The Critical Role of University Research: Funding, Challenges, and Impact

This week on EJB Talks dean Stuart Shapiro and Associate Dean of Research Clint Andrews discuss the vital role federal-funded university research plays in complementing education, driving innovation, and solving real-world problems. Clint highlights why government funding is essential, as much research benefits society beyond what private entities can support. He also explains how cuts to indirect cost reimbursements of university research funding could lead to not only tuition hikes and reduced services, but also the loss of academic talent if it is coupled with the country closing its borders and weakened U.S. global competitiveness. He closes the discussion by illustrating the positive impact of federal funding, sharing a recently completed National Science Foundation project on micromobility safety that led to practical urban planning and technology collaboration and innovations.

Transcript

Stuart Shapiro
Welcome to EJB Talks. I’m Stuart Shapiro, the Dean of the Bloustein School. And the purpose of this podcast is to highlight the work my colleagues and our alumni in the fields of planning, policy, and health are doing to make the world a better place.

Today I’m speaking with my colleague, Associate Dean of Research and Distinguished Professor Clint Andrews, who’s making his second appearance on the podcast. Today, though, we’re going to focus on his role as research dean and discuss university research and the role it plays. Welcome back, Clint!

Clint Andrews
Thanks. Good to talk with you, Stuart.

Stuart Shapiro
So let’s start with a really basic question for you and I, but something that might not be basic for a lot of people. When people think of universities, they often think, well, that’s where I send my kid to college. And he better get good classes and he better get a job when he or she comes out. Why do universities do research?

Clint Andrews
It’s a completely fair question and the way I’d answer it is by saying that research complements teaching. It fosters a more dynamic environment where you basically can get knowledge both being created and imparted together. So it’s a two-way flow. And you know, if you think about that, it means that we’re advancing knowledge. We’re spurring innovations that hopefully benefit people. It means that we’re enhancing education by both helping teachers stay current in their fields and by giving students opportunities to really engage with hands-on experience and develop their critical thinking skills.

And hopefully along the way, we’re solving some real-world problems. We’re creating some economic and social benefits, helping new industries get started, improving the quality of life. And incidentally, elevating the reputation of the university so that it can attract resources and good students.

Stuart Shapiro
Excellent. Well, that all makes sense to me, not surprisingly.

Clint Andrews
You’re in the right job, Stuart!

Stuart Shapiro
Yeah, apparently so! It took me a while to find it! So let me take this from another angle though, and I’ll put on my libertarian hat or my market-oriented hat. That’s great—university research produces social benefits. It makes sure our faculty are on the cutting edge so we can help students learn about that cutting edge. I get all that. But why does the government fund research if this research is so valuable? Shouldn’t there be enough private sources for it?

Clint Andrews
That’s a great question, and luckily, Economics 101 has given us an answer.

Stuart Shapiro
Which I happen to teach, by the way.

Clint Andrews
Well, you can grade me afterwards then. So, I think the key thing is to appreciate that a lot of the research that goes on, falls into this category of being a “public good.” It’s a type of thing that the private sector just under supplies, because the benefits often spill over to the rest of society. And so it makes sense to spread the costs of performing that research as widely as its benefits extend.

And there are a number of other, more specific reasons that I’d throw into the mix for why government funds research. One is to advance national interests. And that can range from national security to improving the quality of life. It’s because the government is interested in spurring economic growth by innovating in ways that lead to new industries and more jobs and economic opportunities. And because doing it at a university trains the next generation of workers so that they have, you know, both the soft skills and the hard skills that are going to be needed in whatever emerging economy we expect.

And along the way, government wants to solve problems of public health and safety, invest in solutions-oriented research. You know, whether it’s medicine or environmental science or engineering or the social sciences. And all of that also has a competitive dimension because, what we do in this country in terms of advancing quality research is going to affect our competitive position in the world and our ability to lead the global economy.

Stuart Shapiro
Yeah, so I would give you full credit for that answer. And just to sort of frame it a little more, you know. The market itself for private institutions, the benefits of research don’t always go to them, right? Particularly basic type research. And so, to your first point about it being a public good, they just don’t have the incentive to do what we would see as the optimal amount of research. Because they’re not going to get the rewards from it. It will help advance knowledge that could spiral out in a whole bunch of different directions that others will benefit from.

Clint Andrews
Yeah. And you know, part of what that means is that, there is some research that the private sector is best to do. And that’s where the benefits can be captured by the firm. But if it’s not the case then somebody’s going to do it, or else it won’t get done. And that’s why government steps in, in pretty much every country in the world.

Stuart Shapiro
So now let’s get into the weeds a little bit. One of the recent government announcements has been cutting back how much government will support university research. Particularly cutting back the overhead, or as those of us in the business call with the “F&A,” that government will give grants. In other words, they’ll pay for the research itself. But not the broader infrastructure that supports that research. Can you sort of explain that a little bit more for people who are, in my experience, very confused about what that means?

Clint Andrews
Absolutely. And I know it sounds arcane, but it’s really a straightforward issue. And when the accountants track the costs of doing business at a university, or frankly any other enterprise, they have to distinguish between direct costs that can be directly attributed to producing a product or service, and the indirect costs that can’t be so specifically allocated.

For example, direct costs of performing research at a university include the investigators time. And the materials consumed in carrying out that research. And then there are indirect costs that include the resources that serve many research projects, as well as the university’s teaching and service missions. These are things like buildings, libraries, administrative support and regulatory compliance activities.

Now both types of costs are real costs of doing research. It’s just that the direct costs are simpler to allocate to specific projects using timesheets and invoices. The indirect costs need to be allocated using more approximate methods. And a rate or percent added to direct costs is the most typical approach. And it’s really been accepted accounting practice for many, many decades to audit all of the expenditures at the university and to specify which belong to the direct versus indirect cost category. And it’s on the basis of these audits that the university signs an indirect cost rate agreement with the funding agency that specifies the rate the university will charge. And the process is led in practice by the U.S. Department of Health and Human Services, which houses the National Institutes of Health, and most other federal agencies then follow their lead.

Stuart Shapiro
So these indirect costs, libraries, regulatory compliance, business services. They would exist regardless of whether a particular research project were getting done, right?

Clint Andrews
Exactly. And to put some numbers on all this, you know, the current Rutgers indirect cost rate, which is known colloquially as its “facilities and administrative charge rate,” is about 57% for on campus, federally funded research. And so if the direct cost of a research project at Rutgers is $100, then Rutgers would charge the sponsor $157.

And there are lots of nuances to these calculations, but that’s the big picture view. And this is something that’s formalized in a 5-year agreement and in the case of Rutgers that’s an agreement that spans the years 2022 through 2027. And peer reviews have similar rates and similar arrangements to Rutgers.

There is one important thing that people sometimes forget, and that is, that because these indirect cost rates are negotiated, they do not necessarily represent the full actual costs. And the Association of American Universities has examined the trends pretty closely and has shown that the federal portion of the total costs of university research only added up to covering about 71% of the total cost, back in 1970.

Stuart Shapiro
Wow.

Clint Andrews
And that meant that tuition cross subsidies and gifts and endowments and businesses and state and local governments had to make up the difference. In 2023, the federal share was down from 71% to 55%. And so the subsidization of federally funded research at universities by other actors is substantial, and it’s increasing. And in the fiscal year 2023, that added up to approximately $6.8 billion in unreimbursed indirect costs on a national basis.

Stuart Shapiro
And I want to be absolutely clear about that because, I think that’s a critical point here. If the federal government did not pay indirect costs, those costs don’t go away. But they are paid by other parties. And if you could just repeat what you said as to who that would fall on if the government pulls back in paying indirect costs?

Clint Andrews
Yeah. It means well, what are the other sources of revenue for a university? Tuition. It’s a big one. Gifts. Endowment interest. Contracts from businesses and funds from state and local governments. Those are who are going to pick up whatever the federal government fails to deliver.

Stuart Shapiro
Yeah. And for a public university, that last one. State government is particularly important of course. So for people listening this means higher tuition. It means a higher portion of your tax dollars go to universities if we want to keep universities open. If the federal government is not supporting indirect costs, that’s a policy choice. But it’s one with consequences to normal people.

Clint Andrews
It really is. And just to remember how recent these developments are, the Trump administration directive arbitrarily capping the allowable indirect cost rate at 15% came on February 7th of this year. And that, it’s important also to note that that directive is temporarily on hold due to a court order issued on March 5th of this year. But if this indirect cost rate cap directive eventually goes into force, it’s going to disrupt the research enterprise nationwide and here at Rutgers.

Stuart Shapiro
Yeah. And of course things are moving so quickly. I mean, I’m glad you noted this went into effect in February, suspended in March. And, I almost feel like every day there’s going to be a new development along those lines. Following up on that, there’s been a lot of other things that impact university research. Do you want to speak briefly about some of the other things that have happened in the administration that impact the research enterprise?

Clint Andrews
Sure. Before I do that, I’d like to just mention the scale of the impact at Rutgers to help us add a little bit of a picture of it.

Stuart Shapiro
Great.

Clint Andrews
And so, in the last fiscal year, fiscal 2024, Rutgers received about $167 million in federal funds for indirect cost reimbursements. And that’s on a direct cost basis of about $693 million. So that’s a lot of money. If the federal indirect cost rate drops from 57% to 15%, that is going to remove on the order of $50 million a year from the Rutgers budget. And so that means tuition going to have to go up, for example. It does mean probably that we’re going to see a reduction in the services that go into overhead. So, reduction in library services, reduction in administrative support, a reduction in human subjects protections, a reduction in legal protections for researchers and subjects.

There also are probably going to be some efforts to shift some of the costs out of the indirect cost category into the direct cost category. You know, for example, by charging rent on professor’s labs and offices. And having that be a direct cost of grants.

Stuart Shapiro
Interesting.

Clint Andrews
And probably the research activities are just going to decrease because all of this cross subsidization by tuition and gifts and the state could become an unbearable burden for everybody.

Stuart Shapiro
Right. And that gets back to losing the things that research provides that we talked about at the top.

Clint Andrews
Yeah, yeah. And so, you know, if we think about what that does, it’s going to reduce the rate and the scope of innovation. That’s going to have implications for jobs and economic growth. And competitively, Chinese universities are being very well supported these days. We are going to be losing our competitive edge in the global competition.

Stuart Shapiro
And higher education is one of the areas where we have been strongest globally at least since World War II.

Clint Andrews
Yeah, you know, I always think of this being higher education, especially at research universities, being one of our most successful exports.

Stuart Shapiro
Yep, yep.

Clint Andrews
But so, this isn’t the only threat, this indirect cost rate reduction threat. There are others. And you know, one that I’ve really been seeing a lot in the headlines lately. And it’s so disturbing, is the withholding of research funds altogether to try to force compliance with culture war motivated edicts. And this has been playing out in really, several different areas that, you know, they all have in common this sort of broad-brush smear sometimes framed as “DEI wokeness.” Sometimes it’s gender ideology, sometimes it’s anti-Semitism. And one could get the sense that the real purpose might be more to weaken academic institutions rather than enforce some current vogue and political correctness.

Stuart Shapiro
Yeah, and weakening institutions will certainly be the outcome if money is withheld, even if money was withheld for good reasons, you might… you would see the weakening of the institutions. If it’s just a pretext, well, that’s even more disturbing.

Clint Andrews
Yeah, yeah. And one other thing that I’ve again, it’s been in the headlines, but it’s something that we see up close as we deal with personnel issues at the university. And that’s that research universities play on a global stage and we really do try to recruit the best talent we can find around the world. Leading businesses do the same, of course. But in an era when there’s sort of an isolationist dogma and its closing borders, what we are seeing is that the world’s best and brightest, in a sense, no longer seem welcome here. Even though it’s their energy and their skills that are really playing an important role in driving our economy forward. And this chilling effect is visible and it’s strong and it’s getting worse.

Stuart Shapiro
Yeah, I know it will have an effect on our ability to do research. It will also have an effect on our student bodies as we have always—I know here at Bloustein and at Rutgers at-large—attracted people from around the world. And it may be more difficult to do so in the years ahead.

Well, let’s end on a positive note or a semi positive note. Can you talk about a project at Bloustein that’s happened because of federal funding or with the assistance of federal funding?

Clint Andrews
Sure. I’ll mention the National Science Foundation grant that just ended. And so, its title was “Making Micromobility Smarter and Safer.” And its focus was on those annoying electric scooters that suddenly showed up on city streets all around the world in 2018. And so, with the NSF grant, I led a multidisciplinary team that included urban planners, civil engineers, and computer science students and professors. And we investigated well, what are the safety issues? And how could we improve safety with these new devices that nobody had seen before?

And we demonstrated the value of low-tech solutions such as bike paths to separate scooter riders and bikers from car traffic. But we also created high-tech innovations in computer vision to count near misses between scooter riders and others using traffic cameras. And that allowed us to generate better safety statistics.

And we also created sort of, I’ll call them, “situational awareness apps” that alert the mix of road users, whether they’re pedestrians, or scooter and bike riders, or car drivers, to one another’s locations and trajectories. And this work gained attention from the industry as well as from policymakers at the local, state and federal levels. And the results are now entering implementation. And they’re being picked up in a variety of ways.

And so this was $1 million plus dollars that I consider well spent. It funded half a dozen grad students through the Ph.D. It funded a postdoc who wrote lots of great articles. It funded three graduate urban planning studio classes that trained future urban planners how to work on micromobility issues. And it sparked fruitful and ongoing collaborations among faculty members from different disciplines, all working to address an emerging safety problem. So that’s what federal research can do when put in good hands.

Stuart Shapiro
Fantastic. Clint, thank you so much. I think that was very useful and hopefully educational for our listeners.

Clint Andrews
All right. Thanks, Stuart. Good talking with you.

Stuart Shapiro
Also a big thank you to Tamara Swedberg and Karyn Olsen who make this podcast happen. We’ll be back in a week or two with another episode of EJB Talks. Until then, stay safe.