The Council on Governmental Relations (COGR) report, "Finances of Research Universities" (June 2014), presents a comprehensive analysis of the financial structure, challenges, and future outlook for U.S. research universities, drawing on data from both public and private institutions. It emphasizes the complex and shifting revenue landscape in which research universities operate, particularly noting the diminishing role of state appropriations for public institutions, leading to greater dependence on tuition, federal grants and contracts, and private gifts. The report outlines key revenue streams and expenditure patterns, highlighting the increasingly similar financial profiles of public and private universities due to state funding declines and constraints on tuition increases. Federal, state, and local grants and contracts now constitute the largest single source of revenue, supplanting state funding at public universities. The analysis also covers the diverse uses of funds, with the majority of expenditures directed towards instruction, research, and public service.
A significant focus of the report is the financial mechanics of federally sponsored research, including the processes for reimbursement of both direct research costs and facilities and administrative (F&A) or indirect costs. The report identifies enduring issues such as systematic under-recovery of indirect costs, statutory caps (notably a 26% cap on administrative cost reimbursement), and the mounting financial burden on universities to subsidize unreimbursed research expenses out of institutional funds. These trends have resulted in universities’ institutional funds accounting for a growing share of total research expenditures—a situation the report deems unsustainable and inequitable. The COGR contends that the current financial model poses risks to the long-term competitiveness of the U.S. research enterprise and urges enhanced collaboration between the federal government and universities. Recommendations include striving for full cost reimbursement, reducing costly and inefficient federal regulations, and fostering a balanced and transparent partnership to ensure the continued vitality of American research universities. The report concludes by stressing the necessity of confronting these financial imbalances to preserve the nation’s leadership in research and innovation.
