Hughes Cuts Researcher Grants As Endowment Takes a Hit

Reposted from Science magazine, 22 November 2002

The U.S. economic slump has hit the lab bench. After enjoying years of soaring research spending fueled in part by an economic boom, some life scientists are being told to tighten their belts. A major blow landed last week, when the Howard Hughes Medical Institute (HHMI), one of the world's largest private research philanthropies, confirmed that it will trim spending by about 10%, or $100 million, over the next 2 years. "The great expansion is over," says HHMI president Thomas Cech. "We're spending too much, so we have to make some hard decisions."

Other research institutions are also feeling the pinch. But the picture isn't uniformly bleak: Diversified fundraising and low interest rates have allowed some institutions to weather--or at least delay--the financial storm. "We're still on track to grow the research program," says Ray Bye, vice president for research at Florida State University in Tallahassee. Thanks to an infusion of federal funds and patent licensing fees, the school's research budget will hit $175 million this year, double its 1998 level.

Much of the financial woe is due to nearly 3 years of falling stock prices. Overall, U.S. universities have seen the value of their endowments and other investments drop by an average of 10% since 2000, analysts estimate, with some faring far worse. Foundations are also hurting, with about half of 225 major charities planning to cut spending this year, according to the Center for Effective Philanthropy in Boston, Massachusetts.

At HHMI, a shrunken endowment (see graph) no longer produces enough income to cover the institute's annual spending, up 60% since 1996 to nearly $650 million for the fiscal year that ended 30 September. To pare back, HHMI's governing board started at home. It has cut this year's administrative budget by about 6%, or $3.5 million, and frozen hiring at its Chevy Chase, Maryland, headquarters. "You have to clean your own house before you ask others to do the same," says Cech. It also trimmed a $100-million-plus-a-year grants program, eliminating a $22 million program serving medical schools.

Financial pinch. A declining stock market has shrunk HHMI's endowment.

But most of the savings will come out of the institute's prestigious $442 million biomedical research program, which currently supports about 330 investigators and their 3000 staffers. The investigators, who are employed by HHMI but work at universities, will have to cut spending by up to 10% annually in 2003 and 2004. The average investigator receives $500,000 to $1 million a year in support for 5 years, renewable after a rigorous review.

To soften the blow, HHMI is allowing investigators to squirrel away spare cash saved over the next 8 months. Researchers will also be able to plead their case to HHMI officials, who will decide budgets on a case-by-case basis. "I felt an across-the-board cut was a mindless approach," say Cech. "It might be a mistake to make an early-career investigator take as big a cut as a more mature investigator."

Flexibility, however, will be limited by Cech's overall goal of lowering HHMI's spending from the current 6% of its endowment to 5%, based on a rolling, 3-year average. If successful, Cech says, the result should be a budget that can accommodate a new class of investigators within a few years. But he expects the steady-state number of investigators to be about 300, down from a high of about 350 last year.

Researchers are bracing themselves. Organic chemist Carolyn Bertozzi, an HHMI investigator at the University of California, Berkeley, says she has already cancelled some expensive service contracts, has stopped paying some travel costs for job candidates, and plans to reduce the size of her 34-member research group through attrition. "I may have to eliminate some projects as well," she adds, but she won't decide until next year. Bertozzi says she could lose up to $100,000 in salary and supply funds.

Bertozzi and HHMI aren't alone. At Stanford University in Palo Alto, California, administrators are trying to close a $40 million budget gap by, among other actions, freezing hiring; the school has added more than 1200 staff over the last 5 years, boosting the total to 7900. It is also slowing a planned $1.6 billion construction program. Other science powerhouses planning reductions include Duke University in Durham, North Carolina, where officials plan to reduce faculty through attrition but say they might have to lay off professors if the economy doesn't improve. The Massachusetts Institute of Technology in Cambridge and the California Institute of Technology in Pasadena are eyeing cuts.

Institutions that depend on narrow funding sources face special problems. The Palo Alto-based David and Lucile Packard Foundation, a major backer of marine science, might lay off up to half of its 160 staff members next month because the value of its endowment, made up mostly of beleaguered Hewlett-Packard stock, has sunk to $4 billion from $13 billion in 1999.

There is some good news. Low interest rates have made it easier to sustain construction projects, including HHMI's $500 million Janelia Farm research campus in Loudoun County, Virginia. And a growing stream of government research dollars, led by a 5-year doubling of the National Institutes of Health's budget, has helped some campuses grow despite declines in other income streams.

Even with cutbacks, notes Cech, who spent 22 years at the University of Colorado, Boulder, before joining HHMI in 2000, many academic research programs will end up ahead of where they were just a few years ago. "It just may take a little longer to fill those buildings," he says.

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