Welfare for the rich funds

Imagine if your gas station charged the normal price for a gallon of gasoline, but billionaires only had to pay a nickel.

This is largely how universities handle the tariffs they charge for overhead costs on research grants. Taxpayers pay a rate of almost 60%, while billionaire-backed funds pay between 0% and 15%.

Our new study sheds light on exactly how taxpayers are forced to pay more than the base of billionaires through the almost unfathomable process by which universities bill the overhead – or indirect – costs of academic research.

An academic research project entails direct costs, such as researcher salaries and laboratory equipment. But it also entails indirect costs, which are fixed costs for facilities and administration. Direct costs are specified and booked in each grant. Indirect costs, which are impossible to quantify accurately, are paid through a flat, arbitrary rate “negotiated” by each university. This is known as the indirect rate.

The federal government is the largest funder of university research. It awards thousands of research scholarships each year through agencies such as the National Institutes of Health and the National Science Foundation. However, billionaire-supported foundations also fund academic research.

The problem is that the taxpayer pays a significantly higher indirect rate than nonprofit funds. The money that funds would have spent on overhead costs if they had to pay the same rate as taxpayers can be spent on more research of their choice. In a clear example of camaraderie, this represents a transfer of money from taxpayers to very wealthy funds backed by the interests of companies.

We are not talking about chump change here. Our analysis suggests that the average cross-subsidization from taxpayers to funds in 2019 was somewhere in the range of $ 87 million to $ 133 million per year. University. In our sample of 82 universities from across the country, this sums up from $ 7.1 billion to $ 10.9 billion.

As an example, taxpayers pay Harvard an indirect rate of 69%, while the Chan Zuckerberg Initiative and the Bill and Melinda Gates Foundation refuse to pay more than 15%. And only a handful of funds pay 15%; many pay nothing and no funds pay an indirect rate that comes close to the average rate of 58.3% that universities charge taxpayers.

Sometimes foundations fund important research. At times, their projects seem as frivolous and wasteful as state-funded research into fish endurance on a treadmill.

But all too often, the research they commission is clearly designed to support the left-leaning agendas of private foundations. For example, the George Soros Open Society Foundations funded a 2020 project at New York University “to support climate change, education, and communication related to climate change.”

To be clear, private organizations should be able to fund any research project they choose with money they receive voluntarily. But even if it was not ideologically motivated, why should taxpayers then pay for research by billionaires like Soros, Bill Gates and the Walton family?

Taxpayers should not pay universities an indirect rate that is higher than the lowest rate accepted by private organizations, such as foundations and companies. The federal government must remove the comrades’ cross-subsidization from taxpayers to billionaires. This would at least encourage universities to spend money more efficiently.

Taxpayers are also getting the short end of the stick in terms of economic growth. There is empirical and historical evidence that innovation and scientific advances that improve our lives are not driven by university research. There is a desperate need for a shift in the current paradigm of research funding.

Congress should reduce federal research spending and taxes so that more money is invested in organizations competing in the innovation market – not the marketplace for writing grant applications.

Indirect costs are another example of how the federal government wastes taxpayers’ money and helps with the left-wing conquest of large community institutions.

• John Schoof is a research fellow and project coordinator at The Heritage Foundations Center for Education Policy, where Jay Greene is a senior researcher.

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