Dear Colleagues:

We write today to address a serious and disturbing federal proposal that threatens the future of our work as the nation’s most productive public research university. The proposal would reduce research funding by slashing reimbursements for facilities and administrative costs (F&A, also called indirect costs or overhead), forcing universities to cut jobs and shift research portfolios, jeopardizing our research mission.

Right now, this proposal is part of the administration’s FY18 budget proposal and is also being considered by the White House and the U.S. Department of Health and Human Services for immediate implementation. Its scope includes grants awarded by the National Institutes of Health, which last year provided $457.3 million in support of faculty research at the University of Michigan. It could also be extended to other federal agencies that support university research. While there is strong bipartisan support for NIH funding in Congress, some members view a cap on F&A reimbursement as a politically palatable way to reduce federal expenditures on medical research.

We hope you can help us ensure that your colleagues and research partners fully understand the facts and consequences of this proposal, which are detailed further below. All NIH funded labs will feel the consequences of the proposed F&A cut.

Like you, we chose to work at a research university whose work advances the public good. The people who stand to lose most from the administration’s proposal are our patients, our students, and the members of our community whose health is improved or whose lives are saved by the amazing research we do.

The F&A reimbursement proposal

When the NIH awards a grant to a university, the total cost includes two components:

• Direct costs fund expenses that can be attributed to individual projects. Examples include salary support for research staff and students, benefits, supplies, equipment, travel, and publication costs.
• F&A costs support crucial infrastructure, facilities and administrative investments and are essential for the conduct of the funded research. F&A costs cannot be assigned to a single project because they are items like laboratory space, heat, lights, IT infrastructure, library collections, grant accounting, purchasing, journal subscriptions (electronic and print), animal care facilities, hazardous waste disposal, security, insurance, and the support staff required to ensure compliance with a complex array of federal and state regulations.

The White House proposal would impose a 10 percent cap on F&A cost reimbursements to the university’s NIH grants. Currently, F&A costs are established in partnership with the federal government using long-existing guidelines that ensure accountability of all parties. The proposed cap on NIH reimbursements would result in about $92 million in lost funding to U-M.

There is often a misconception that F&A costs do not directly support research. Characterizing F&A costs as “indirect” is imprecise. These vital funds are used to partially reimburse universities for investments that are essential to the support of quality research. The actual costs are much higher.

To fully consider the impact of the proposed cut, we describe how U-M’s current F&A reimbursement rate – which is based on actual audited costs historically incurred by the university – is negotiated with the federal government, as well as explain some of the possible consequences for both our campus and the society we serve. That information is available here.

What you can do

U-M is working with the Association of American Universities and many others to educate our colleagues across the nation and the public about the consequences of the White House’s proposal. Our goal is to protect what the AAU calls the “phenomenally successful 70 year university-federal government partnership for American science.”

We are asking for your support and assistance in sharing the facts of F&A reimbursements and their essential benefits to universities and the nation as a whole. All members of the public – from our families and neighbors, to businesses that sell us our supplies or use our research to advance our economy, and the students who look to us to support their future ambitions in discovery and science – have a stake in this issue. If you’d like to contact your elected representatives in Congress, you can find them here.

We thank you for time and consideration.

[Note: If you decide you want to advocate on this topic, we encourage you to use a personal email account rather than your university account. This is consistent with campaign guidelines posted in more detail here.]

Sincerely,

Mark S. Schlissel
President

Paul N. Courant
Interim Provost and Executive Vice President for Academic Affairs

Marschall S. Runge
Executive Vice President for Medical Affairs

S. Jack Hu
Vice President for Research