Top Public Policy Issues Facing Governing Boards in 2025–2026:
Federal and State Funding

Published March 28, 2025

Still uncertain at this writing is the full scope of what will happen to federal support for the National Institutes of Health (NIH), the National Science Foundation (NSF), the Department of Energy, and other agencies that fund more than half of the $109 billion recently spent on medical and scientific research on campuses.⁴ Already the NIH announced it would reduce to 15 percent the amount of indirect costs that colleges and universities can take in addition to the amount of the grant. NIH said the move, instituted almost immediately, would save $4 billion a year. Indirect costs, called facilities and administrative (F&A) costs, have always been a bone of contention for cost-cutting lawmakers. Some universities’ indirect cost rates are far higher than 15 percent, including 56 percent at the University of Michigan.⁵
Matt Owens, a member of the advisory group to AGB’s Top Public Policy Issues report and president of the Council on Government Relations, an association of academic medical centers and research institutes, told the Washington Post, “This is a surefire way to cripple lifesaving research and innovation.”⁶

Barbara R. Snyder, president of the American Association of Universities, said indirect costs (for labs, utilities, and other expenses) are “real and necessary costs of conducting the groundbreaking research that has led to countless breakthroughs in the past decades. A cut to F&A reimbursements for NIH grants is quite simply a cut to the life-saving medical research that helps countless American families.”⁷

Ted Mitchell, president of the American Council on Education, called the move “short-sighted, naive, and dangerous. It will be celebrated wildly by our competitors, who will see this for what it is—a surrender of U.S. supremacy in medical research. It is a self-inflicted wound that, if not reversed, will have dire consequences on U.S. jobs, global competitiveness, and the future growth of a skilled workforce.”⁸

Research institutions have been here before. Congress did not adopt the president’s 2017 proposal to reduce the budgets of the NIH and the Department of Education by nearly 20 percent. Instead, lawmakers continued to increase funding for these agencies. At the time, there was broader bipartisan support in Congress for research and education spending. In the current environment, however, proposals aimed at restructuring federal departments and reducing personnel have gained traction. As part of a broader push for efficiency, the NIH may face consolidation, potentially merging or eliminating some of its 27 institutes and centers, many of which focus on specific medical areas such as cancer, cardiovascular health, or infectious diseases. While the extent of potential research budget reductions remains unclear, some universities and teaching hospitals—including Harvard University, Stanford University, and the University of Pittsburgh—have responded to the uncertainty by implementing faculty and staff hiring freezes.⁹

With Robert Kennedy Jr. appointed as Secretary of Health and Human Services, some in the medical, scientific, and pharmaceutical communities expressed concern about the future of drug and vaccine research and development. A federal judge issued a temporary restraining order lifting a funding freeze, but by mid-March only monies for already-funded clinical trials had been released. Advisory councils that determine the last step in approvals for new grants have been unable to meet because of a travel freeze, delaying at best, new awards. At worst, freezes might mean the de facto cancellation of such advisory councils. A mid-March meeting of advisers to the Food and Drug Administration to determine the components of the vaccine for the 2025–2026 flu season was put off. Current and pending grants aimed at increasing diversity, equity, and inclusion have been cancelled.¹⁰ Efforts to dismiss 1,200 NIH probationary employees, along with a hiring freeze affecting early-career research scientists and the departure of senior scientists from the NIH’s intramural research labs, created significant disruption and uncertainty within the agency.¹¹

Even if funding is restored and staffing reductions are paused by the courts, universities and researchers may have questions about whether the NIH and NSF—both facing administrative challenges and staffing changes—will have the capacity to effectively manage federal research grant programs.

While the free exchange of scientific information has been a cornerstone of research at U.S. universities, the federal government has become increasingly concerned in recent years about potential vulnerabilities in the research system, particularly in relation to countries such as China. “U.S. officials and others have raised concerns about various efforts of foreign governments—most notably the People’s Republic of China—to influence and exploit the openness of the U.S. research ecosystem. The acquisition of U.S. advances in science and technology, intellectual property, and talent by strategic competitors may pose a risk to U.S. national defense and global economic competitiveness,” a Congressional Research Service report said in 2024. U.S. universities, meanwhile, have expressed concerns about the administrative burden of certain recordkeeping and regulatory requirements introduced to address national security considerations. Both President Trump in his first term, and President Biden took steps to reduce the risks, including requiring applicants for federal funding to disclose any foreign support for their research.¹² All foreign gifts and contracts, including research contracts, must be reported annually to the Department of Education under Section 117 of the Higher Education Act, and this information is publicly available.¹³ But research institutions have raised concerns about the administrative complexity involved in compliance efforts, though only a small percentage involve Chinese scholars or others from countries with strained U.S. relations.

Published March 28, 2025

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• Looking to the immediate future, what does the board foresee regarding the financial health of the institution/system? How might reductions in government funding affect key operations of the institution(s)?
• How often does the board debate and discuss the affordability of our institution, or system institutions? Has the cost(s) of attendance been stable recently, increased, or decreased?
• How would possible reductions in federal student aid impact our institution or system? Do the board have a clear sense of levels of student debt?
• If our institution, or institutions of the system, have substantial research programs, how are they being affected by federal funding freezes, projected reductions in the NIH indirect costs, and changes to federal agency staff capacity?
• If our state has a free college program, has it made college more affordable than it was before its enactment? Has it changed the composition of our student body?
• Has the board considered the financial implications for a reduction in international students?
• If we are an affiliated foundation, what are the implications of institutional budget gaps? Does our foundation have a sustainable business model if institutional support is decreased? Does our foundation have the capacity to help our institution address urgent financial challenges while fulfilling our fiduciary obligation to sustain the long-term value of the endowment?

Trusteeship Podcast Episode 39: What Boards Need to Know about the Federal Budget (November 2023)