Big European Space Agency Budget Contains Hidden Shortfall

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  Space News Business

Big European Space Agency Budget Contains Hidden Shortfall

By PETER B. de SELDING
Space News Staff Writer
posted: 31 January 2005
11:22 am ET


PARIS — Hidden beneath the figures in ESA‘s 2005 budget is a huge financial shortfall that the agency will spend the next three years trying to eliminate, according to ESA and European government officials.

Also hidden is the fact that ESA’s largest contributor, France, has no intention of paying the amount ESA has set down as the French contribution this year. And France may not be alone.

ESA Director-General Jean-Jacques Dordain said one of his principal tasks this year is to persuade his 17 member governments that he is putting ESA’s financial accounts in order. If he succeeds, he has a chance of winning support for new programs he wants to propose in December at an ESA ministerial conference.

Any discretionary spending not going directly to pay ESA’s industrial contractors this year will be scotched, Dordain said Jan. 21. This includes the agency’s normally large, and expensive, pavilion at the biennial Paris air show in June, where ESA will be absent for the first time.

“I had to demonstrate that I was serious about cleaning up our budget,” Dordain said. “Any spending not going to support industry has been reduced. This includes ESA staff costs, mission costs and salaries.”

Over the years, the same ESA governments that have approved the agency’s programs and related budgets have failed to keep up, in their annual contributions, with the spending needed for these programs.

Each year, ESA works around the problem with short-term advances from its general fund, bank loans or by delaying bill payments. In addition, program development milestones are often delayed, meaning money expected to be needed one year is not needed the next.

This does not solve the problem. It delays a reckoning until the next year. Dordain said the sum total of the shortfall between programs approved and the payments made by ESA member governments is more than 600 million euros ($780 million) — 20 percent of the agency’s 2005 budget.

Dordain has said he will try to eliminate this overhang by 2008.

It is not his only budget problem.

The French space agency, CNES, had a problem similar to ESA’s in that program commitments had exceeded budget allocations. One solution adopted by CNES President Yannick d’Escatha was to freeze CNES’s ESA contributions at 685 million euros per year until 2009.

CNES is ESA’s largest contributor, routinely paying about 29 percent of ESA’s total budget. Germany is second with about 22 percent, with Italy at 12-14 percent.

After reviewing its program commitments for 2005 — and receiving approval from its member states for the total — ESA is counting on CNES to pay nearly 741 million euros this year — 56 million euros more than CNES’s fixed annual contribution.

CNES Financial Director Michel Lefevre said Jan. 21 that CNES “will not be paying a cent more” than the 685 million euros it set as the annual ESA payment to 2009.

Lefevre said it is ESA’s job to smooth out its budget obligations so that CNES’s average annual payments do not exceed 685 million euros. “Some years we will owe more, and some years less,” Lefevre said. “ESA can use its treasury to smooth out the bumps, just as in some years we will be paying more than is expected of us.”

That appeared to be the case in 2004, when ESA fixed the French contribution at 676.3 million euros but received the usual 685 million.

Dordain said ESA would not have to take out loans in 2005 to cover its shortfall but that 2006 would be another year of financial acrobatics. “The most difficult year is always next year,” Dordain said. “The fact is that not being able to meet our commitments is unacceptable and I plan to clean up the situation as quickly as I can.”

Comments: pdeselding@compuserve.com