University Leaders Warn Appropriators on Proposed Research Overhead Cuts

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Publication date: 
1 November 2017
Number: 
143

Appropriators of both parties appear increasingly united in opposition to the Trump administration’s proposed 10 percent cap on research overhead reimbursements at the National Institutes of Health.

At an Oct. 24 hearing of the House Appropriations subcommittee that writes the annual bill that funds the National Institutes of Health, four administrators from leading research institutions warned the appropriators against paying for the Trump administration’s proposed NIH budget cuts by capping reimbursements for facilities and administrative (F&A) costs, also known as indirect costs. They said such a move would force their institutions to scale back research, imperil the long-running partnership between the federal government and universities, and risk turning away the next generation of researchers.

In his opening remarks, the chair of the House Labor-HHS-Education Appropriations Subcommittee Tom Cole (R-OK) added his voice to a growing chorus in Congress opposed to the cap, saying,

Based on many discussions with researchers, administrators and other research funders, both in Oklahoma and across the country, I'm very concerned that the proposed F&A rate cut would drastically reduce the amount and quality of research conducted in the United States and that public universities would be particularly hard hit.

He pointed out that the proposed 10 percent cap on reimbursements for indirect costs would be a dramatic reduction from the 28 percent average rate in fiscal year 2017.

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Rep. Tom Cole (R-OK)

Rep. Tom Cole (R-OK), the chair of the House Labor-HHS-Education Appropriations Subcommittee, is joining a growing group of his colleagues set on blocking the Trump administration’s proposed 10 percent cap on reimbursements for research overhead costs.

(Image credit – House Republican Conference on Flickr)

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Appropriators praise partnership between universities and government

Cole, Subcommittee Ranking Member Rosa DeLauro (D-CT), and the witnesses praised the long-standing partnership between U.S. universities and the federal government in supporting research as a public good.

Kelvin Droegemeier, vice president for research at the University of Oklahoma and former vice chair of the National Science Board, explained that in the 1930s “virtually all research in higher education was funded either by philanthropy or by private foundations, not by the federal government.” This changed after World War II, when the federal government established the National Science Foundation and began funding university research through a social contract in which the government funds research for the public good and that simultaneously creates benefits for universities.

Initially, Droegemeier said, the government fully reimbursed universities for research overhead. In the 1960s, he explained, that model was revised so that universities would share in paying for indirect costs of research. Today, the federal government funds about 55 percent of university R&D, including both direct and indirect research costs, while 24 percent is funded by the universities themselves. About another 6 percent is funded by foundations and private philanthropy. 

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Cost-sharing partnership between federal government, universities, and other entities.

The above chart depicts how university research is a cost-sharing partnership between the federal government, universities, and other entities.

During this exchange, Cole affirmed that “We all acknowledge this cost-sharing relationship as valid and necessary to maintaining U.S. leadership in research and development.”

Keith Yamamoto, vice chancellor for science policy and strategy at University of California San Francisco (UCSF), agreed, emphasizing that universities’ and other research institutions’ own contributions constitute the second largest source of biomedical research funding in the U.S., behind only NIH.

Witnesses say research overhead cuts will lead to less research

Yamamoto said that if the proposed cap is adopted, UCSF would fall short of its budget by $120 million with “no way make up the deficit.” He continued:

Instead we would have to decide which research and health programs, which training programs, which facilities are going to be maintained; which would be cut back; which would be closed. And make no mistake that, at smaller institutions that are actively, vigorously building up their biomedical research enterprises, it could lead to total shutdown of those efforts that are so vital to their regions and their congressional districts.

Droegemeier echoed Yamamoto, saying that the University of Oklahoma would have to shut down labs, hire fewer students, and scale back research, “because we don't have the resources to make up those lost F&A costs.”

Bruce Liang, dean of the University of Connecticut School of Medicine, added the cap would “weaken our ability to innovate and to develop new medicine and cures, will shut down research programs, and will also in Connecticut adversely affect biotechnology innovation.” He listed a number of spinoff biotechnology companies and research centers in his region that depend on the flow of NIH dollars.

Gary Gilliland, president and director of the Seattle-based Fred Hutchinson Cancer Research Center, said “the impact on the Hutch would be calamitous. … This 10 percent cap would represent a $60 million operating loss for us.”

Rep. Andy Harris (R-MD) seemed the most open among committee members present to the administration’s proposed cap, although he did not outright endorse it. He asked Droegemeier why non-profits and private foundations, which pay a lower overhead reimbursement rate, cannot do more to contribute. Droegemeier replied that foundations have a “very, very different role,” and explained that their low reimbursement rates are workable because they fund only a small fraction of total research costs.

Reducing regulatory burden key to maximizing research dollars, say witnesses

DeLauro and some of the witnesses pointed out that, even with the multi-billion dollar increases in the NIH budget in recent years, NIH spending has fallen by about $6.5 billion since 2003 after being adjusted for research inflation, and grant programs have become more competitive. She said that 16 years ago,

NIH funded about one in three meritorious research proposals. Today, the rate has fallen to about one in five. … The unfunded grants translate to medical discoveries not being made and lives not being saved. … I wonder, if you add a cap to indirect costs on top of this decline in opportunity, how does that impact your ability to carry on?

Gilliland testified that steeper competition is leading to young biomedical researchers choosing to “go off and work for Amazon or Microsoft or Google,” instead of committing to a research career.

When Rep. Mark Pocan (D-WI) asked about ways the federal government could get more grant money to researchers, Droegemeier suggested that researchers’ regulatory burden is an issue ripe for attention. He said,

Two studies successively have shown … that faculty who are funded by the federal government on average spend 42 percent of their time on administrative activities. … A lot of these regulations have been shown to have no impact, but yet they really are suppressing our research system.

Yamamoto agreed, saying “I spend all my time … chasing down regulatory reports, compliance reports.” He said he hopes Congress will address the issue, bemoaning that current federal regulatory compliance regime is “…not only very wasteful of resources, but it really [reduces] … the time and energy that one can put into thinking about science.”


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Cumulative number of new federal regulations governing research at U.S. universities between 1991 and 2014.

The above graph, included in University of Oklahoma Vice President for Research Kelvin Droegemeier’s written testimony, charts the cumulative number of new federal regulations governing research at U.S. universities between 1991 and 2014. 

(Image credit – Council on Governmental Relations)

Cole adds voice to growing chorus of opposition to research overhead cuts

Cole ended the hearing by making it clear he will be a champion for preserving the current relationship the research community has with the federal government. He said:

I want to make sure that we don't throw out the baby with the bathwater, looking for savings and disrupting what's really a pretty complex and now 70-year-old ecosystem that has produced extraordinary benefits for the American people and extraordinary benefits, to be quite frank, for all of mankind. This is one of America's great contributions to humanity.

Other lead appropriators have also pushed back against the proposal. Sen. Roy Blunt (R-MO), who chairs the equivalent appropriations subcommittee in the Senate, told NIH Director Francis Collins at a June hearing that he could “rest assured” the president’s budget would not be implemented. And Sen. Lamar Alexander (R-TN), a member of Blunt’s subcommittee who also chairs the Senate Health, Education, Labor and Pensions Committee that oversees NIH, called the idea “hare-brained.

Congress is already stepping in to ensure that the administration does not attempt to implement any changes to research overhead reimbursement rates or formulas without its consent. The House and Senate Appropriations Committee reports accompanying fiscal year 2018 spending legislation for NIH both include language explicitly rejecting the administration’s proposed cap or any similar changes to reimbursement formulas. In addition, the continuing resolution currently funding the federal government through Dec. 8 includes a provision blocking implementation of the cap through the term of the resolution.

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