No Subsidies for Wealthy Universities Act

Bill Number

H.R. 422

Origin Chamber

House

Congress

119th Congress, Session 1

Policy Area

Education

Status

Introduced

Latest Action

2025-01-15: Referred to the Committee on Science, Space, and Technology, and in addition to the Committee on Education and Workforce, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.

Last Updated

2025-07-21T19:44:15Z

AI-Generated Summary

Purpose

The "No Subsidies for Wealthy Universities Act" (H.R. 422) aims to reduce federal subsidies to wealthy institutions of higher education by capping reimbursements for indirect costs—overhead expenses like administrative support—in federal research awards. It seeks to prioritize direct research funding while increasing transparency and oversight of how these funds are used.

Key Provisions

• Definitions: Establishes clear terms, such as "indirect costs" (expenses not directly tied to specific research, like utilities or management salaries, per federal regulations) and "Federal research award" (grants, contracts, or agreements from federal agencies for research).
• Endowment Data Collection and Categorization:
• The Commissioner for Education Statistics must annually gather endowment values (investment funds held by universities for long-term support) from participating higher education institutions.
• Institutions are categorized based on endowment size as of September 30 each year:
• Over $5 billion: No reimbursement for indirect costs.
• $2 billion to $5 billion: Maximum indirect cost rate of 8% (ratio of indirect to direct costs).
• Under $2 billion: Maximum indirect cost rate of 15%.
• The Office of Management and Budget (OMB) distributes these lists to federal agencies, Congress, and the public.
• Enforcement of Caps: Federal agencies must apply these limits to research awards, overriding other laws. Institutions must annually report endowment data to comply with federal student aid agreements.
• Oversight Reporting: The Government Accountability Office (GAO) must submit an annual report to Congress detailing:
• How reimbursed indirect costs were spent, including on administrative staff and diversity, equity, and inclusion (DEI) roles.
• Top research fields, agencies, and institutions receiving the most funding.
• Effective Date: Takes effect one year after enactment, applying to awards made on or after that date.

Significant Changes to Existing Law

• Introduces strict caps on indirect cost reimbursements (previously often higher, up to 50-60% in some cases under uniform federal guidelines), with zero allowance for the wealthiest institutions.
• Amends the Higher Education Act of 1965 to require annual endowment reporting as a condition for federal student aid participation.
• Mandates new annual data collection by the National Center for Education Statistics (NCES) and GAO reporting, enhancing federal oversight of research funding not previously required at this level of detail.

Potential Impacts

• Government Agencies: Agencies like the National Science Foundation or National Institutes of Health must adjust award processes to enforce caps, potentially reducing administrative burdens but requiring new compliance monitoring; this could redirect funds toward direct research.
• Citizens and Taxpayers: May lead to more efficient use of federal research dollars by limiting overhead, potentially increasing funding availability for scientific projects; however, it could indirectly affect educational access if universities cut programs due to reduced revenue.
• Institutions of Higher Education: Wealthy universities face significant funding cuts for operations, possibly straining budgets and shifting costs to tuition or private sources; smaller institutions get a modest cap but more flexibility than elite peers.
• International Relations: No direct impacts mentioned, though reduced U.S. research capacity at top universities could subtly affect global scientific collaboration.

Main Stakeholders Affected

• Institutions of Higher Education: Primarily large, endowment-rich universities (e.g., Ivy League schools) will see the biggest restrictions; smaller colleges benefit relatively from the tiered system.
• Federal Agencies: Those administering research awards (e.g., science and health agencies) must implement changes, affecting grant negotiations.
• Congress and Oversight Bodies: NCES, OMB, and GAO gain new responsibilities for data handling and reporting.
• Researchers and Students: Faculty may face tighter budgets for labs and support; students could experience indirect effects on program funding.
• Taxpayers: As funders of federal research, they stand to benefit from cost controls on administrative spending.

Notable Legal, Constitutional, or Political Implications

• Legal: Overrides existing federal cost-reimbursement rules (e.g., in 2 CFR Part 200), potentially inviting lawsuits from affected universities claiming arbitrary restrictions on federal contracts; the reporting mandate ties research funding to student aid compliance, creating enforceable conditions.
• Constitutional: Could raise First Amendment concerns if indirect cost limits are seen as restricting academic freedom (e.g., by limiting DEI-related administration), though courts have upheld similar funding conditions; no equal protection issues apparent, as tiers are based on objective endowment size.
• Political: Promotes fiscal accountability by targeting "wealthy" institutions, aligning with debates on reducing federal support for elite education; may spark partisan divides, with supporters viewing it as curbing waste and critics as undermining U.S. research competitiveness.

This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.

Sponsor

Rep. Cline, Ben [R-VA-6]

Cosponsors (3)

Rep. Clyde, Andrew S. [R-GA-9], Rep. Harris, Andy [R-MD-1], Rep. Self, Keith [R-TX-3]

Recent Actions

• 2025-01-15: Referred to the Committee on Science, Space, and Technology, and in addition to the Committee on Education and Workforce, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
• 2025-01-15: Referred to the Committee on Science, Space, and Technology, and in addition to the Committee on Education and Workforce, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
• 2025-01-15: Introduced in House
• 2025-01-15: Introduced in House

Bill Versions

• No Subsidies for Wealthy Universities Act — issued 2025-01-15 — PDF (7 pages)