More Funding Cuts and Uncertainty at NSF

Caltech jointly sued a third federal agency last Monday over another 15% cap on indirect cost rates–this time at the National Science Foundation (NSF). The lawsuit comes amid growing uncertainty about the agency’s future, as NSF has terminated over 1,400 grants in the past month and has reportedly halted all funding actions for the time being.

The action against NSF follows two others filed against the National Institutes of Health (NIH) and the Department of Energy (DOE) earlier this year; both have resulted in district courts enjoining the indirect cost caps at those agencies.

According to the lawsuit, a reduction in the NSF indirect cost rate to 15% would result in an “annual loss of approximately $14.8 million to Caltech’s planned research budget.” An awarded grant consists of direct costs, which fund the research itself, and indirect costs, an added percentage that covers overhead such as infrastructure and administration. Caltech currently has 210 active awards and subawards from NSF. In Fiscal Year 2024, the Institute spent over $93 million on NSF-supported research, including nearly $22 million in indirect costs.

In the policy notice for the 15% cap, the NSF stated that the standard indirect cost rate is “intended to streamline funding practices, increase transparency, and ensure that more resources are directed toward direct scientific and engineering research activities.” The policy also “improves government efficiency by eliminating the need for individualized indirect cost negotiations.”

In the lawsuit against NSF, the plaintiffs state that “NSF’s action is unlawful for most of the same reasons [as the NIH and DOE caps], and it is especially arbitrary because NSF has not even attempted to address many of the flaws the district courts found with NIH’s and DOE’s unlawful policies.” They argue the 15% cap is “arbitrary and capricious,” noting that NSF hasn’t explained why its audits would not suffice to improve efficiency, and that the cap applies only to universities and not other grant recipients without explanation.

The legal challenge comes at a time when the agency is already in turmoil. On April 18, NSF stated it would start terminating active research grants. Most recently, around 380 grants were terminated on May 2, bringing the total to approximately 1,425 terminated grants as of May 6. The agency states that awards “not aligned with NSF’s priorities have been terminated, including but not limited to those on diversity, equity, and inclusion (DEI) and misinformation/disinformation.”

According to Science, sources say that the terminations are driven by a report released by Senator Ted Cruz and the U.S. Senate Committee on Commerce, Science, and Transportation minority staff in October 2024. The report, titled “Diversion. Extremism. Ideology: How the Biden-Harris NSF Politicized Science,” identified 3,483 NSF grants that “went to questionable projects that promoted DEI or pushed neo-Marxist perspectives about enduring class struggle.” These grants were grouped into five categories: Status, Social Justice, Gender, Race, and Environmental Justice.

In February, the database of all 3,483 grants was published. Three Caltech grants were included: Professor Brian Stoltz’s “Transition Metal-Catalyzed Reaction Development Toward the Synthesis of Alkaloids,” Professor Jennifer Jackson’s “Melting of compressed iron-alloys using a multi-technique approach,” and Professor Ryan Hadt’s “CAREER: Probing Quantum Coherence in Biomolecular Microenvironments via Electron Spin Molecular Quantum Sensors.” All three grants were categorized under Status, and Professor Stoltz’s project was additionally categorized under Social Justice.

According to the report, Status is defined as “grants that described persons based on their membership in a population deemed underrepresented, underserved, socioeconomically disadvantaged, or excluded.” Social Justice is defined as grants that “prioritized inclusivity over scientific advancements” and “impose social justice perspectives on scientific disciplines.” Furthermore, the report states that many grants categorized as Social Justice “lacked a relevant academic or scientific mission.”

Last month, Democrats on the Committee on Science, Space and Technology in the House of Representatives published a rebuttal of Senator Cruz’s report, stating that the authors “lack a basic understanding of how [NSF] awards are selected” and “the scientific literacy to discern technical terms with multiple meanings.” The rebuttal pointed to examples of grants flagged for referencing biodiversity or focusing on topics such as “female” leopard seals.

Earlier this month, Nature reported that NSF staff were instructed to “stop awarding all funding actions until further notice,” suspending new grants and additional funding or sub-awards for existing projects. Researchers should be able to use grant money that has already been disbursed, but the fate of future funding and how NSF will operate moving forward remains uncertain.

One NSF staff member told Nature, “This country’s status as the global leader in science and innovation is seemingly hanging by a thread at this point.”