Federal and State Policy Change Updates

Dear Faculty, Staff and Graduate Students,

As Congress continues to meet to discuss each federal agency’s budget request and the Governor continues to consider legislation, we understand that there is an overwhelming amount of information to sift through from both levels of government. Our hope is that these weekly messages provide you with information on the key updates that may impact our work so you can continue to pursue our mission of excellence with clarity and confidence. We greatly appreciate your efforts to make our university the best place in the world for research, learning and service.  

Federal Budget Process Continues for FY 2026

Throughout the last few weeks, agency leaders have been testifying before Congress to discuss their FY26 budget requests. This follows both the President’s release of his budget last month and federal agencies each publicizing their specific agency request. It’s important to keep in mind that this is not a short process and significant work remains. Texas A&M University officials, both at the university and System levels, are engaging with legislators and staff on the importance of robust federal funding, in addition to Texas A&M’s own federal priorities. Please note that as budget negotiations continue, you can find information regarding the FY26 federal budget on our Federal Budget Updates page.

Hearing on Indirect Costs Lawsuit with National Science Foundation

Previously, the National Science Foundation (NSF) notified institutions of a new Facilities and Administrative (F&A) cost rate of 15% for all new awards on or after May 5. On May 5, a group of higher education organizations, including the Association of American Universities (AAU), the American Council on Education (ACE) and the Association of Public and Land-grant Universities (APLU), all of which we are members, along with several research institutions, filed a lawsuit regarding the rate cap. On May 19, the NSF announced that it was temporarily pausing the 15% cap through June 13 (today) pending a hearing is scheduled for today at 2:45 p.m. Eastern Time in the U.S. District Court for the District of Massachusetts. We are monitoring this lawsuit closely and will update the Federal Policy Changes page of our Government Relations website when a ruling has been made, in addition to any other updates throughout the next week.

Department of Defense Indirect Cost Rate Cap Implementation

On June 12, the Department of Defense (DOD) issued a memo regarding the implementation of a 15% F&A rate cap for DOD research funding conducted at institutions of higher education (IHE). The memo states that all new awards to IHEs will not allow indirect cost rates higher than 15%, effective as of the date of the memo (June 12). For all existing awards, the DOD is directed also to apply the 15% cap on indirect cost rates through renegotiations. Until a renegotiation is completed, existing awards may continue to operate under their originally determined rate, and the new rate is not retroactive to the beginning of the award but must have an effective date that is not later than Nov. 10, 2025. If renegotiations are not completed by Nov. 10, 2025, the DOD is directed to terminate the award. Similar to other rate change announcements, we will continue to monitor this situation closely, and we encourage you to check the interim updates section of the website as new information becomes available. In the meantime, please continue your work as normal. We continue advocating for your research, and we won’t stop. Your work is building a brighter, safer world for the people of Texas, the nation and beyond. If you are planning a submission to DOD, please work directly with Sponsored Research Services (SRS).

Joint Association Working Group Townhall on F&A Rates

On June 12, the Joint Association Working Group (JAG) released its recommendations for a new indirect cost rate model, describing two proposed options for the national research community to consider: Fiscal Accountability in Research (FAIR) Model 1 and FAIR Model 2 (detailed below):

• FAIR Model 1 introduces a streamlined, standardized percentage applied to total federal research project costs, adjusted based on institutional and research-type factors and eliminating the need for negotiated F&A rates.
• FAIR Model 2 provides a detailed, cost-driven approach by directly budgeting key research support functions, including facilities, grants management and regulatory compliance, as standardized direct cost categories (only minimal administrative costs remain).

Institutions have been asked to test the models and provide feedback to the JAG for consideration of one model over another, or a hybrid of both, as soon as possible. The JAG plans to deliver a final model by June 27 to Congress that will be acceptable to both the government and the research community. Texas A&M will be examining both models closely and organizing our feedback accordingly with extensive analyses and conversations with key stakeholders, including principal investigators (PI). We understand how profoundly this policy shift will impact all of you and continue to strongly assert our perspective in these ongoing discussions and processes. We are hopeful that whichever model is ultimately put forth and potentially agreed upon will have the least amount of disruption to our research community.

It is important to note that regardless of which model is put forward to Congress, this is only a recommendation, and it is possible, and likely, that Congress will have further changes to any potential new F&A rate model.