Feds fuel financial uncertainty

Dan Renzetti

Work in Yale’s research laboratories may be affected if the NIH succeeds in slashing reimbursement rates for its grants to universities. View full image

The blizzard of executive orders, firings, budget cuts, and policy changes in the first months of the Trump administration has shaken many sectors of American life and work, not least higher education. Yale and its peers are now grappling with the possibility of major disruptions to their operations if some of the administration’s measures are implemented.

Among the most consequential is a change in funding by the National Institutes of Health, which awards more than $36 billion in grants every year for research. Those grants typically include reimbursement for facilities and administrative (F&A) costs borne by the research institution; for Yale, that reimbursement is currently set at 67.5 percent above the direct costs in a grant. In February, the NIH said it would cap F&A for all institutions at 15 percent. For Yale, which received more than $645 million in NIH grants last year, the cap would cost $170 million a year in lost reimbursement. After several parties filed a lawsuit, a federal judge in Massachusetts stopped the NIH from implementing the new rate until the case is decided.

“This cap on indirect costs directly harms Yale’s core research mission and our scientists’ ability to discover life-saving cures for people across the country and the world,” President Maurie McInnis ’96PhD wrote in a message to the university community in February. “Yale does not profit from federal indirect cost reimbursements, which cover the actual expenses incurred in supporting federally funded research as determined through negotiations with the government and ongoing audits.”

Also looming is the possibility that Congress will increase an excise tax on investment income from the endowments of dozens of universities, including Yale. The tax, first enacted in 2017, now stands at 1.4 percent. But in January, the House Ways and Means Committee chair suggested increasing the tax tenfold, to 14 percent; another representative has introduced a bill to raise it to 21 percent. An increase to 14 percent would cost Yale between $450 million and $500 million a year in revenue.

In addition to policy changes, the administration has also singled out some of Yale’s peers for funding cuts. In March, Columbia agreed to several measures required by the government as a step toward getting $400 million in federal funding restored; the money had been withheld over what the education department said was “continued inaction in the face of persistent harassment of Jewish students.” Penn was targeted with $175 million in cuts because it had a transgender woman on its swim team in 2022. And the administration announced on March 31 that it was reviewing nearly $9 billion in grants and contracts to Harvard because of the university’s “failure to protect students on campus from anti-Semitic discrimination.”

At Yale, units across the university are preparing their 2025–26 budgets to include the possibility of significant cuts to the institution’s $6 billion in annual revenue. “We have asked the leaders of all schools and units to prepare their budgets for the next fiscal year, assuming a standard set of budget parameters,” wrote provost Scott Strobel to the Yale community in March. “However, we have also asked these leaders to engage in contingency planning by describing actions that might be necessary if federal policies were enacted that significantly reduce university revenue.” Strobel wrote that capital projects may be delayed and that salary increases for faculty and staff will be “more modest than in previous years.”

Not all of the consequences at Yale have been financial. In March, Jason Stanley, the Jacob Urowsky Professor of Philosophy, announced that he was leaving Yale for the University of Toronto. Stanley, a scholar of fascism, told a philosophy website that he is “very happy at Yale, with the department and the university,” but that he wants “to raise my kids in a country that is not tilting towards a fascist dictatorship.”