Labs in a Bubble
By Daniel S. Greenberg
In the major leagues of academic America, this is an era of laboratory construction on a colossal, unprecedented scale. But as welcome as the new buildings are for the performance and pride of universities, the construction boom poses serious, little-discussed perils for the research economy. A bubble is rising, and as with the forlorn dot.coms and the current deflation of the real-estate market, science could easily be in for painful economic shocks. Nonetheless, the pile drivers are rhythmically banging and the girders are rising on campuses across the country—with notable inattention to the coming crunch: a major imbalance between rapidly rising research capacity and a slumping supply of money to perform research in those buildings. As the laboratories are going up, the money for research is going down or standing still. Warnings of worse financial times ahead for research are plentiful, as usual, but far more plausible than in the past.
The asynchronous relationship between money and buildings arises from the nature of research finance in the U.S. and the hard laws of construction and politics. Money for the conduct of academic research is largely concentrated in Washington, which disburses it nationwide on a competitive basis to hundreds of universities. University laboratory buildings are locally planned and financed, with little or no federal money or involvement. From design, groundbreaking and construction to the joyous ceremonies of ribbon cutting, the construction of new labs usually requires four to six years. In 1998, intense lobbying and the ever-present hopes for medical miracles propelled the Congress to double the budget of the National Institutes of Health over five years, a goal that was reached in 2003, with an appropriation of nearly $28 billion. (Similar resolves of budget doubling have been expressed for the National Science Foundation, but the money has never been forthcoming at the required pace.) As the NIH appropriations annually increased over the five-year span, in defiance of an austere environment for most federal domestic spending, planners in academic medical centers envisioned a reinvigorated era of federal research support. Virtually all of that NIH money was for research—not for laboratory construction, which receives scarcely any federal research support. No matter. Money would somehow be found. Buildings, suitably equipped, are indispensable for winning grants. The construction boom was on, but the zest behind the NIH budget growth was fading. Under the weight of record federal deficits, the NIH budget has actually dropped a bit in actual dollars, and more in buying power, since completion of the doubling agenda—a stunning reversal for an agency that had experienced annual budget growth in every year between 1970 and 2005. With all the doubled appropriations committed to new research projects and continued financing of many previously approved projects, NIH is now as strapped for money as it was prior to the huge increases. As summarized in the latest annual budget analysis by the American Association for the Advancement of Science:
“Because of these flat to declining budget trends, NIH projects that it will fund only 19 percent of all research project grants (RPG) applications in 2006 and 2007. While the number of new grants would increase slightly in the 2007 budget, the total number of RPG’s would continue to slide, as would the inflation-adjusted size of the average research grant.”
The AAAS assessment focuses on the selective, alarming numbers that have long served well to grow the NIH budget—without reference to whether more spending equates with greater scientific knowledge or improved health for the nation. But the assessment also reflects the dynamics and stresses of a research system which is predicated on more each year and is ill-equipped by experience and expectations for accommodating to less.
Meanwhile, from San Francisco’s Mission Bay neighborhood, where the University of California is building a goliath research campus, to Allston, MA, where Harvard is commencing construction of a huge campus, new labs are in the works, with the emphasis on the medical and biological sciences. And naturally so, since that’s where scientific opportunity intersects with NIH money, inadequate as the supply may be. Lab space for the two favored disciplinary fields has also proliferated recently or is on the way in Wisconsin, Michigan, Arizona, New York, Texas, and Florida, and at virtually every other locale of the big institutions known as research universities and academic medical centers. The expansion is also proceeding at smaller schools. But there it’s mainly for instructional purposes, entailing little or no dependence on federal research funding, which, by a wide margin, pays for the research and researchers, as well as many of the students, in the great schools that have brought glory to American science. In research funding, NIH is the giant, dispensing approximately half of the federal government’s non-defense R&D money.
Allowing for the time required for conceiving and commencing laboratory construction, the building boom dovetails with NIH’s 1998-2003 money boom. From fiscal year 2001 to FY 2003, research space in academic institutions increased by 11 percent, to a total of 173 million square feet, “an increase substantially greater than any previous 2-year increase since FY 1988,” according to the National Science Foundation. Of the 173 million square feet, the two largest categories were the biological sciences (36 million) and the medical sciences (34.9 million). NSF’s data indicate that the boom is accelerating. In 2002-2003, “Almost half of all universities began construction projects,” with expenditures for that year totaling $7.6 billion. In 2004 and 2005, work was planned or under way for an additional 19 million square feet of lab space, at cost of $9.1 billion. Of the new space, 53 percent was for the medical and biological sciences, but their lab space being costlier than most others, they took up 61 percent of the construction costs. Listed as “deferred projects” in those years, probably for lack of money, were building plans priced at $8.4 billion for all disciplines, including $4.8 billion for the medical and biological sciences.
Who’s paying for the new buildings? In most matters of academic science, the federal government is customarily the main financier, providing 62 percent of the money that universities spent on R&D in 2003, a typical year. But when it comes to lab construction in the nation’s universities, Washington is a small provider, and has been getting smaller, dropping to 5 percent of building costs in 2002-2003, the smallest proportion since 1986-1987, according to NSF. The dearth of federal money for bricks and mortar is not a matter of inadvertent neglect or indifference. Rather, the managers of the federal R&D bankroll know they can leave those costs to the universities with full confidence that money for buildings will be found. The “academic arms race” for scientific stature, federal funding and the coveted recognition of U.S. News & World Report assures unflinching pursuit of the wherewithal. Suitable buildings are indispensable for obtaining federal research grants, and all universities, without known exception, desire federal research grants. “Build it and they will come” applies here, too. Somehow, it is correctly assumed, the money will arrive. And it usually does. At private universities, the “edifice complex” is financed by gifts from alums and philanthropists eager to be beneficent as well as immortalized on a structure’s brass nameplate. Also, there’s endowment income, tuition, bond issues in some cases, and whatever other funds can be scrapped together. At public universities, all the aforementioned sources are present, but in addition, the state legislature is customarily the big provider. For NIH’s headquarters campus in Bethesda, Md., Congress, in bipartisan enthusiasm for medical research, appropriates money for new research buildings—many in recent years. And in recognition of its bountiful role, Congress, with the cheerful compliance of the NIH management, names the buildings after prominent legislators, usually chairmen or sub-committee chairmen of the appropriations committees. Through a variety of financial mechanisms, the infrastructure of American science is rapidly growing.
However, virtually absent from the cash flow is a sector that’s widely, but mistakenly, viewed (often with dark suspicions) as a big-bucks financier of academic research: industry. NSF reports that “industry provided only 5% of academic R&D funding in 2003, a substantial decline from its peak of 7% in 1999.” NSF adds that “Industrial support accounts for the smallest share of academic R&D funding, and support of academia has never been a major component of industry-funded R&D.” Industry spends a great deal on what it designates as R&D—$220 billion in 2004—but almost all of it in its own research facilities. The share of company R&D money going to academe was a miserly 1.5% in 1994, dropping to an even more miserly 1.1% in 2004. Industrial money is little, if at all, involved in the academic building boom, and accounts for only a minor share of research funding, mainly in a handful of universities. But even in those institutions, industry pays for a paltry share of R&D. At the University of Wisconsin, Madison, federal agencies provided $396 million for R&D in 2003; industry provided $16 million. Similar disparities exist throughout university research: Johns Hopkins, $525 million from Washington, $18 million from industry; Stanford, $484 million and $31 million; Harvard, $349 million and $6 million, and so on.
Dependent as industry is on academe for trained personnel and scientific knowledge, will corporate America reverse course and come to the financial rescue of research in the glistening new buildings that grace university campuses across the nation? That’s doubtful, though pharmaceutical and other high-tech industries readily acknowledge their dependence on academic research institutions. When R&D budgets encounter rough weather on Capitol Hill, corporate chieftains warn of ill effects on American competitiveness if budget growth is not sustained. Nonetheless, financial aid for academic science ranks low in corporate priorities—understandably so, given Washington’s readiness to pay the costs.
The biotechnology industry originated in and survives on academic science, through licensing of university-owned patents and in professorial startup companies. But biotech is a feat of financial levitation, recently described by the CEO of Genentech (a rare, profitable exception) as “one of the biggest money-losing industries in the history of mankind.” The cumulative loss since 1976, he noted, “is nearing $100 billion.” The good news is that the loss in 2005 was only $2.1 billion, compared with $4.9 billion in 2004. Don’t look to biotech for academic sustenance, or to the Big Pharma firms. They continue to be big money makers, but mainly through wilier marketing and promotion techniques. When it comes to research, many are pulling back in their own laboratories while scouting to buy innovative biotech firms that might be onto a promising new product. Academic philanthropy and research sponsorship rank low in corporate strategy.
But then there’s the promising, new phenomenon of state governments responding to federal restraints on stem cell research by raising their own funds for the research—$3 billion in California, $750 million in Wisconsin, with other states also providing or seriously discussing similar funds. Scientists and facilities will be on hand to make good use of the money, but in the overall context of research finance, these designated funds are piddling compared to the scale of Washington’s resources. Research funding has never held a high place in state finance. The NIH budget alone is about 10 times the amount of money for academic research provided by all 50 states combined.
But perhaps growth will resume at NIH, swelling the rivers of money for research in the new labs. On the basis of NIH’s Houdini-like evasions of federal budget cutters over several decades, that possibility cannot be discounted. Biomedical research is the easiest sell on Capitol Hill, where it’s supported by public hopes for cures, skillful, well-financed lobbies, and unquestioning bipartisan support. NIH spending proposals never evoke skepticism or questions about the best use of given sums for improving health. At appropriations hearings, NIH managers are usually chided for not seeking more than the White House proposes in the official budget. Even so, the NIH budget has been becalmed for three years, currently faces another bleak year and worse beyond that. The Bush Administration’s American Competitiveness Initiative provides a bit of growth for energy and space research and information technology, but passes over NIH. The discretionary part of the federal budget, from which NIH draws its money, is the only chunk of government spending that’s accessible to spending cuts—unlike defense, which is sacrosanct and rising, and health-care and retirement entitlements, which are politically untouchable and rising. The slump in NIH spending does not come from political whim or disenchantment with medical research. Growth is harder to come by, to the point where it has essentially stopped.
The consequences of an overbuilt, under-financed research enterprise can be glimpsed at this point, but the full effects of the imbalance are yet to come and can only be guessed at. Research buildings without research obviously represent squandered resources that could otherwise be employed productively. Worsening odds for success in grantsmanship are likely to foment unsociable behavior, or worse, in the scientific community. Is scientific misconduct linked to tough times in the grants market? There’s no clear answer to that, but possibly so. Pandering after commercial deals to finance research in those buildings could intensify, with competition inducing lowered standards of academic suitability and secretiveness common to industrial research but anathema to university science. The very scarcity of industrial money for academe makes the little bit of it worth stronger efforts. Universities heavily depend on federal research grants to bring in indirect-cost payments for maintenance, administrative services, security, and other activities generated by the presence of research projects. Though squabbling about the appropriateness and adequacy of indirect costs dates back to primeval times in government-university relations, the payments add up to a great deal of money—about 30 to 65 percent of direct costs, depending on the type of research and the characteristics of the institution. Less research means reduced indirect cost payments to help keep up the new buildings. Private foundations and other non-government sources rarely come close to the percentages that federal agencies allow for indirect costs, and often disallow such payments entirely. Finally, the spectacle of great new laboratories but scant money to run them is not likely to encourage the young to pursue careers in science.
Can economic sense be injected into the research system? I was pondering that question in connection with this article, when the April 28 issue of the invaluable Chronicle of Higher Education arrived. Front-page headline: “Raising Kentucky. The leader of the state’s flagship university wants to make it a top-20 research institution.” The ensuing article described big growth ambitions on the Lexington campus, in large part focused on scientific expansion, and went on to report: “Kentucky is not alone in having a plan to strengthen its national ranking. For example, Virginia Tech is seeking to become a top-30 research university by 2010, while Clemson University wants to become a top-20 public university.
“John C. Vaughn, interim president of the Association of American Universities, says there are so many such plans by universities to improve their rankings ‘that it becomes a joke.’”
The Kentucky story came a few days after another report from the frontiers of academic aspiration, this one concerning the impending shutdown of the Colorado Institute of Technology, “founded just six years ago,” the Chronicle noted, “with the ambition of rivaling powerhouses like Caltech and MIT....” But then came the dot.com bust and the rapid decline of high-tech employment. The interim president and CEO was quoted as saying, “It was apparent that ongoing support was not going to be sufficient to see the organization through.”
Aberration or straw in the wind?
Daniel S. Greenberg is the author of “Science for Sale: The Perils, Rewards, and Delusions of Campus Capitalism,” to be published next year by the University of Chicago Press. Greenberg, a Washington-based journalist, is a Guest Scholar at the Brookings Institution and holds an Investigator Award in Health Policy Research from the Robert Wood Johnson Foundation. His previous books are “Science, Money and Politics: Political Triumph and Ethical Erosion” (University of Chicago Press, 2001) and “The Politics of Pure Science,” (new edition, by Chicago, 1999).
The views expressed here are those of the author.