How Research Funding Cuts Could Affect the North Bay and Cost the Bay Area Billions

The new administration in Washington has proposed capping indirect costs associated with grants from the National Institutes of Health at 15%. That is the money that funds institutions beyond direct research: cleaning floors, maintaining buildings, keeping the lights on. The cap would mark a significant change, creating a billion-dollar shortfall in Bay Area universities' budgets over the coming years and weakening a crucial engine of the region’s economy

Reporters Jennifer Wadsworth and Noah Baustin, The San Francisco Standard share with us that, “Two-thirds of the almost 3,000 grants received by Bay Area educational institutions in the 2024 fiscal year had indirect cost rates of more than 15%, meaning they would have been subject to cuts under the new NIH directive. The median indirect cost rate among those institutions was 48%. The NIH currently reimburses University of California campuses an average negotiated indirect cost rate of 59%, according to a UC spokesperson. A judge blocked the order Monday following a lawsuit by 22 states, including California. But relief, like the court stay, is temporary.”

The authors spoke with several scientists that fear that the federal assault on research funding will continue as long as President Trump is in office, and that the impact of slashing billions in research grant funding would ripple far beyond university campuses. They explain, “The Bay Area is home to some of the institutions that receive the most NIH funding in the country. To understand the potential local impact of the Trump directive, The Standard analyzed last year’s NIH grant data. If the directive had come during the 2024 fiscal year, the $1.6 billion in federal grant funding for Bay Area education institutions would have been cut by $282 million. Last year, UCSF received nearly $815 million from the agency, more than any other U.S. academic institution except Johns Hopkins University. UCSF says it has been the top public university recipient of NIH funds for nearly two decades. Under the new rules limiting indirect costs, its grant funding would have been cut by $138 million.”

Wadsworth and Baustin continue, “The $613 million Stanford University received in NIH grants last year ranked it 10th in the country. It would have lost $114 million in 2024 if the cap had been in place. Stanford officials say future annual losses could reach $160 million.

Research institutes in the Bay Area were also significant recipients of NIH grant funding in 2024, taking in 316 grants worth $261 million.

Representatives of several institutes told The Standard they anticipate that they could lose funding under the new NIH directive; among them are the Buck Institute for Research on Aging (a potential $10 million loss), the Northern California Institute for Research and Education ($6.3 million), and the Palo Alto Veterans Institute for Research ($1.9 million).”

“While a federal judge has temporarily paused the funding cuts, the threat comes at a vulnerable time for the Bay Area’s economy. Nonprofits, another cornerstone of the region’s workforce, are already in the crosshairs of a series of executive orders.”

“Meanwhile, Bay Area business has struggled to recover from the pandemic, with round after round of tech layoffs and restaurant closures.

Amid the turmoil, the education and healthcare sectors have been rare “green shoots” in the economy, continuing to flourish despite the inclement conditions, according to Abby Raisz, research director of the Bay Area Council Economic Institute.”

“Biotech, life sciences — these have been real bright spots of our economy,” said Raisz. “We’re definitely seeing a lot of growth in those sectors, and we want to encourage that growth to continue.”

If the sector stagnates, or reverses course, it could have serious implications for the local workforce. UCSF is San Francisco’s second-largest employer, with a staff north of 29,000, representing more than 5% of all city employment.

Ted Egan, San Francisco’s chief economist, said that if funding cuts force layoffs at UCSF or other major universities, “that would have ripple effects that would hurt the entire economy.”

The NIH funding is “a very big part, not just of California’s sort of economic accounting, but it’s an ingredient to California’s competitiveness,” he said. “You don’t have innovation unless you have people first working on research to produce new ideas.”

“Heather Pierce, a senior director at the Association of American Medical Colleges, warned that NIH funding cuts would stop crucial research in its tracks.”

“Every bit of scientific progress that’s federally funded impacts every person, every community,” Pierce said. “Everyone should care about these cuts.”