in loan
guarantees for industry ($500 million of Budget
Authority) during 1976 for the commercial demon-
stration of synthetic fuel production from coal,
oil shale, and other domestic resources. A total
of $6 billion in loan guarantees is expected to be
necessary over the 1976-78 period in order to reach
the 1985 objective of 350,000 barrels per day of
synthetic fuel prodution capacity (refer to des-
cription of Syn Fuels, Tab).
10
Regulation
Regulatory programs include:
price controls on petroleum products
interstate gas price and transmission controls
coal mine safety
nuclear power plant safety and materials safeguards.
Program highlights for 1977 include:
Petroleum Regulation - FEA's budget for 1977 shows a
sharp drop from the 1976 level, because it assumes the expira-
tion of petroleum price controls and allocation authorities
on December 15, 1975.
The 1977 budget therefore provides for only a standby
allocation force, and for completion of a comprehensive
program to audit petroleum producers, refiners, whole-
salers and retailers to make sure that they complied with
the regulations before expiration. The Energy Policy and
Conservation Act has extended petroleum price and alloca-
tion controls. This Act will provide for the gradual phasing
out of controls on domestic oil. FEA will therefore continue
its regulatory program during 1977, and will take steps to
simplify and streamline controls on domestic oil. A budget
amendment will be necessary for 1977.
Nuclear Regulation - Funding for the Nuclear Regulatory
Commission will increase 23% because of the important role
which NRC plays in ensuring that nuclear power continues
to be a safe and environmentally acceptable means of
generating electricity. The United States needs additional
nuclear power plants in order to achieve more energy
independence from foreign suppliers and to provide consumers
with cheaper electricity than alternative sources can provide.
The additional resources for NRC will help enable the U.S.
to achieve the benefits of nuclear power by assuring adequate
attention to the problems of safety, environmental effects,
and safeguarding nuclear materials against theft.
Nuclear Licensing - A legislative proposal to streamline the
NRC procedures for licensing nuclear power plants to reduce
the amount of time required to process applications while
maintaining safety and environmental standards.
EIA
TAB B
FY 1977 Budget
Energy Independence Authority
(Proposed Legislation)
Need for Initiative to Develop Domestic Energy Resources
It is essential that the Nation move promptly to develop
domestic energy resources to assure that needed supplies are
available in the long run to avoid a growing dependence on
foreign energy supplies. The Nation's energy situation
continues to deteriorate:
- Domestic crude oil production peaked in 1970 and since
then has declined by more than one million barrels
per day. Production is now at a nine-year low.
- Oil imports are about 37% of the U.S. oil consumption
and are expected to rise to more than 50% of consumption
or 12 million barrels per day by 1985 if no new actions
are taken.
- Because of our increasing import dependence, our payments
to foreign producers for imported oil has increased from
less than $3 billion in 1970 to about $25 billion in 1974.
- Domestic natural gas production peaked in 1973, declined
by 6% in 1974 and dropped another 8.5% during the first
half of 1975, leading to curtailments of service in many
parts of the country.
The Nation has undeveloped reserves of coal, oil, gas and
uranium. There are also many opportunities to conserve energy
through the use of more energy efficient processes. However,
many domestic energy projects are not proceeding to construction
because of difficulties being encountered by the private sector
in obtaining:
the necessary funds for large scale projects,
needed regulatory permits in an expedited manner.
Presidential Proposal for Energy Independence Authority
To encourage needed domestic energy development and conserva-
tion, the President has proposed the establishment of a
government corporation, the Energy Independence Authority (EIA)
with $100 billion in financial resources to help achieve greater
energy independence. The EIA will:
2
have financial resources totaling $100 billion
consisting of $25 billion in capital stock owned
by the government and authority to borrow up to
$75 billion,
supplement and encourage private sector capital
investment by providing loans, loan guarantees and
other financial assistance for domestic energy
projects across a broad spectrum of energy supply,
conservation and energy related environmental projects,
expedite the regulatory process at the Federal level
on projects deemed "critical" to assure domestic
supplies.
A. Scope of EIA Investments
Specific types of projects which EIA could provide
financial and regulatory assistance would be limited
to commercialization of:
- Emerging energy technologies such as synthetic
fuels, not yet in widespread domestic commercial
operation.
- Technologies essential to production of nuclear
power.
- Conventional or emerging technologies for production
and transmission of electric power generated by
sources other than oil and gas.
- Conventional energy technologies for the production
or transportation of energy that are of such size
or scope that they would not otherwise be financed
by the private sector.
The projects that could be supported by EIA cover the
full spectrum of energy, excluding research. These
would include such areas as synthetic fuel commerciali-
zation (e.g., coal gasification, liquefaction, and
production of oil from shale) ; other emerging technologies
(e.g., solar energy or geothermal energy) ; and conven-
tional technologies (e.g., coal, nuclear, and geothermal
power plants). EIA could support projects that increase
efficiency of energy use, as well as those of unusual
size such as energy parks or major new pipelines for
transportation of oil and gas.
3
B. Financial Structure
EIA will have authorized capital stock of $25 billion
and the authority to issue and to have outstanding at
any one time notes, debentures, bonds, or other
obligations of $75 billion.
The corporation's issuance of its securities, as well
as loan guarantees or other similar obligations, will
be subject to approval by the Secretary of the Treasury
as to the timing, method, source, interest rate, and
other terms and conditions. At the discretion of the
Secretary of the Treasury, EIA's obligations may be
purchased directly or channeled through the Federal
Financing Bank.
Financial commitments by EIA will not be for the purpose
of acquiring a permanent controlling or operating
interest in commercial production, transportation, or
distribution of energy. Federal ownership or operation
could occur only temporarily, in the event of default,
or in providing financial assistance involving construc-
tion, testing, demonstration of a facility provided to
a business on a "turnkey" basis, or in providing lease-
purchase and sale-leasebacks. No permanent ownership,
control, and operation of energy production facilities
by the EIA will be authorized.
EIA financing will provide for the maximum participation
of private financial institutions in projects. To the
extent practicable, financial assistance will be in the
form of loans and loan guarantees. Such assistance will
be provided in ways that will not give recipients undue
advantage over competing firms. Minimum interest rate
requirements and other terms to be required by EIA before
financing is executed.
EIA in the President's 1977 Budget
Because the EIA is to be self-liquidating and will have its
investments repaid, its outlays will not be included in the
budget of the United States. However, the Authority's losses
or gains from its operations are included in the budget. In
1977--its first year of operation--it is estimated that the
corporation's net losses will be about $42 million.
4
The off-budget activities of the Authority in 1977 include an
initial $8 billion appropriation request for purchase of EIA
capital stock and a one-time request for congressional
authorization of $75 billion in borrowing authority. During
its first year of operation, it is anticipated that EIA will
use up to $10 billion of its financial authority. Off-budget
outlays of the corporation in 1977 are estimated at $650 million.
TAB C
Synfuels
1977 Budget
ERDA SYNTHETIC FUELS COMMERCIAL DEMONSTRATION PROGRAM
($ millions)
1976*
1977
Budget
Budget
Authority
Outlays
Authority
Outlays
Loan Guarantee Fund
500
--
--
--
Administrative Expenses
3
3
--
--
Total
503
3
--
--
*The loan guarantee fund will cover $2 billion in guarantees to
initiate the program in 1976. The guarantee program will be
transferred to the Energy Independence Authority upon its
enactment in 1977.
Need for the Program
U.S. dependence on foreign sources of oil and gas continues to
grow with domestic production having fallen in the last several
years.
Even using advanced oil and gas recovery techniques, extensive
production from the Outer Continental Shelf and Alaska, improved
energy conservation, expansion of nuclear power facilities, and
greater direct burning of coal, oil imports will continue to
rise substantially if synthetic fuel production capacity is not
available by the middle 1990's. Synthetic gas and liquid fuels
can be obtained from the processing of coal, oil shale, biological
waste, and other domestic resources not now being fully utilized.
Initiating a synthetic fuels industry capable of providing about
5 million barrels/day of production capacity (i.e., about 100
major plants) by 1995 will require early resolution of a number
of uncertainties related to regulation, environment, financing,
labor and transportation. The lead time to initiate such an
industry requires the construction and operation, over the
next 5 to 10 years, of a variety of synthetic fuel plants to
obtain the needed data and information.
The President's Proposal
In his 1975 State-of-the-Union message, the President proposed
the first important step toward the development of a synthetic
fuels industry--a Federally sponsored Synthetic Fuels Commercia!
Demonstration Program. An extensive interagency study concluded
that the synthetic fuels program should proceed in two phases, the
first of which would involve the construction and operation of about
12-15 commercial-size plants and would result in total synthetic
oil and gas production equivalent to 350,000 barrels per day of oil.
The second phase might begin in 1978 or 1979 and raise production
to 1 million barrels per day, but this depends on the results
of R&D efforts, additional information on environmental
impacts, and the private sector's response to the first phase.
Although a $6 billion program of loan guarantees to implement
aspects of the President's proposal was passed by the Senate
during the last session, it failed to pass the House of
Representatives.
Support for the Program in the 1977 Budget
The President is again supporting immediate creation, in 1976, of
a synthetic fuels commercial demonstration program in the Energy
Research and Development Administration. This program will be
carried forward in ERDA until such time as the Energy Independence
Authority is enacted and the program can be incorporated under
that Authority.
- As a first step in implementing this program a supplemental
1976 request will provide for $503 million in budget authority
to cover $2 billion in loan guarantees for the remainder of
1976.
- Additional budget authority to cover the full $6 billion loan
guarantee program for Synthetic Fuels, which the Administration
supported in 1975, is included in the 1977 Budget under the
Energy Independence Authority.
TAB D
Nuclear Power
FY 1977 Budget (ERDA)
R&D to Improve Commercial Use of Nuclear Power
Summary Table
(Outlays $ Millions)
% Change
Research and Development Programs
1976
1977
1976-1977
Nuclear power plant safety*
60
89
49%
Safeguarding nuclear materials
15
27
80%
Nuclear fuel reuse
13
30
131%
Management of commercial wastes
12
63
425%
Total
100
209
109%
*
Most of these funds are included in the budget of the Nuclear
Regulatory Commission (NRC).
Need for the Program
- The U.S. needs more nuclear power
Although domestic coal supplies are extensive and accessible,
their use isseverely limited by environmental constraints.
Widespread use of coal without relaxing environmental
standards will require new clean conversion technologies
(e.g., gasification or liquefaction of coal) or those
permitting direct use of coal (e.g., sulphur removal from
exhaust gases.)
Recovery of potentially significant solar and geothermal
resources is currently limited by technological and economic
uncertainties. Their economical use will require develop-
ment of new or improved technologies.
The U.S.'s most plentiful domestic resources are coal and
nuclear. Neither one alone could be sufficiently developed
to meet all our energy needs over the next few decades due
to limitations on required transportation and other supporting
facilities and equipment manufacturing capacity. Both coal
and nuclear must be exploited to achieve energy independence
from foreign suppliers.
Furthermore, compared to coal-fired power plants, the price
for electricity generated by nuclear power plants is
significantly cheaper for the consumer in most parts of
the country.
2
-
But nuclear plants and their associated service facilities also
have problems that must be addressed
Nuclear plants must be carefully designed, constructed, and
operated so that none of the radioactive materials contained
deep inside the plant can ever be released to the environment.
An independent Government agency (the Nuclear Regulatory
Commission) regulates the safety of nuclear power plants
at every stage.
A recent report by a group of safety experts has concluded
that nuclear power plants are very safe (the chance of any
member of the public being killed in a nuclear plant
related accident is one in 5 billion which is slightly
less likely than the chance of being struck by-a meteor
and over 2000 times less. likely than being struck by
lightning).
The nuclear materials that serve as fuel for the power plant
must be protected against theft.
For most stages of a nuclear fuel's production and use
cycle, the nuclear materials are in forms which would
make it extremely difficult, if not impossible, for
anyone to succeed in fabricating even a crude bomb.
Nuclear fuel discharged from power plants must be reused or
recycled and radioactive waste material must be safely
managed and disposed of.
In the process of operating and generating electric power,
most of the uranium fuel in nuclear power plants becomes
converted to either radioactive wastes or a material
known as plutonium which can also be used as fuel for
nuclear power plants.
In order for the U.S. to be able to take advantage of
the benefits of nuclear power, industry and the Govern-
ment must develop the technology to ensure (a) the safe
long-term disposal of radioactive wastes and (b) the
safe, environmentally-soung and economic reuse
("recycle") of fuel recovered from power plants.
After being used in the nuclear power plant for about
one year, the spent fuel is removed and stored in large
water basins. As presently planned, the spent fuel will
be sent to a special facility (known as a "chemical
reprocessing" plant) where it will be separated into
three main components:
3
- Uranium which has not been consumed and which can be
reused as fuel.
- Plutonium which can also be used as fuel.
- Radioactive wastes which must be converted into a
solid form and sent to a long-term storage facility.
As presently planned, the recovered uranium and plutonium
will be fabricated into fuel for use in power plants.
This will result in a major (45%) increase in the nuclear
fuel supplies of the U.S. and hold down the price of
electricity for consumers.
Presidents Proposal and the FY 1977 Budget
Nuclear Power Plant Safety
- The Nuclear Regulatory Commission will expand its safety research
program to assure the safety of commercial nuclear power plants
even beyond the extremely safe levels achieved to date. This will
be done by proceeding with all major safety experiments now under-
way, such as the loss of fluid (coblant) tests (LOFT),
Safeguarding Nuclear Materials
- The large increase requested for FY 1977 will be used to design
and test overall systems and to improve methods of accounting for
nuclear materials in order to improve current methods of protecting
the public health and safety from possible misuse of nuclear
materials such as plutonium or possible sabotage of nuclear facili-
ties.
Waste Management
- Radioactive wastes will be converted into a solid form and stored
in rock formations deep underground. In the FY 1977 budget, ERDA
will greatly accelerate its waste management efforts by (a) conducting
drilling at various locations to determine their suitability as
storage sites and (b) intensifying research and development on a
more stable material form for the wastes, on containers for the
long-term storage of the wastes, and on the preparation of an
overall assessment of the environmental impacts of disposing of
these wastes.
Reuse of Nuclear Fuel
- Because of the potential economic benefits of recovery of uranium
and plutonium, industry has started to build the required facili-
ties. However, all of the Government's rules for operating these
facilities and safeguarding the plutonium against theft has not
yet been established. In addition, these facilities are very
expensive to build and require the development of difficult
4
technology. Thus, industry now faces major regulatory, cost, and
technical problems. In order to realize the national benefits to
U.S. fuel supplies and electric power costs, in the FY 1977 budget
the Government will increase its efforts toward solving key tech-
nical problems. In addition, the Government will ask industry
to identify the specific assistance which may be required in order
to complete these facilities.
FY 1977 Budget
Outer Continental Shelf Oil and Gas Leasing Program
Background
The major undiscovered petroleum deposits in the United
States are believed to be on the Outer Continental Shelf
(OCS).
The OCS is the sea-bottom from the seaward boundary of
each State - usually three miles from shore - down to
where the rocks of the continent merge with the rocks
of the deep seabed.
OCS mineral resources are owned by the Federal Government
and have been leased by sealed competitive bid to oil
companies for exploration and development since 1954.
Since that time:
- more than 10 million acres have been leased;
- more than 17,000 oil and gas wells have been drilled;
- during the 1953-1972 period 43 major OCS accidents
occurred, 20 of which spilled oil. However, since
1968 the accident frequency has declined because of
more stringent regulation, and improved drilling
technology. The Government is committed to doing
all that can feasibly be done to reduce the environ-
mental risks of OCS operation in order to avoid the
greater environmental risks and other undesirable
features of importing foreign oil by tankers.
Current Plans
In 1974, the President decided to accelerate development
of the OCS as part of our effort to reduce U.S. dependence
on foreign oil supplies.
The planning schedule for leasing in fiscal years 1976
through 1977 includes:
- 14 lease sales
- sales in "frontier" areas off Alaska and the Atlantic
coast which have great petroleum promise but have
never been explored by drilling.
22
2
- Environmental baseline and monitoring studies, geo-
logic hazard studies, and all other environmental
procedures necessary to assure that the environment
is protected. These procedures include an Environ-
mental Impact Statement with associated public
participation for each planned sale.
None of these sales will be offered until all environmental
procedures have been completed and the Secretary of the
Interior has decided whether they can be leased, explored
and developed with environmental safety.
Estimating Receipts
The Federal Government sells the rights to explore and
produce OCS oil by a competitive bidding process, receiving
a "bonus" which is the subject of the bid and paid in ad-
vance of exploration, plus a fixed royalty on each barrel of
oil produced. These receipts go to the Treasury and the
estimated amount is included in the budget.
OCS budget receipts are estimated in the following way:
- The Geological Survey estimates the potential reserves
for each sale based on acreages to be offered and
rough estimates of the volume of petroleum-favorable
rocks likely to be under that size acreage in the sale
region.
- Economists in the Department of the Interior analyze
the likely costs of producing those reserves given
water depths, distances to shore, and other factors.
- Market prices of the petroleum and the prices which
bidders are likely to offer, given costs and market
prices, are estimated.
- An analysis is done of the probabilities that scheduled
sales will not be held in the fiscal year because of
litigation, decisions to delay, or decisions not to
lease specific areas.
Receipt estimation is very difficult and uncertain because:
- In areas not drilled before, no experience of the
geology or of potential bids is available.
3
- Company bids are based upon detailed evaluations of
the geology and economics of individual tracts. While
the Government has all of the company data at the time
of the sale and uses it to accept or reject bids,
budget estimates must be made as much as 20 months
before the sale when detailed tract-by-tract geologic
and economic data are not available. In fact, specific
tracts to be leased have not yet been selected at that
time.
- Some sales are quite controversial and become delayed
by litigation.
- Some sales turn out to involve difficult environmental
questions and are delayed by the Government to resolve
those questions or to allow further comments by State
governments or other interested parties.
- The Government may decide to not offer a scheduled
sale at all for environmental reasons.
- The value placed on a given tract by the oil companies
may vary widely - with the winning bid on some tracts
as much as 4 or 5 times as high as the second highest
bid.
The following shows how recent budget estimates of OCS
receipts have compared with actual receipts:
Fiscal
Original Budget
Actual Receipts
Year
Estimate ($ M)
($ M)
1970
950
187
1971
970
1,051
1972
190
279
1973
3,080
3,956
1974
2,100
6,340
1975
5,000
2,428
In fiscal years 1976 through 1977, we estimate that OCS
receipts will be:
($ M)
FY 1976
3,000
Transition quarter
500
FY 1977
6,000
4
Unfortunately, estimates for those periods are subject to
more than usual uncertainty because the majority of the
scheduled sales are first sales in so-called "frontier"
areas which have never been drilled before.