This past Friday night, the Trump/Musk Administration announced that American research universities and hospitals should soon commence firing many of their support staff and shutting down buildings.

Specifically, whoever is nominally in charge at the National Institutes of Health announced that as of this coming Monday, the "indirect rate" for all NIH grants will be reduced to a standardized 15%.

At the core of this topic there is a kernel of genuine need for reform. (Researchers who win competitive federal research grants only see the "direct" portion of their funds; their institutions retain an "indirect" percentage of funds for the broader university or hospital to pay for buildings, libraries, support staff, etc. Each institution negotiates its own indirect rates with federal agencies through a complex dance.) But as with most of the Project 2025 executive orders and purported departmental actions of the past few weeks, this one is so sudden and so massive that it's clearly meant as an existential threat to university and hospital workforces and to American scientific and medical progress more broadly. If enacted, any "savings" will likely represent massive cuts, rather than strategic and incremental redirecting of funds.

Hopefully this NIH announcement — which is illegal in that it overrides already negotiated grant contracts and is in conflict with bipartisan legislation passed last year — is already being challenged in court.

In the meantime: Let me try to tell a story about a yacht that was once docked in Alameda.

Its name: the Victoria. Its length: 72 feet. The year: 1988.

The Victoria "sported walnut and cherry paneling, brass lamps, marble counters and lavish woodwork," according to the San Francisco Chronicle. Stanford's sailing team had received the yacht as a donation and used it as a "fundraising tool" to "wine and dine campus bigwigs."

However, the university didn't just receive the yacht as a donation. Rather, university accountants received the yacht as a donation and then reimbursed the university for its depreciation from a pool of indirect cost funds.

Put more bluntly by an enterprising US Office of Naval Research staffer: Stanford paid for their sailing team's entertainment yacht using federal research money.

This was apparently a genuine accounting error. The yacht was never supposed to be charged against the indirect cost pool. But also charged against the indirect cost pool were many lavish expenses for the university president's house. And these, Stanford's president Donald Kennedy, argued were normal expenses for normal university business, and allowable under existing federal reimbursement guidelines. After all, the university had negotiated its indirect rate with federal grantmaking agencies and was entitled to use those funds to support its needs.

After charged Congressional hearings, Kennedy eventually resigned as Stanford's president. The US Office of Naval Research more closely inspected the indirect rates it had negotiated with other 40 universities, and found that Stanford was not alone in taking advantage of ONR's flexibility. While Congress was considering legislation, the US Office of Management and Budget issued new rules to tighten which university expenses could be covered using indirect cost pools from federal grants.

Following the new rules, research institutions are now more constrained in what expenses they can cover using indirect funds from the federal government. (No alcohol, for instance, unless its literally part of a scientific experiment.) On average, universities now often end up subsidizing indirect expenses out of their own non-federal funds, and also have added internal expenses for compliance with the more complex federal requirements.

What happened to the Victoria?

The fate of the yacht goes unmentioned in "Technically Allowed: Federal Scrutiny of Stanford University’s Indirect Cost Expenditures and the Changing Context for Research Universities in the Post-Cold War Era" (a 2019 article by Brent D. Maher in History of Education Quarterly that I've skimmed while writing this blog post).

Maher ends that journal article with:

In order for the social contract to thrive, universities must not only convince Congress and the broader public that academic science fulfills a
critical national purpose but also demonstrate that they can self-regulate in the service of public interests.

Since that scandal in the '90s, universities have generally upheld their end of that scientific "social contract." Now it's time to litigate and bully and shame the Trump/Musk administration to uphold the other end of that social contract — and ensure American scientists and their institutions continue their work.