Federal funding for the indirect costs of research, such as caring for these mice at Purdue University in West Lafayette, Indiana, could be reduced under President Donald Trump’s 2018 budget proposal.

Purdue Agricultural Communications Service photo/Tom Campbell

Trump’s NIH budget may include reducing overhead payments to universities

The Trump administration may be planning to help pay for a massive 18% cut to the National Institutes of Health (NIH) by slashing payments to universities and research institutes for overhead costs, ScienceInsider has learned.

The proposed budget released by the White House yesterday, for the 2018 fiscal year that begins 1 October, contains a brief paragraph describing a $5.8 billion cut to NIH’s current $31.7 billion budget, as well as plans to reorganize the agency. The paragraph ends with this sentence: “The Budget also reduces administrative costs and rebalances Federal contributions to research funding.”

According to a source close to the Trump administration, the sentence refers to plans to attack so-called indirect costs. That is money universities receive from NIH and other agencies to cover the expenses associated with conducting federally funded research. Indirect costs include everything from paying the utility bills for a faculty member’s lab to the salaries of the staff needed to comply with federal rules on using animals in research. 

The portion of a research grant that universities can use to pay indirect costs is negotiated between individual universities and the government, although the administrative portion is capped by law. In general, universities that are awarded an NIH grant for the direct costs of a research project can receive from 10% to 100% of that amount to cover indirect costs. In fiscal year 2016, NIH paid out $6.4 billion for indirect costs in addition to the $16.9 billion in direct costs for research projects and other awards it funded.

Indirect costs have long been controversial. Investigators often see the payments as a tax that reduces the size of their research grants. And some policy experts say that universities have too much leeway to use the money for things such as fancy new buildings. Meanwhile, many private foundations pay much lower overhead rates—for example, the Bill & Melinda Gates Foundation limits indirect costs to 10% for U.S. universities.

A source close to the administration says the White House is concerned about indirect costs. The Trump budget’s $5.8 billion cut to NIH in 2018 could be offset partly by lowering indirect cost rates. (If the rate had been 10% in 2016, for instance, NIH’s indirect costs would have dropped by about $4.7 billion, to $1.7 billion.) But the source also acknowledged that any proposal to slash the rates would run into fierce opposition from universities, which argue that indirect costs are vital for maintaining high-quality research infrastructure and that they are already subsidizing the true cost of running a research lab.

“The costs are real and necessary for the conduct of research. It has to be paid for somewhere. And this historical bargain between the federal government and performers of research has been that the government pays part of the infrastructure costs,” says Tony DeCrappeo, president of the Council on Governmental Relations, a Washington, D.C.–based association of research universities and institutes that helps its members navigate federal regulations. Foundations, he adds, can get by charging a lower rate because they allow researchers to charge certain costs to their grant—such as leasing space—that can’t be charged to their NIH grant. And nonfederal grants may involve fewer regulations, lowering regulatory costs.

The details of the Trump plan may not become public until the full budget is released in May. 

Correction: This story has been changed to reflect that private foundations often pay, not charge, lower overhead rates.