One of the first signs of what would become an ongoing attack on scientific research came when the Trump administration ordered the National Institutes of Health (NIH) to radically reduce research funding for universities. These funds, termed indirect costs, are awarded when researchers at an institution receive a grant. They cover costs that aren’t directly associated with the research project, such as utilities, facilities for research animals, and building maintenance.
Previously, these costs had been the subject of negotiations and audits, with indirect cost rates for universities in more expensive locations exceeding half the value of the grants awarded. The Trump administration wanted to cut this to a flat rate of 15 percent for everyone, which would be crippling for many universities.
A number of states, later joined by organizations representing a broad array of universities and medical schools, immediately sued to block the policy change. A district court temporarily blocked the new policy from being implemented and later issued a permanent injunction. The government appealed that decision, but on Monday, an appeals court rejected the effort because the first Trump administration had attempted the same move before—and Congress passed a rule to block it. Indirect research funding will remain intact unless the Supreme Court intervenes.
Don’t try that again
Universities rely on indirect costs to cover everything from building and maintaining dedicated lab space to paying the staff who pick up trash and dispose of hazardous waste. Their costs vary from location to location; universities in dense urban areas, for example, have to pay more for buildings and pay their staff higher salaries. So the NIH has created a formula for universities to estimate their research costs, which serves as the starting point for negotiations. Once the rate is set, audits can be conducted at any time to ensure that the actual costs are consistent with the rate and that funds are spent appropriately.
While indirect rates (the money paid for indirects as a percentage of the grant’s value) average about 30 percent, many universities have ended up with indirect cost rates above 50 percent. A sudden and unexpected drop to the 15 percent applied retroactively, as planned by the Trump administration, would create serious financial problems for major research universities.
The district court’s initial ruling held that this change was legally problematic in several ways. It violated the Administrative Procedures Act by being issued without any notice or comment, and the low flat rate was found to be arbitrary and capricious, especially compared to the system it was replacing. The ruling determined that the new policy also violated existing procedures within the Department of Health and Human Services.
But the Appeals Court panel of three judges unanimously determined that they didn’t even have to consider all of those issues because Congress had already prohibited exactly this action. In 2017, the first Trump administration also attempted to set all indirect costs to the same low, flat fee, and Congress responded by attaching a rider to a budget agreement that blocked alterations to the NIH overhead policy. Congress has been renewing that rider ever since.
A clear prohibition
In arguing for its new policy, the government tried to present it as consistent with Congress’s prohibition. The rider allowed some exceptions to the normal means of calculating overhead rates, but they were extremely limited; the NIH tried to argue that these exceptions could include every single grant issued to a university, something the court found was clearly inconsistent with the limits set by Congress.
The court also noted that, as announced, the NIH policy applied to every single grant, regardless of whether the recipient was at a university—something it later contended was a result of “inartful language.” But the judges wrote that it’s a bit late to revise the policy, saying, “We cannot, of course, disregard what the Supplemental Guidance actually says in favor of what NIH now wishes it said.”
Finally, the judges noted that Congress passed the rider specifically to prevent what the Trump administration was trying to do, writing, “The appropriations rider was a direct response to the first Trump administration’s proposal to impose a uniform 10 percent indirect cost reimbursement rate.” Even if the language in the rider wasn’t clear (and the court found it more than clear enough), the legislative history provides a good indication of how the text should be interpreted.
If the administration wants to pursue this policy, it’s left with very few options. One would be to work with Congress to ditch the rider, but Congress is in the process of reversing the cuts to science that the administration had called for, so that’s unlikely to work out. Given how decisive this ruling is, asking the full appeals court to reconsider is also unlikely to go well. That leaves one option: appeal to the Supreme Court, which has generally worked out well for the administration.
The judges here seem to have been considering that potential outcome. There’s an obvious and recent Supreme Court precedent regarding whether courts can intervene in research funding policy. It was an awkward split decision that nobody on the Supreme Court seems to have been happy with, but the appeals court treats it as setting a clear and reasonable standard and spends a fair bit of text explaining how the court’s decision is consistent with it. So to some extent, this decision seems written with an eye toward potential Supreme Court review.
Overall, the decision is a clear win for research universities, with the threat of these funding cuts seeming increasingly remote. There are plenty of other ways that scientific funding is under threat, but for now, Congress and the courts seem to have blocked this one.
Woman Primarily Uses Phone to Decline Calls