Trump Proposal to Cut Indirect Research Payments Would Hit State Universities Hardest

The Trump administration’s plan to cut billions of dollars in research spending by eliminating indirect cost reimbursements would devastate university science, especially at public institutions, experts warned.

The U.S. secretary for health and human services, Tom Price, told Congress this week that the idea is to save taxpayers money while giving them the same amount of research activity. Indirect cost payments are funds spent on “something other than the research that’s being done,” Dr. Price told a House of Representatives subcommittee on health appropriations on Wednesday.

But university representatives made clear Thursday that it simply does not work that way. Indirect costs reflect the legitimate expenses of providing scientists with labs and complying with a host of essential services that somehow will still need to be paid, the representatives said.

Under current law, a researcher who receives a federal grant to conduct research cannot simply be billed by his or her university for those costs, said Tobin L. Smith, vice president for policy at the Association of American Universities, which represents major research institutions.

And universities absolutely won’t force students to cover the difference, Mr. Smith said. “The reality is we don’t have other revenue sources to pay for those things, because let’s face it, we are not going to rob tuition to pay for those costs,” he said. “It just is not going to happen.”

It’s not clear what universities would do if Congress actually accepted the administration’s proposal to end indirect cost payments, said David Kennedy, director of costing policy and studies at the Council on Governmental Relations, another association of research universities and affiliated medical centers.

State institutions probably would suffer first and hardest, Mr. Kennedy said, because they would have virtually no ability to cover lab costs with outside resources. Some private institutions might try to let faculty accept some grants and cover facility costs from endowments, though that, too, is hard to predict, he said.

But Mr. Smith cautioned about even that scenario. Some large private universities may have healthy endowments, but often those funds are restricted to specific uses, he said.

Each university negotiates its indirect cost rate with the federal government, with typical levels ranging around 50 percent of the grant value. The National Institutes of Health last year paid $6.4 billion in indirect cost reimbursements to accompany $16.9 billion in total research support, some types of which do not involve indirect cost payments.

The Trump administration, for its fiscal 2018 budget recommendation earlier this month, suggested cutting the NIH budget by 18 percent — from $31.7 billion to $25.9 billion. It subsequently proposed cutting $1.2 billion from the NIH’s budget for the current fiscal year.

Other federal agencies also pay indirect costs on their research grants. The administration has not yet announced a budget plan for the National Science Foundation, which gets about $7.5 billion in annual taxpayer support.

Expenses, Not Bonuses

Cutting government spending by attacking indirect cost payments, Mr. Smith said, appears to reflect a failure by some policy makers to understand the basic terms that led to the creation of the system. Indirect cost payments may seem like bonus money for universities, he said, but they actually constitute a basic cost that governments and businesses recognize in many other settings.

If the federal government eliminated the indirect cost payment system, Mr. Smith said, it would need some other means for institutions to cover their essential laboratory and administrative costs. And determining that share on a grant-by-grant basis would be a far less efficient method than the current negotiated system, he said.

The director of the NIH, Francis S. Collins, although now a member of the Trump administration, made clear this week that he realizes the danger in Dr. Price’s proposal. Already, data show that federal indirect cost payments don’t fully cover the facilities and administrative expenditures incurred by universities, Dr. Collins said.

Suggesting the full elimination of indirect cost payments is “really quite threatening” to universities, Dr. Collins told reporters after addressing a policy conference hosted by the American Association for the Advancement of Science. “That kind of potential has to be thought through very carefully.”

Even the Johns Hopkins University, annually the largest recipient of NIH dollars, is deeply worried, said Landon S. King, a professor of medicine and executive vice dean of the Hopkins School of Medicine.

Hopkins researchers get about $600 million a year in NIH support, and insufficient indirect cost payments leave the university on the hook for about $100 million a year in additional costs, Dr. King said. Some universities such as Hopkins do accept research grants from foundations that pay even less in indirect cost support, but that’s not a model that can be sustained across the much larger share of grant support coming from the government, he said.

Congress ultimately is likely to realize that, Dr. King said, given its history of bipartisan support for scientific research. Dr. Price’s failure to understand is “disappointing,” perhaps reflecting a medical professional — a former assistant professor of orthopedic surgery at Emory University — who means well but has had limited exposure to research activities, Dr. King said.

As to Dr. Price’s suggestion that cutting indirect cost reimbursements would not hurt research, Dr. King said, “I feel confident that his colleagues at Emory would say to him in no uncertain terms that he has that wrong.”

Paul Basken covers university research and its intersection with government policy. He can be found on Twitter @pbasken, or reached by email at paul.basken@chronicle.com.