How Universities Would Overhaul Research Funding

After the National Institutes of Health tried earlier this year to cut funding for universities’ costs indirectly related to research and set off alarm bells across higher education, 10 higher education associations decided to come up with their own model for research funding rather than having the government take the lead.

Now, after just over six weeks of work, that group known as the Joint Associations Group is homing in on a plan to rework how the government funds research, and they want feedback from the university research community before they present a proposal to Congress and the Trump administration at the end of the month.

“Unfortunately, something is going to change,” said Barbara Snyder, president of the Association of American Universities. “Either we will be part of it or it will be imposed upon us … Significant division in the research community is going to kill us.”

Snyder and other JAG members said at a virtual town hall Tuesday that the current system for direct and indirect research funding costs has served the community well, but it isn’t transparent and leads to confusion about how the rates are calculated, among other challenges. AAU and other higher ed groups sued the NIH in February after the agency proposed capping indirect expenses for all institutions at 15 percent of the direct research costs—down from the average of 28 percent. (Historically, colleges negotiate their own reimbursement rates directly with the federal government.)

The White House said the cap would make more money available for “legitimate scientific research,” but universities warned that the change would halt lifesaving research and lead to job losses, among other consequences. The NIH rate cap would mean a cut of $4 billion for university-based research.

Court challenges have since halted the NIH plan, as well as similar caps proposed by two other federal agencies; meanwhile, the Department of Defense is working on its own plan related to indirect costs. Snyder said the lawsuits are about fiscal year 2025, while the JAG effort looks ahead to fiscal year 2026 and beyond.

Over the years, Congress and federal agencies have sought to rethink the funding model but didn’t reach an agreement. In fact, after the first Trump administration proposed a 15 percent cap on indirect costs in 2017, Congress specifically prohibited such a move. But now that prohibition doesn’t seem likely to stick as lawmakers consider bills to fund the government for fiscal year 2026, so a new model is necessary. Adding to the pressure on universities, Trump has proposed significant cuts to research funding in his budget.

JAG’s panel of experts presented two options to the university research community at a webinar last week and then answered questions at the town hall Tuesday. Colleges and universities have until June 22 to test the proposed models and provide feedback before JAG sends its final proposal to the government June 27, though any model will likely need additional work.

“No one would choose to work at this rapid pace and rethink how to effectively, fairly and transparently cover these real and unavoidable costs,” said Matt Owens, president of the Council of Government Relations, at last week’s webinar. “But we are where we are, and it’s vital that we meet this moment so that we can emerge with an improved and sustainable indirect cost policy that will enable our country to continue leading the world in research and innovation.”

Proposed Models

Both versions of what JAG is calling the Fiscal Accountability in Research model, or FAIR, are geared toward offering more accountability and transparency about how federal research dollars are spent. JAG hopes that in the end, the new model will be simpler than the current one. They also want to nix terms like “indirect costs rate” and “overhead” for either essential research support or general research operations in an effort to underscore that the money goes toward the real costs of research.

“This will require a bit of a culture change in institutions, but we think the benefit of that far outweighs the downsides,” said Kelvin Droegemeier, a professor and special adviser to the chancellor for science and policy at the University of Illinois at Urbana-Champaign, who led the JAG effort, at the webinar.

One model, which the group calls FAIR No. 1, would include costs related to managing the grant, general research operations and facilities as a fixed percentage of the total budget. The percentage would be based in part on the type of institution and research. This approach is designed to be simple and reasonable, according to the group’s presentation, but it’s more general, which makes it “difficult to account for the wide array of research frameworks that now exist.”

The other model, FAIR No. 2, would more accurately reflect the actual costs of a project and make the structure for federal grants more like those from private foundations. Under this model, essential research support would be lumped into the project costs while funding for general research operations, such as payroll and procurement, would be a fixed percentage of the total budget. That change would likely increase the direct costs of the project.

Droegemeier and other members of JAG’s expert panel noted that FAIR No. 2 would be a “significant departure” from the current approach, and universities would likely need more time to overhaul their processes for tracking costs. Still, the group said this model would better show what the money goes toward, addressing a key concern from Congress.

Droegemeier described the two models as “bookends” and said the group would probably end up somewhere between the two.

‘In a Good Spot’

At Tuesday’s town hall, attendees questioned whether Congress or the Trump administration would even consider JAG’s proposal and why any change was necessary.

Droegemeier said he’s met with members of Congress who have endorsed their process, and he’s kept in touch with Trump administration officials about the group’s work. So far, he’s seen a positive response to the models, adding that officials at the Office of Management and Budget indicated that they weren’t “oceans apart.”

“We’ve done everything possible to build goodwill and trust,” he said. “There’s a long road ahead of us, but I think we’re in a good spot.”

Other speakers echoed that point, noting that Sen. Susan Collins, a Republican from Maine and chair of the powerful Appropriations Committee, publicly supported the models at a recent hearing. And NIH director Jay Bhattacharya called the proposals “quite promising” at the same hearing, STAT News reported.

Additionally, the House’s appropriations bill for the Department of Defense calls on the agency to “work closely with the extramural research community to develop an optimized Facilities and Administrative cost reimbursement solution for all parties that ensures the nation remains a world leader in innovation.”

Across the board, speakers at the town hall said they must act to have a say in discussions about the future of research funding.

“The two models are a significant change,” said Deborah Altenburg, vice president for research policy and advocacy at the Association of Public and Land-grant Universities. “But all of our organizations are responding to a new political situation.”