Bloomberg Opinion on how university funding should be reformed, not reduced:

Six months before World War II ended in Europe, President Franklin D. Roosevelt wrote a letter to his top science adviser. Could the wealth of technical knowledge developed for combat, he asked, spur the peacetime economy and improve public health? The resulting treatise, presented to Congress in 1945, established the nation’s commitment to funding university research.

Today, the federal government covers more than half of universities’ R&D spending, much of which flows through the National Institutes of Health. The agency spent more than $35 billion on almost 50,000 grants in 2023. NIH-funded research has supported lifesaving innovations from the hepatitis B vaccine and cancer therapies to MRI scans and gene-editing technology.

According to the current White House, drastic changes are needed to this system. Too much federal money is being wasted, officials say, when it should be supporting research. Their basic criticism isn’t crazy. But their proposed solution threatens to impede essential scientific research without achieving its stated goals.

NIH grants are divided into direct and indirect costs. The former are expenses tied to a specific project, such as equipment and materials. The latter might include costs shared across various grant proposals — utilities at a lab, for example — but also expenses such as administrator salaries. The average so-called indirect cost rate, negotiated by universities and federal officials, has risen to 39% from a uniform 8% in the 1950s. At some schools, it’s more than 65%. More than a quarter of NIH funding dollars went toward indirect costs last year.

Some of the expenses covered by indirect costs are critical for the advancement of science. Others are more tenuous. Clerical staff and IT workers, parking lots and paint jobs — all can qualify as indirect costs. At some universities, meanwhile, administrators have started to outnumber faculty.

Sorting out essential expenses from administrative bloat isn’t easy. The painstaking rate negotiations between universities and the federal government attempt to do so, but they more often bog down the process and encourage school officials to inflate their needs. In theory, a flat rate would curb this perverse incentive, simplify the process, save money and thus free up funding for direct costs. Better yet, a tiered system of flat rates would address discrepancies in costs.

It’s possible the administration had some version of this in mind when it proposed cutting the indirect rate to 15% last month, citing the standard for philanthropic grants. ....

... A flat rate for indirect costs is a reasonable way to contain overhead and ensure that taxpayer funds support research. But getting the details right is essential. If it wants to ensure the United States remains the world’s leader in cutting-edge research, the administration should withdraw this heedless guidance and try again.