Balancing Science Budgets

Key federal providers of public funds to research institutions, such as the National Science Foundation (NSF) and the National Institutes of Health (NIH), have altered internal policies to cap “indirect costs” of research to a maximum of 15%. Organizations like these are some of the largest supporters of science in the world, so any changes in internal policies have far-reaching effects throughout research and academia.

The NIH is one of the largest funders of research related to disease and public health, and its ~$50 billion budget supports both intramural (internal) research conducted at the NIH campus in Bethesda, Maryland, as well as extramural research conducted by scientists across the US. In contrast, the NSF conducts no internal research and instead uses its ~$10 billion budget to provide grants to scientists researching non-medical basic science and engineering. Together, these two agencies account for ~3% of all US discretionary spending, or less than 1% of total US spending.

Indirect costs are funds granted to research institutions which provide support for resources which are crucial to research but not directly related to the science itself. Direct costs for research are used to fund things like scientific equipment, reagents, salaries for faculty and staff, costs to recruit participants, or maintenance of an animal colony. However, indirect funding supports things like animal care staff, infrastructure, maintenance, utilities, administrative staff, and other services which are necessary to conduct science.  

Indirect costs in the past have been negotiated between a research institution and the grant-awarding agency. For example, when an agency (such as the NIH) elects to award a research grant to a university, the university will negotiate the indirect costs to be paid in addition to the awarded grant. Typically, these indirect funds range from 25% to 75% of the total grant funds, with the indirect costs varying greatly depending on each individual institution. An institution which is located in a region with more expensive energy costs, or where the cost of living is higher, necessitating greater salaries for employees, may need to negotiate for greater indirect funding.

Grant-awarding agencies have stated that a cap on indirect costs will largely benefit scientists. By limiting the amount of funds that can be granted towards indirect costs, these agencies will have more funds to provide for direct costs related to science and research. This increased support for direct costs could come in the form of a greater number of grants awarded, or larger pools of funds being granted for direct, research-related costs.

Indirect costs are necessary to facilitate science and research. Most science requires physical facilities, utilities, and a large support staff to safely maintain equipment, participants, and animals. Without these funds, many research institutions simply cannot afford to conduct science at the same scale. Such a change may disincentivize research institutions from investing in science in the future, as it may no longer be financially possible for many universities. Furthermore, a lack of administrative support means that a greater proportion of administrative burden will fall onto scientists, which reduces the amount of time they may be able to spend using their specialized expertise to conduct research.

U.S. District Judge Indira Talwani recently blocked the NSF’s implementation of 15% rule, citing Administrative Procedure Act, stating that the 15% cap is “arbitrary and capricious” and that the NSF has not sufficiently justified how such a change would further its goals, in addition to issues with how the rule was implemented and applied to grants that had already been negotiated. This ruling mirrors a similar April judgement from U.S. District Judge Angel Kelley restricting the implementation of the 15% rule by the NIH. These cases together represent substantial victories for the associated universities that filed suit, and act as roadblocks for federal agencies seeking to cut costs in line with their reduced budgets.

In addition to likely appeals from the Trump administration, the injunctions (judicial orders) issued by the federal judges (while permanent) have been complicated by recent rulings such as Trump v. CASA, Inc. This recent Supreme Court decision limited the power of federal judges to issue universal injunctions, which could complicate the enforcement of these injunctions. It is also unclear how the funding agencies will proceed even if they are restricted from an official “cap” on indirect costs. In line with the large-scale cuts to the budgets and operations of most federal research programs under the Trump administration, future indirect cost negotiations may contain less favorable terms towards research institutions, or may have additional requirements to justify the indirect costs, all of which could result in fewer grant funds paid out to research institutions.