The Truth About University Overhead Costs

Guest Post by Willis Eschenbach
The noted climate alarmist Andrew Dessler has written a Substack post bemoaning the Trump Administration’s decision to cut the “overhead” in Federal research grants to universities from ~ 50% to 15%. He claims that this cost-cutting measure “will determine whether breakthrough technologies emerge in American labs or Chinese ones.”

So let’s see if that scary claim about China is reasonable. For starters, what’s “overhead” when it’s at home? It’s the cost of support services for the organization as a whole. Here’s Andrew’s reasonable description:

Overhead is “the countless support systems making that research possible. Air conditioning, electricity for lighting, wifi, janitorial services, administrative support for payroll and purchasing, and a million other things that cannot be neatly assigned to a particular research project but without which research cannot be done.”

Now, I have more than a passing knowledge of this issue of overhead amounts. In my work running an NGO, I wrote grants that raised over USD$2 million over three years from donors in Australia, New Zealand, Denmark, and the US for our village-level development projects in the Solomon Islands, and guess what?

Every single one of the donors, regardless of country, limited our overhead to 15%.

And despite that crushing blow, the 15% overhead maintained the office, paid for the lighting, the air conditioning, the accountant, the janitor, and the “million other things” Andrew lists above.

So to start with, his claim that it is somehow impossible to get by on less than 50% overhead is a joke. In fact, as near as I can find out, universities are almost the only institutions that get to use an overhead which is 50% on top of their direct costs to support those things … and unlike my projects, they have a whole host of other sources of funding.

Next, he says there are three ways that the Universities could respond to that reduction in funding … but guess what?

Not one of the three ways he lists as proposed responses to the reduction in funding involves the University doing what you or I would do in that situation—reduce expenses, duh.

You can tell that Andrew is living high off the government hog when the idea of cutting costs doesn’t even occur to him. I mean, cutting costs might mean you’d need to fire a bunch of pluted bloatocrats living the good life off of government grants, can’t have that.

So I looked up the numbers. Texas A&M, which is Andrew Dessler’s employer, has a total of 13,712 faculty and staff. Of these, 4,111 are teachers, some unknown number of whom are also researchers. It’s likely not more than half, so we can say there are maybe 2,000 researchers.

And there are 9,351 staff, not including janitors and maintenance workers… so they have 2+ administrators for each teacher, which means 4+ administrators for each researcher. Are we starting to understand why they say they need 50% overheads?

Dessler’s next claim is hilarious. Discussing one of the three ways universities could respond to the cut in overheads, he says:

“Second, universities could find another source of money to cover these costs. But money needs to come from somewhere, and Texas A&M doesn’t have a pile of it sitting around waiting to be spent.”

So I looked up Texas A&M’s funding. To start with, Texas A&M has a trust fund from which it receives about $200 million per year … p;us, over the 2024 – 2025 two year period, total Texas State appropriations to the Texas A&M University System are $3.78 billion, reflecting an increase of $1.19 billion over the previous biennium.

In addition, there are a variety of other sources of money for Texas A&M. Here are the funding sources and annual income amounts for the University:

Trust Fund                            $200,000,000
State Grants                        $1,890,000,000
Tuition & Fees                      $1,354,000,000
Research Grants (including overheads) $845,900,000
Direct Federal Funding                $704,000,000
Gifts & Donations                     $149,100,000
Auxiliary Enterprises                 $462,600,000
Investment Income                     $403,200,000
Other Sales/Services                   $29,300,000
TOTAL                               $6,038,100,000

Next, only about half of the Texas A&M research is funded by the Federal Government. So if Federal overhead for A&M research is cut from 50% to 15%, their total income would be reduced by a whopping … wait for it …

… 1.6%.

I’m sorry, Andrew, but on my planet a 1.6% reduction in university income is not some emergency that will drive all research to China. That’s an easily solvable problem.

They might start with the fact that 43% of their annual expenses go to salaries and that the average professor makes about $130 per hour. But there’s more. Here are the top salaries at Texas A&M:

1 Daniel Durkin Assistant Football Coach    $1,425,000
2 Carl Bjork Athletic Director              $1,343,750
3 Joni Taylor Head Women's Basketball Coach $1,341,667
4 James Schlossnagle Head Baseball Coach    $1,198,296
5 Elijah Robinson Assistant Football Coach  $1,058,333
6 James Coley Assistant Football Coach        $870,833
7 Margaret Banks President                    $822,222
8 Robert Petrino Assistant Football Coach     $806,061
9 Darrell Dickey Assistant Football Coach     $753,297
10 Dameyune Craig Assistant Football Coach    $618,750
11 Karen Wooley Distinguished Professor       $521,247
12 Gregory Hartman COO & Senior VP            $504,167
13 Tommie Robinson Assistant Football Coach   $502,083
14 Trisha Ford Head Softball Coach            $477,500
15 Terrall Rushing Assistant Football Coach   $466,667

Yeah, they’re broke all right … so broke that an Assistant Football Coach tops their salary list at $1.4 megabucks per year and in total, they’re paying their sports-related personnel (coaches, assistant coaches, etc.) over sixteen million dollars per year…

… and Andrew is crying poverty?

The discouraging part is that all these folks living on government money are doing their best to ignore the ugly reality—here in the US, we’re not only broke, we’re in debt up to our eyeballs. We need to, have to, must cut Federal spending wherever we can, including reducing ludicrous overheads for university research. And the inescapable truth is, some cuts will require universities to reduce expenses and fire people. Andrew doesn’t like it, I don’t like it, but it is the brutal reality. The good news is, surviving a cut in overheads is not some impossible task. Thousands and thousands of NGOs survive happily on grants with 15% overheads.

Finally, I would suggest that the hidden truth behind Andrew’s post is that Andrew sees the writing on the wall—his long, lucrative government-funded advocacy for the climate scam is coming to an end. I can understand his concern; he makes on the order of a quarter of a million dollars per year, and his gravy train is about to hit an immovable object in the form of the national debt.

However, I fear that’s an Andrew problem, not a US research problem or a US taxpayer problem.

Best to all,

w.

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