Trump administration says it can cut billions by scaling back reimbursement for overhead costs. University groups say that funding is essential to conducting research.
When President Trump proposed a cut of nearly 20 percent in support for the National Institutes of Health, many wondered how the administration would even attempt to find such reductions. The answer emerged in the congressional testimony last week of Health and Human Services Secretary Tom Price, who argued the government could save billions without hurting research by cutting back on the overhead reimbursements to colleges and universities.
Higher education associations said cutting those reimbursements would have a very real impact on the science conducted on campuses. For some institutions, eliminating support for administrative costs could mean they would find it difficult to continue that research at all, the groups said.
The Trump administration in its so-called skinny budget last month proposed cutting the funding of the National Institutes of Health, the largest backer of university-based research, by nearly 20 percent. Even the most conservative members of the GOP caucus expressed concern after the document’s release about cutting support for the agency that funds important developments in cancer and epidemiology science.
But in testimony in front of a House appropriations subcommittee last week, Price argued that the administration could make those cuts to the agency’s budget without harming any research by eliminating support for administrative costs. Eighty percent of NIH’s funding is directed to universities and medical centers throughout the country in the form of research grants. Price said about 30 percent of that grant funding is spent on what he called indirect expenses.
“We ought to be looking at that,” he told lawmakers. “That’s an amount that would cover much more than the reduction being proposed.”
Price suggested there were greater efficiencies to be found at institutions involved in research that would allow the government to actually increase direct support for research.
Higher ed groups said facilities and administrative expenses involved in supporting campus-based science are very much part of the costs of doing that work and such payments have been part of the financial support of research for decades. Ending that support would mean universities would face billions in additional expenses for staffing, utilities, facilities and more.
The NIH spent about $6.4 billion on such costs last year, on top of $16.9 billion in direct support of research.
“They are intrinsically part of the costs of doing research,” said Jennifer Poulakidas, vice president for Congressional and governmental affairs at the Association of Public and Land-grant Universities. “Indirect cost payments that institutions receive when they do research for the federal government do not even fully cover all the costs associated with doing research. Universities are definitely paying for some of that work already.”
And Poulakidis said colleges and universities have become more and more efficient over recent decades in how they support research enterprises as they grapple with declining support at the state level. At the same time, they’ve seen regulations associated with research increase at the federal level.
“The costs have increased, the state support has gone down and our institutions have become much more efficient,” she said. “There’s not a lot of wiggle room here.”
Universities individually negotiate the rates for overhead payments — shorthand for the reimbursements from the government for administrative costs. Those rates can vary significantly from campus to campus. But Tobin Smith, vice president for policy at the Association of American Universities, said there are already caps for such payments in many places. Congress in the 1990s adopted a 26 percent cap on administrative costs exclusively for universities.
That was part of the fallout from a scandal over how Stanford University used overhead payments on items like decorations for its then president’s house. Since then, the awarding of funding has been cleaned up and standardized by Congress and higher ed, Smith said. But reimbursement rates often don’t cover the entire amount of facilities and administrative costs.
“We often have to subsidize those costs with university money,” he said.
That means universities already have plenty of incentive to be as efficient as possible, Smith said.
“These costs are real. To say they aren’t is very wrongheaded and misrepresents the situation we will face at universities,” he said. “Frankly, some of our universities won’t be able to figure out a way to pay for those costs.”
(Note: This story originally misstated the title of Jennifer Poulakidas. It has been updated.)