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113 Essential levels of S&E operating resources through FY 1988 are projected in earlier chapters as approximately $200,000,000.5 For illustrative purposes, even using a five percent annual growth figure to cover inflationary cost increases and program requirements (beyond those which can reasonably be supported through reallocation of base funds), the Institution would be operating at an appropriation level approaching $300,000,000 in FY 1995. An operating level of this magnitude seems incomprehensible when viewed from today's perspective. This figure, however, is conservative, and a genuine indication of what could happen. As in federal operations, the basic approach regarding long-range trust prospects is a conservative one. Sustained moderate growth in the Institution's endowment is a high priority now and will continue to be throughout the foreseeable future. During FY 1975-80, pursuant to the Board of Regents' policy of increasing the Institution's endowments, the market value of endowments in restricted and unrestricted areas grew from around $42,000,000 to $78,000,000 as a result both of gifts and transfers to these funds, as well as prudent investment. Assuming a comparable economic climate and sound management investment choices, that performance should continue for a decade or so hence. It is planned to be added to the unrestricted endowment and that gifts for restricted purposes will also continue. Overall, by the mid-1990s, if trust revenues are sufficient to offset the effects of inflation, the Institution hopes to be able to increase its net earnings for auxiliary and business-related activities to about $17,000,000 or $18,000,000. The pattern of applying unrestricted net funds throughout future years to institutional operations is expected to be much the same as now: to enhance endowments; to fund Board of Regents' approved programs in research, fellowship, and education areas; to enhance program activities with the museums and bureaus; and to support central institutional administrative requirements. [[underlined]]Grants and Contracts[[/underlined]] Grants and Contracts from the federal government have been a significant source of funds for Smithsonian contributions to scientific and cultural advances almost since the Institution's establishment. Government interest in support of the national basic research enterprise may never again reach the levels recorded in the 1950s and 1960s, simply because of limited resources for higher educational institutions, research laboratories, and establishments such as the Smithsonian. Nevertheless, the federal government cannot neglect basic research, and must continue to support and stimulate through the grant and contract mechanisms quality investigations into selected areas. The Institution has distinguished 5. Projected level of S&E resources required excluding future year legislated pay increases.
