Federal Funding Updates

Due to legal challenges facing President Donald Trump’s executive orders and directives – as well as efforts across federal agencies – there is a degree of uncertainty facing federal research agencies. For example, the White House Office of Management and Budget’s memo to freeze federal aid and funding was halted by two federal judges, and although the White House rescinded the memo, White House Press Secretary Karoline Leavitt added confusion by proclaiming that action was purely to rescind the memo, not the president’s efforts to freeze federal funding. 

While agencies continue to implement the various executive orders issued by President Trump (for example, those related to DEI, climate justice, etc.) researchers should expect to see further efforts to understand whether grants are in conflict with these orders and therefore subject to cancellation. 

The federal government is currently operating under a continuing resolution that expires on March 14, leaving congressional leaders with a little more than a month to reach an agreement. However, due to recent actions and the threat that federal funding could be withheld by the Trump Administration, it appears unlikely that Democratic leaders are willing to work with their Republican counterparts, arguing that they are not negotiating in good faith. In fact, there are now rumors floating that Republicans could seek to pass a full-year continuing resolution to avoid a shutdown threat altogether.

Part of the delay in government funding has been efforts in both chambers to kick-start congressional Republicans’ efforts to pass budget reconciliation, which would include many top policy priorities for President Trump, including national security, defense and energy spending, along with extending many of the tax cuts from the 2017 Tax Cuts and Jobs Act. With a small margin in both chambers – especially in the House – leaders are struggling to find a framework that every member of the caucus can support. 

There are also media reports circulating that the Trump Administration is planning to drastically reduce the federal workforce at the Department of Health and Human Services, including at the Food and Drug Administration, Centers for Disease Control and Prevention and others. Additional reporting suggests that the administration could eliminate between a quarter and a half of the workforce at the National Science Foundation. This follows a series of efforts to reduce the size of the federal workforce’s footprint, such as dismantling the U.S. Agency for International Development and offering a retirement option to virtually all employees, although that is now facing a legal challenge as well.

Universities and the federal government have a long-standing and successful partnership that grew out of World War II. The federal government relies on universities to conduct research in the national interest. This includes research aimed at meeting specific national goals such as health and welfare, economic growth, and national defense. 

Performing research on behalf of federal agencies incurs a variety of costs that would not otherwise exist for universities. Universities – not the federal government – assume the risk of building the necessary infrastructure to support this research in anticipation that their research faculty will successfully compete for federal research grants and thus the university will be reimbursed for a part of the associated infrastructure costs.

Over the past several years, the share of institutional support that colleges and universities provide to support research conducted by their faculty has grown faster than any other sector. This increase is due in part to the rising compliance costs associated with increased federal research regulations and reporting requirements. 

Despite the increasing administrative costs required for compliance, the amount universities can receive from the government for these costs has been capped at a flat rate by the Office of Management and Budget (OMB) since 1991. This cap only applies to higher education institutions. Unlike other sectors that conduct government research, universities must therefore subsidize compliance costs from their own financial resources. 

The University of Michigan’s 56% F&A cost reimbursement rate, like those of all universities, is determined through a rigorous review and audit by federal agencies and university administrators. This rate is based on actual funds previously spent on facilities and administrative (F&A) costs.

F&A rates vary across institutions because expenses such as construction, maintenance, utilities, and administration differ by university and region. Additional factors—such as the age and condition of buildings and the extent of renovations or new construction needed to support specific research projects—also influence these rates.

For more information: 

https://www.cogr.edu/fa-cost-reimbursement-materials-0

https://www.cogr.edu/sites/default/files/Costs_of_Federal_Research_Infographic_Update_Final.pdf

In the coming months, we will see many bills and other proposals for legislation that may propose to change federal research funding priorities. This happens every time a new party obtains control of Congress or the White House.

While there has been an increased focus on cutting overall government spending – thanks in part to the proposed Department of Government Efficiency – it is important to note that reducing the scale of the federal government and resulting government spending has been a Republican priority for many years.

During the first two years of President Donald Trump’s first term, when Republicans also controlled both chambers of Congress, there also was a focus on reducing the size of the federal government and major changes never materialized. Members of the House and Senate Committees on Appropriations pride themselves on their ability to stay out of partisan fights while drafting spending bills that reflect the policy objectives of their parties.

While the Trump Administration will undoubtedly influence federal research policy, it’s also important to note that individual members of Congress – especially those with leadership positions on key committees – have their own priorities, too. It is not uncommon for a Congress led by the same party as the president to ultimately pass funding bills that do not align with all of the president’s budget requests. We believe that there will be a shift in research priorities and policy, with a larger focus on the following:

• Industries of the Future: artificial intelligence, advanced manufacturing, and quantum computing
• National Security: defense and homeland security
• Space

For reference, the Office of Federal Relations has been analyzing what proposed policy and funding changes could be debated as Republicans return to the majority in both chambers of Congress.

During the last Congress, several key legislators took an interest in making changes they said would modernize the NIH, reflected in separate proposals released by then-House Energy and Commerce Committee Chair Cathy McMorris Rodgers (R-WA) and then-Senate Health, Education, Labor, and Pensions Committee Ranking Member Bill Cassidy (R-LA). As the top Republicans on the House Energy & Commerce and Senate Health, Education, Labor, and Pensions (HELP) Committees, respectively, these proposals could be viewed as benchmarks for potential Congressional activity in the future.

However, it is worth noting two key factors while analyzing these proposals:

• Senator Cassidy is now the chairman of the Senate HELP Committee, meaning he will have a larger role in crafting health policy, and
• Rep. McMorris Rodgers retired at the end of the last Congress and her successor, Chairman Brett Guthrie (R-KY), will likely want to put his own mark on NIH reform, should that raise to be a top priority for him.

Chair Cassidy’s white paper stems from a request to stakeholders last year to solicit feedback on policies Congress should consider to modernize NIH. While this proposal can be viewed more as a framework by interested parties and less of a formal proposal, it is difficult to say how the senator decided what feedback should be incorporated into this document. The white paper only notes that respondents ranged from academic institutions, relevant professional societies, think tanks, trade associations, patient advocates and individual researchers.

On the other hand, former Chair McMorris Rodgers released a broad framework for sweeping reforms across the NIH to tackle issues including the consolidation of institutes, tenure length for institute directors, sexual harassment issues at NIH and funding sources. Key takeaways include:

• The reduction of the number of institutes from 27 to 15. While certain institutes would continue to exist as-is, others would be consolidated to form institutes focusing on broader issue topic areas, moving away from more niche demographic topics towards a more holistic approach while other standalone institutes would also be rebranded or split apart.
  
• One major change would be the consolidation of the Advanced Research Projects Agency for Health (ARPA-H) with the National Center for Advancing Translational Sciences, the National Institute of Biomedical Imaging and Bioengineering and the Common Fund to create the “National Institute on Innovation and Advanced Research.” As the preeminent agency for funding high-risk, high-reward health research, ARPA-H funds research projects that may otherwise not receive federal support but have the potential to realize major implications and improvements for health sciences. To couch ARPA-H into a broader Institute could diminish its impact and ability to promote such innovative research.
  
• Notably, the funding for the consolidated institutes would not be cut. Instead, certain institutes would receive a boost in funding in addition to the combined funding pools for the original institutes.
• The framework also criticizes the “stagnant nature of leadership” at the NIH, calling for tenure limits for institute directors. To address this, the framework proposes implementing five-year tenure limits for directors, with the ability to serve up to two terms at the discretion of the NIH director.
• The proposal emphasizes the need to address current NIH funding mechanisms,  both in how the agency and its respective institutes are funded as well as how grants from NIH are meted out to researchers. 

The relationship between Chairs Cassidy and Guthrie will also signal how much traction NIH reform has in the upcoming Congress. If both chairs pursue their own reform ideas, it will likely complicate a potential compromise, while a close partnership likely indicates NIH reform has a real chance at success. It will also be interesting to see the general appetite for taking on a large-scale NIH reform amid other key legislative initiatives competing for attention in the new Congress.

The Office of Federal Relations has drafted a memo with additional information on each NIH-reform proposal. 

As many in the research enterprise at U-M know, facilities and administration (F&A) costs – also referred to as “indirect costs” – are essential costs of conducting research. The federal government’s long standing recognition and payment of its share of these costs has helped U.S. universities build and support the required research infrastructure that has made the American research enterprise the best in the world. Cuts to F&A research costs are cuts to research. If such cuts are made, they will reduce the amount of research that universities and their scientists can conduct on behalf of the federal government to achieve key national goals to improve the health and welfare of the American people, grow the economy and enhance our national security.

The process of determining F&A cost reimbursements, including how university F&A cost rates are established and why this system is both equitable and efficient, is inherently complex. Understanding these costs — and their essential role in supporting federally funded research — is not easily distilled into simple explanations.

Then-President Trump’s proposed FY 2018 budget suggested placing a 10% cap on all F&A cost reimbursements for NIH, leading many to believe that with a focus on efforts to curtail overall government spending, the incoming administration may undertake additional attempts to cap or significantly reduce F&A cost reimbursements. While some members of Congress remain critical of F&A reimbursements, it is important to note that House Appropriation Committee Chairman Tom Cole (R-OK) has stated on the record that “proposed F&A rate cut[s] would drastically reduce the amount and quality of research conducted in the U.S.”   

U-M works in close collaboration with peers in higher education and other institutions to advocate for federal research funding that saves and improves lives and creates opportunities for our state, nation and world. This advocacy includes a focus on communicating the critical importance of facilities and administration reimbursements to U-M’s research efforts.

OVPR and U-M’s Federal Relations Office are diligently tracking new developments and committed to keeping you informed with pertinent updates. We will continue to share information through existing communication channels (newsletters such as VPR Update and U-M Federal Relations’ Washington Update – sign up HERE) and look to expand our in-person touch-points,  utilizing time at key meetings to update research leadership; scheduling town hall meetings, brown bags and unit-specific meetings to engage the broader research community and offering “office hours” for faculty and staff to ask questions and engage with federal relations staff to ensure time for topic-specific questions.

We stand ready to catalyze, safeguard, and support your world-changing research.