“The Blue Sheet” Vol. 36, no. 8

-4 -
"The Blue Sheet"

February 24, 1993

University researchers could face some belttightening if the new Administration follows through on
a promise to cut back on indirect, or overhead costs associated with federally-funded grants. Clinton's economic
plan, entitled "A Vision of Change for America," asserts
that "in 1972, each dollar of direct research funding paid
to universities cost an additional 300 for the overhead
allocated to federal research. By 1990, 46~ in overhead
was paid for each dollar spent on direct research."
An Office of Management and Budget document
calls for a "concerted effort to shift national spending
from overhead to funding research," estimating that
savings derived from lower indirect cost reimbursements
will be "$383 mil. in 1997, $1.2 bil. over four years."
Specifically, the savings are projected to be $156 mil. in
FY 1994; $330 mil. in 1995; $369 mil. in 1996; $383
mil. in 1997; and $396 mil. in 1998.
Last year, OMB modified Circular A-21, its regulation governing indirect cost reimbursement, to cap administrative overhead costs at 26%. Another series of
proposed revisions, which were not published in final
form before former President Bush left office, are being
re-reviewed by new OMB director Leon Panetta ("The
Blue Sheet" Feb. 3, p. 12).
R & D Tax Credit May Be Permanent - Clinton Budget
Government employees under OMB's plan will be
subject to a variety of yet-to-be-announced proposals designed to "reduce administrative and overhead costs,
increase productivity, streamline agency operations and
improve delivery of services to the public," the document says. For example, new guidelines will be issued
for "selection of conference sites and federal employee
attendance at conferences," according to the document.
It also calls for "abolition of at least one-third of the
700 non-statutory federal advisory commissions now in
existence."
The Clinton budget package also proposes to make
permanent the research and experimentation tax credit,
which has been given a series of one-year extensions
since it initially expired in 1985. The administration
estimates the R&D proposal will result in reduced federal revenues of $6.4 bil. over four years, but has not yet
specified if it plans to alter the formula for computing
the credit. Last year, the credit applied to 20% of a
company's increases in research spending above a base
year amount, generally derived from a ratio of research
expenditures and receipts between 1984 and 1988.
The plan predicts that the R&D tax credit "will
encourage firms to undertake the research necessary to
develop the technological innovations required to
increase the supply of good jobs."

Separately, NIH's newest institutes - the National
Institute of Mental Health, the National Institute on
Drug Abuse and the National Institute of Alcohol Abuse
and Alcoholism - are currently preparing their own
bypass budgets for FY 1994. Those plans are expected
to be completed by early to mid-March.
NIMH's bypass budget for FY 1994 will be broken
into three distinct sections. The first part will include a
discussion about the brain and behavior. The second
section will include an evaluation "disease by disease"
of NIMH's research efforts. The budget will provide
information on the basic, clinical and services research
approaches to each disease. The last section will address
the future direction of NIMH research.
Signed into law last July, the ADAMHA Reorganization Act includes a provision stating that the three
institutes "shall...prepare and submit, directly to the
President for review and transmittal to Congress, an
annual budget estimate (including an estimate of the
number and type of personnel needs for the Institute) for
their respective Institutes, after reasonable opportunity
for comment (but without change) by the Secretary for
Health and the Human Services, the Director of the
National Institutes of Health, and the Institute's advisory
council."
Up until the ADAMHA Reorganization Act, only
the National Cancer Institute had the authority to prepare a bypass budget. If the NIH reauthorization bill is
signed into law with its current language pertaining to
reorganization of the Office of AIDS Research, OAR
would then be effectively charged with preparing an
annual bypass budget for NIH's AIDS research portfolio.
NIH TO RECEIVE $24 MIL. IN FY 94 FOR HIGH PERFORMANCE
COMPUTING AND COMMUNICATIONS INITIATIVE
President Clinton's recently-released economic plan
allocates $24 mil. in funding for NIH's portion of the
multi-agency High Performance Computing and Communications (HPCC) initiative. In FY 1993, NIH will
receive supplemental funding of $9 mil. for HPCC,
which is coordinated by National Library of Medicine
Director Donald Lindberg.
First organized by the Office of Science and Technology Policy during the Bush Administration, HPCC
aims to build a network of high-speed, digital computers
using fiber optic technology that will have multiple
applications for researchers and industry. For health
care, HPCC aims to create a national information infrastucture for computer-based medical information.

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