State Government Agencies’ Expenditures for R&D Increased 4% From FY 2024 to FY 2025

Overview

State governments are both funders and performers of R&D. Although all R&D performance is measured in terms of expenditures, not all expenditures are a measure of actual performance. For example, intramural performance of R&D is measured by the expenditures on the work of state employees within state-owned and -operated facilities. However, state government expenditures to external parties (e.g., businesses, higher education institutions, and nonprofit organizations) to conduct R&D on behalf of the funding agency, usually in the form of contracts and grants, are not a measure of performance. This funding is referred to as expenditures on extramural R&D, but these expenditures do not reflect the actual performance of R&D by these external performers. The actual performance by these recipient sectors would be measured by their respective expenditures, which are measured on other NCSES surveys.^​

Intramural R&D Performance

Five states accounted for 68% of the $785 million in total expenditures for intramural R&D performed by state agencies in FY 2025: New York ($286 million), California ($114 million), Florida ($65 million), South Carolina ($36 million), and Washington ($35 million) (table 2). New York State’s own intramural R&D expenditures accounted for 36% of all state governments’ intramural R&D performance. In FY 2025, 55% ($430 million) of total state government intramural R&D expenditures came from each state’s own funds, whereas 39% ($304 million) was supported by federal funds. New York State accounted for 42% ($127 million) of all intramural R&D expenditures sourced from federal funds across all states.

State government intramural R&D activities are measured by type of R&D, which has three distinct categories: basic research, applied research, and experimental development.^​ In FY 2025, 77% ($601 million) of all intramural R&D expenditures were directed toward applied research, followed by basic research at 17% ($137 million) and experimental development with 6% ($47 million) (figure 2). Applied research is defined as original investigation undertaken in order to acquire new knowledge. It is, however, directed primarily toward a specific, practical aim or objective. Given that state governments’ R&D activities are intended to address practical aims and solutions to problems for the benefit of their citizenry, it is expected that intramural R&D be primarily directed toward applied research.

Extramural R&D Performance

In FY 2025, all state government expenditures for extramural performance of R&D totaled $2.7 billion. The five states with the largest amount of extramural R&D expenditures were California ($794 million), Texas ($299 million), Florida ($230 million), New York ($181 million), and Tennessee ($137 million). Combined, these state governments accounted for $1.6 billion, or 61% of all state governments’ extramural R&D (figure 3).

However, states varied in how they distributed extramural R&D. For example, Texas state agencies directed $217 million of the state’s total $299 million extramural R&D toward higher education institutions, compared with $79 million to companies and individuals. By comparison, the majority of California’s extramural R&D funding was distributed across three sectors, with $349 million directed toward companies and individuals, $265 million toward higher education institutions, and $112 million toward nonprofit organizations.

Overview

Whether performed by state agencies themselves or by other performers outside the agency, most states reported a broad mix of R&D related to state government functions (table 3). Of the six functional categories of state agency R&D expenditures, health-related R&D remained the largest with nearly $1.5 billion in expenditures in FY 2025, increasing 0.5% from FY 2024. R&D related to environment and natural resources remained the second-largest functional category with $660 million, followed by energy-related R&D with $600 million. Transportation-related R&D totaled $311 million, and agriculture-related R&D totaled $196 million. Other R&D—a combination of activities including but not limited to corrections, criminal justice, education, forensic science, labor, public safety, and social services—totaled $248 million in FY 2025.

Agency-Specific R&D Details

Of the 554 state agencies that responded to the survey in FY 2025, the largest 20 state agencies by total expenditures accounted for 58% ($2.0 billion) of all agency R&D expenditures (table 3). Although many states invested in health-related R&D, expenditures were highly concentrated among the largest funding agencies. For example, among the 20 largest state agencies, 13 funded health-related R&D. These 13 agencies accounted for $1.2 billion (79%) of the nearly $1.5 billion total for health-related R&D, and the four largest agencies in terms of health R&D expenditures constituted 63% ($916 million) of all FY 2025 state government health-related R&D. State expenditures for energy-related R&D were even more highly concentrated: the California Energy Commission alone accounted for 52% ($344 million) of all state agencies’ energy-related R&D expenditures ($660 million).