NEW ORLEANS - On April 14, Louisiana State University (LSU) received a “conditional termination” letter from the Department of Energy (DOE), stating that all of its DOE research awards will be cut off unless the university accepts a new 15% cap on indirect cost reimbursements by May 14. University officials estimate this change could result in a $1.3 million loss for LSU, primarily impacting the College of Science and College of Engineering.
Similar concerns are reverberating at Tulane University as it assesses potential hits to critical projects under DOE’s cost-cutting mandate.
The controversial cap, unveiled by DOE on April 11, has already sparked a court battle and a temporary injunction halting the policy’s implementation. The DOE cap followed closely on the heels of the National Institutes of Health (NIH) cap at the same rate.
Indirect costs, also known as facilities and administrative (F&A) costs, fund research infrastructure and services, from laboratory maintenance and utility bills to compliance staff and safety measures. LSU’s federally negotiated F&A rate is currently 50%, so a sudden drop to 15% would sharply reduce reimbursements for these overhead expenses.
“If we don’t get those indirect costs, then how can we perform the research to be compliant with the federal regulations that they’re requiring of us?” LSU Vice President of Research & Economic Development Robert Twilley said in Feb.
LSU President William F. Tate IV earlier estimated that an NIH-imposed 15% cap could mean an immediate loss of $12 million for LSU, potentially costing hundreds of research-active faculty members, graduate assistantships and research administration jobs in the state. With DOE's similar cut, LSU faces a significant shortfall on energy and engineering projects if it complies.
“The combination of cutting both total funding and indirect costs for research reduces our ability to support society through new discoveries,” Twilley said.
The DOE’s overhead cap is not just LSU’s problem – all three of Louisiana’s R1 universities (LSU, Tulane and UL Lafayette) rely heavily on federal research dollars and could be hard-hit by the new cap. Tulane University is particularly dependent on competitive federal grants. Over 70% of Tulane’s research funding comes from the federal government according to Tulane Vice President for Research Giovanni Piedimonte. He described the 15% cap as “a devastating blow to research operations in any academic institution. In 20 years of my research career, I have never seen so much confusion, so much angst.”
Tulane could lose around $32 million in annual research support at its School of Science and Engineering, School of Medicine, and its National Primate Research Center in Covington where current federal grants carry an indirect cost rate of about 74%, far above the new cap.
“In light of this policy change and its potential impact, we are contacting our Congressional leaders, who have long supported the research conducted by Tulane and our fellow universities throughout the state,” Tulane President Michael Fitts wrote in a message to faculty. However, the fate of the DOE policy currently rests in the courts rather than in Congress.
Legal Challenge Halts Policy (For Now)
In the DOE’s policy memorandum “Department of Energy Overhauls Policy for College and University Research, Saving $405 Million Annually for American Taxpayers,” it argues that universities’ overhead rates are too high.
“The purpose of Department of Energy funding to colleges and universities is to support scientific research – not foot the bill for administrative costs and facility upgrades,” U.S. Energy Secretary Chris Wright said in the memo, vowing that under President Trump’s direction the department would ensure every dollar is used for research and innovation.
Research universities swiftly pushed back, arguing the cap is arbitrary and would inflict serious damage on America’s scientific enterprise. On April 14, a coalition of major universities and higher-education associations filed a federal lawsuit in the U.S. District Court of Massachusetts seeking to block the DOE policy.
The plaintiffs include the Association of American Universities (AAU), the Association of Public and Land-grant Universities (APLU), and the American Council on Education (ACE), along with prominent institutions such as MIT, Princeton University, California Institute of Technology, Brown University, the University of Illinois, University of Michigan, and Michigan State. Their complaint calls DOE’s sudden rate cap “flagrantly unlawful” – a virtual carbon copy of a recent NIH policy that another federal judge struck down – and warns that if allowed to stand, the 15% cap “will devastate scientific research at America’s universities,” forcing labs to lay off staff and even “shutter” specialized research facilities.
Imposing a blanket 15% cap, the plaintiffs contend, amounts to an unauthorized funding cut that violates the Administrative Procedure Act.
Two days after the suit was filed, the universities gained an early victory in court. U.S. District Judge Allison D. Burroughs in Boston issued a temporary restraining order on April 16 blocking DOE from enforcing the new 15% rate nationwide. Judge Burroughs set a hearing for April 28 to consider a longer-lasting preliminary injunction. Under the temporary order, DOE must pause any termination of grants or other penalties tied to the overhead cap. The injunction buys time for LSU and other universities facing the May 14 deadline, effectively freezing the status quo until the legal challenge is resolved or a further court decision is made.
“There’s nothing that can replace indirect costs,” Tulane’s Piedimonte stressed, pointing out that private donations and endowment funds are typically earmarked for specific projects, not the behind-the-scenes expenses of running a research enterprise.
On April 4, U.S. District Judge Angel Kelley permanently enjoined the NIH’s identical 15% cap, calling it an unlawful overreach.
“Bad policy is bad policy, and doubling down on it doesn’t make it better,” said the Council on Governmental Relations, adding that such cuts only serve to harm the nation’s research capacity while yielding dubious savings.
