On Friday, the National Institutes of Health (NIH) — the world’s leading public funder of biomedical research — announced that the agency is making cuts to grants that support research institutions across the country by limiting the amount of indirect cost recovery for research projects to 15%. This applies to all new grants issued, as well as to current grants for which expenses would be incurred beginning Feb. 10.
At Penn State, applying that to the last financial year would have led to the loss of approximately $35.2 million ($18.3 million for University Park, and $16.9 million for the College of Medicine) and we expect a similar number for the current financial year. The loss of these funds will substantially reduce our ability to conduct groundbreaking research, particularly in the health sciences.
Our leadership team, including our government relations and legal teams, is working closely with our peers and national organizations — including the Association of American Universities (AAU), the Association of Public and Land-grant Universities (APLU), the American Council on Education (ACE), Council on Governmental Relations (COGR) and the Association of American Medical Colleges — to assess the potential impact and to advocate strongly.
For background, when universities perform research on behalf of the federal government, they incur costs — commonly called indirect costs — which may include, for example, research security, research compliance, high performance computing, specialized core facilities, human and animal subject protections, and personnel required to support essential administrative and regulatory compliance work. These costs are recovered through a negotiated rate between the University and the federal government. This cost recovery does not result in an income stream for research institutions and is not used to subsidize anything else. In fact, universities are not even fully reimbursed for the expenses they incur to provide the necessary infrastructure and support to conduct federal research.
As we know, the federal government relies on universities to conduct many different kinds of research in the nation’s interest. This includes research aimed at meeting specific national goals that benefit taxpayers, such as health, economic growth, agriculture, and national defense. Performing research on behalf of federal agencies results in a variety of expenses that would not otherwise be incurred by universities. All universities have indirect costs, and for most, this drastic cut would be devastating, and universities could not operate in the way we do now, if these costs were not recouped.
It is critical to note that we are still working to understand the directive and the potential implications for Penn State. This proposed change represents a significant shift in funding policy and would have substantial implications for our ability to support federally funded research.
We also know that many in our research community may be thinking about the potential for other funding agencies to take similar actions.
We are working diligently on this critical challenge. The landscape will evolve quickly, and we will continue to share updates as we assess the situation and engage in advocacy efforts.
Thank you,
Andrew F. Read
Senior Vice President for Research
Karen E. Kim, MD, MS
Dean, College of Medicine