By Kritika Agarwal
For more than 80 years, research conducted at America’s universities has fueled major breakthroughs that have improved our health, created new jobs and economic growth, and strengthened our nation. While much of this research has been funded by the federal government, most Americans don’t realize that universities are not just recipients of federal support – they are also the second-largest funders of academic research and development in the United States.
Moreover, universities already provide more to fund their own research than private businesses, charitable foundations, or state governments – meaning they have little capacity to backfill significant cuts to federal research funding from other sources.
In FY24, according to data from the National Science Foundation, universities invested $30.2 billion of their own funds in campus‑based research.
To put it another way, in FY24, more than a quarter (26%) of all spending on university R&D came from universities themselves. And universities spent more of their own funds on research than all other non-federal research supporters combined, including state and local governments (5%), industry (6%), and other sources, including nonprofit organizations (9%). Only the federal government contributed more to university research ($64.7 billion, or 55%) than universities themselves.
The HERD survey data show that AAU’s 69 U.S. member universities continue to lead the nation in conducting research: AAU member institutions accounted for 60% ($71.1 billion) of all spending on R&D by universities in the country.
Universities are also spending more of their own funds each year on research. The $30.2 billion that universities spent on research in FY24 was 9.1% higher than FY23.
According to the NSF, the institutional sources of funding from the universities themselves include funds spent from university endowments on research activities, including providing start-up packages, seed funding, or bridge funding for faculty; competitively awarded internal research grants and departmental grants designated for research; and tuition assistance for students working on organized research.
Universities also spend significant sums on the infrastructure needed to support research, including building and maintaining world-class laboratories, paying for utilities, providing high-speed data processing, complying with patient safety rules, providing administrative support, and more. These costs, often referred to as the “indirect costs” of research or facilities and administrative (F&A) costs, are shared between the federal government and universities.
While the federal government reimburses universities for some of these essential institutional research costs, since 1991 OMB has placed a cap on how much agencies can pay universities for their administrative and compliance costs related to research. This cap is unique to universities and not imposed upon any other performer of federally sponsored research (national laboratories or industry, for example).
In FY24, according to the NSF, universities had to spend more than $7 billion of their own funds on indirect costs that were not reimbursed by any other funder of research, including the federal government. As a recent article in NCURA Magazine noted, this essentially amounts to universities “subsidizing the federal research enterprise.”
This level of university investment in research makes two things clear: first, that universities are active co-investors in research alongside federal agencies, and not just passive beneficiaries. They have real skin in the game, and universities are putting their own funds on the line to expand knowledge, drive innovation, train students and future scientists, and ultimately benefit the public with discoveries that save lives, create new American businesses, and make our nation stronger.
Second, it shows that there is no realistic way for universities to make up for loss in federal support by turning to industry, state or local governments, or philanthropic organizations. Non-federal sources simply cannot match the scale of federal funding, nor can universities simply absorb multibillion-dollar reductions in federal spending by spending more of their own resources.
The NSF data show that – as a percentage of the total – federal funding for university research has actually declined over the past 25 years, while funding for university research from state and local governments and industry has remained relatively flat (see chart above).
In short, this means that the end result of a non-trivial loss of federal research funding would be a substantial scaling back of the research enterprise itself – and, therefore, a cut in all of its associated benefits to the American people.
Kritika Agarwal is assistant vice president for communications at AAU.