The Debt Deal Casts Doubt on Whether Congress Will Fully Fund the CHIPS Act

In what could change the futures of a handful of communities, the U.S. Department of Commerce last month announced $500 million to create Silicon Valleys around the country.

The money is the first allocation from a pool of $11 billion authorized in the CHIPS and Science Act that President Joe Biden signed into law last August. The money is meant to create facilities in small, rural communities that will support research and development into new chip technologies, such as artificial intelligence and robotics. It is part of a larger effort under the law to restore the U.S. to a position of worldwide leadership in the semiconductor industry. 

But some experts are questioning whether that vision will be fully met after Biden and Republican House Speaker Kevin McCarthy agreed to freeze spending as part of a deal to keep the nation from defaulting on its debt. While the Commerce Department says it has enough to pick and fund between five to 10 regional technology hubs, the CHIPS Act called for creating at least 20 over the next five years.

“The debt ceiling deal won’t help,” said Mark Muro, a senior fellow at Brookings Metro, and an expert on the CHIPS Act.

Rep. Rosa DeLauro, the top Democrat on the House appropriations committee, agreed. “Under the caps put in place in the debt limit bill, I am worried about funding for all domestic programs,” she said in an email.

Sen. Shelley Moore Capito, a West Virginia Republican and a member of the Senate appropriations committee, added, “I think we need to move forward with this. I voted for it. But these are times of constrained resources and that’s a consideration as well.”

According to a 2019 study by the Brookings Institution, 90% of jobs created in industries that rely on innovation between 2005 and 2017, were in only five “superstar” metropolitan areas—Boston, San Diego, San Francisco, San Jose and Seattle. More than half of them were in just 16 of the nation’s 3,006 counties.

In the Notice of Funding Opportunity issued last month, the Commerce Department’s Economic Development Administration laid out what it is looking for in the Silicon Valleys of tomorrow.

Applicants, for example, will have to show how the benefits from these hubs “will be shared by all communities in the project area, including any underserved communities.” In other words, the agency will be looking to see how a project would increase the number of high-wage, high-quality jobs, including union jobs; make it easier for people without college degrees to find work; and help minority-owned businesses.

The department is also requiring applications to be submitted by a regional group made up of local governments, companies, universities and economic development agencies. Officials have said they will prioritize rural areas, and will not give money to areas without universities. 

“Economic development is a team sport,” Alejandra Castillo, the Commerce Department’s assistant secretary for economic development, said in a statement to Route Fifty. “No one entity can do it alone. We encourage regions to think big and make bold plans.”

The department will be using this first round of funding to identify 20 regions that could ultimately be named a hub. Commerce officials said the funds will go out to the regions that seem to have the “assets, resources and capabilities” to become globally competitive in one of 10 technologies. 

Among the 10 are AI and robotics; natural and anthropogenic disaster prevention or mitigation; advanced communications technology and immersive technology; biotechnology and genomics; data management and cybersecurity; advanced energy and industrial efficiency technologies; and advanced nuclear technologies.

Regional groups have until Aug. 15 to apply for one of the planning grants of $400,000 to $500,000 the department will be handing out. Then in the fall, the hubs will compete against each other to become of the five to 10 regions to get a grant of an average of $65 million to make their plans a reality.

Colorado is among the regions that will be competing for money. The state is working on two applications, said Johnna Reeder Kleymeyer, president and CEO of the Colorado Springs Chamber & EDC. 

Home to the U.S. Space Command, Kleymeyer said the area is already a tech hub. But adding more tech-related jobs would be important. “We have a lot of people in our region that when they exit the military from their years of service they want to stay in the state of Colorado, and this would allow for good-paying American manufacturing jobs,” she said.

According to a spokesperson for Colorado’s Office of Economic Development and International Trade, the state has hired a consultant to begin looking at how it can make the argument that it’s better poised than other areas to become a global player in technology. The state is still working through what kind of hubs it wants to create. 

But Muro is concerned that, even before the debt ceiling deal, Congress wasn’t spending enough to realize the vision carved out in the CHIPS Act. The current budget falls $3 billion short, according to a paper he co-authored with Matt Hourihan, associate director for R&D and advanced industry for the Federation of American Scientists, and Melissa Roberts Chapman, the association’s director of ecosystems and entrepreneurship.

Despite funding concerns, the Commerce Department’s Castillo described the $500 million “down payment” as a good start.

“We hope that members of both parties will continue to recognize the critical need for the U.S. to remain at the leading edge of technology development and to keep the jobs they create in our local communities,” she said.