On February 7, the National Institutes of Health (NIH) announced a 15% cap on its research overhead recovery rate. This ceiling will apply to all new research grants as well as existing grants as of the February 10 effective date. Currently, Cornell charges overhead recovery rates up to 64%.
When the NIH awards a research grant, it approves a budget for direct costs such as Professor salaries and experiment supplies and also allows for the recovery of indirect costs such as rent, electricity, and cleaning staff as “overhead.” The NIH audits Cornell to make sure that only allowable costs are recovered in the overhead rates.
In response, on Monday, February 10, Cornell, together with the Association of American Universities, the American Council on Education, the Association of Public and Land-Grant Universities, and 11 other research universities filed a lawsuit seeking the restoration of prior overhead recovery rates. The Attorneys General of New York and 21 other states filed a second lawsuit on the same topic. In response, a Federal District Court Judge in Boston has temporarily blocked the NIH plan. The judge then expanded the temporary restraining order on February 21.
The overhead charge is supposed to compensate Cornell for laboratory facilities, administrative costs, and other indirect costs. A significant portion of Cornell’s $2.5 billion debt is spent to finance Cornell’s research facilities, which are amortized by grant overhead recovery.
In response, Provost Bala issued a statement on February 8, which said:
“While we work to reverse the announced reductions, we are engaging in thoughtful discussion with faculty and researchers with significant NIH portfolios. We encourage researchers to consider short-term measures for expenses and to avoid new hiring or spending for the moment. Please consult with your colleagues on shared resources and to think beyond the walls of your own labs to the people, activities, and equipment that might be shared to reduce our expenses.”
The NIH’s decision was based upon an analysis of other research funders and the ceilings they impose on overhead rates. The NIH reported, “Of 72 universities in the sample, 67 universities were willing to accept research grants that had 0% indirect cost coverage. One university (Harvard University) required 15% indirect cost coverage, while a second (California Institute of Technology) required 20% indirect cost coverage. Only three universities in the sample refused to accept indirect cost rates lower than their federal indirect rate. These universities were the Massachusetts Institute of Technology, the University of Michigan, and the University of Alabama at Birmingham.”
In response, the lawsuit points out that in 2017, the NIH under the first Trump Administration attempted to set a nationwide ceiling of 10% on overhead recovery rates. Each year since, the Congress enacted a budget bill rider which requires that “provisions relating to indirect costs . . . including with respect to the approval of deviations from negotiated rates, shall continue to apply to the National Institutes of Health to the same extent and in the same manner as such provisions were applied in the third quarter of fiscal year 2017.” They claim that NIH’s February 7 action violates this law.
Cornell also argues that its overhead recovery rate is based upon its actual costs and that there are documented costs justifying its 64% rate that are subject to an annual audit. The NIH counterargument is that 15% appears to reflect the market value of research recovery rates and that federal taxpayers should not pay more than what universities charge funders such as the Gates Foundation or the Rockefeller Foundation.
As for the political implications, the NIH’s action is consistent with Project 2025 (p 355), which claimed that above-market rates on overhead recovery funded the “leftist agendas” of research universities. As reported in Science magazine, the abrupt NIH change represents “a nuclear bomb on university budgets,” says Morgan Polikoff, an education researcher at the University of Southern California. “I mean, listen, it doesn’t take a rocket scientist to figure this out. They’re just trying to hurt universities.”
David K. Skorton, a former Cornell president and the current CEO of the Association of American Medical Colleges (AAMC), condemned the NIH policy in a statement from AAMC.
“The [Trump] administration’s decision to drastically reduce federal support for biomedical research by cutting reimbursement for peer-reviewed NIH grants will diminish the nation’s research capacity, slowing scientific progress and depriving patients, families, and communities of new treatments, diagnostics, and preventive interventions.”
The Cornell Graduate Students United (CGSU-UE) also decried the last of transparency in overhead rates and demanded greater disclosures,
CGSU-UE complains, “Cornell takes years to fix dangerous ventilation problems, but is always on top of collecting their overhead fees from grants.”
RELATED: Federal Grant Freeze Lifted
Aside from the reduction in overhead recovery, the NIH has been ordered to fire 1,165 probationary employees, including nurses at the NIH’s research hospital in Bethesda, MD. Meanwhile, the other big science funding agency, the National Science Foundation, is facing its own funding challenges. Local media reports that on February 20, the NSF dismissed 168 out of its 1,450 employees (12%). In response to an Executive Order, the NSF fired all probationary and “at will” employees, including contract experts in specialty fields.
In addition to the Administration impairing existing grants, the peer-review process of awarding new grants has also been frozen. A recent Nature magazine article explains that expert panels are scheduled far in advance and are sent a large number of grant applications to review. The panels then meet in person to debate the merits of the research proposals. A notice of such panel meetings is required to be published in the Federal Register. Because the Administration has blocked the printing of these notices, the panel meetings in February have been cancelled, and the hours spent evaluating proposals may have been wasted. The blocking of new NIH grants seems to be inconsistent with the claim that any savings from an overhead cap will be redirected to additional research projects.
Estimated Impact
By one estimation, this year, the NIH awarded 75 grants worth $32,809,343 to Weill Cornell Medical Center and 24 grants worth $8,125,613 to Cornell’s main campus. Assuming all of these grants have a 64% overhead recovery rate, the new policy represents a potential annual revenue shortfall of $20,058,128. However, the lawsuit complaint says Cornell “expended approximately $452 million on 1,693 NIH awards for its 2024 fiscal year and received $137 million in reimbursement for indirect costs. Cornell has 1,207 awards from NIH for fiscal year 2025 and estimates that this reduction in the indirect cost reimbursement rate would result in a shortfall of over $42 million for the remainder of this fiscal year alone.”
Cornell must also prepare for the possibility that other federal grant-making agencies will follow the NIH in capping recovery of overhead. At the same time, the CGSU-UE will have to reconsider the feasibility of its demand for a 30% increase in guaranteed base pay. Although graduate student research assistant salaries are “direct costs” included in the budgets of the currently awarded grants, Cornell may not have enough unrestricted funds to accommodate 30% salary increases while absorbing any shortfalls in overhead recovery.
Finally, on February 10, President Kotlikoff issued a statement indicating that Cornell “remain[s} deeply committed to research that enhances the lives and livelihoods of people in New York state and around the world in tangible and lasting ways. We look forward to partnering with the NIH to ensure that we fulfill that mission together.”
