University of Maine System officials trying to determine the possible impact of President Trump’s proposed budget have identified more than $25 million in the current system budget that could be at risk.

These funds could include at least $8.3 million in indirect costs for federal grants at the University of Maine, as well as a half-dozen programs that could be cut or eliminated.

“This proposed budget, if it passed as it stood today, would have an enormous impact on higher education,” Renee Bishop, a principal with auditors Berry & Dunn, told members of the trustees’ audit committee at their meeting in Orono on Monday.

Bishop highlighted a half-dozen proposed changes that could impact the UMaine System, from direct cuts to grants to new tax penalties for foreign employees that could make it harder to recruit faculty. Students could be hard hit by the proposed elimination of the federal work-study program, and the elimination of the public service loan forgiveness program, which graduates use to pay off student debt through public service.

For now, there is little higher education officials can do but wait for more news from Washington. Trump’s $4.1 trillion spending plan for the budget year beginning Oct. 1 proposes a 13 percent cut for the Education Department alone, and deep cuts to federal agencies that frequently fund grants to colleges for research and development.

Many of the proposals are still only broad outlines, and like any initial budget, likely to change significantly. But it’s a major signal of the White House priorities.


“We’re trying to learn a bit more about each one of these. We’re mostly in the information gathering phase,” said Ryan Low, the system’s chief financial officer. “I imagine like anything in D.C., it’s all still up in the air.”

The $8.3 million in UMaine’s indirect costs for federal grants are essentially overhead for the research work. The money pays for heating buildings, library services, security and administrative costs.

Every five years the system evaluates its costs and develops a standard rate used in federal contracts for the following five years. Currently that rate is 44 percent, so if a UMaine researcher gets a $100,000 grant, the federal government actually pays $144,000.

The revenue from indirect costs fluctuates depending on how many grant-funded projects are underway. Currently, it’s $8.3 million, according to Claire Strickland, the chief business officer at UMaine.

Those reimbursements mean that federal grants don’t “cost” a university money – they are revenue neutral. If those reimbursements are cut, then every federal grant will wind up costing the college almost half the amount of the grant, officials said.

For example, UMaine has been competing for years on wind technology and last year was named a finalist for a $40 million grant. But could the system, still trying to recover from years of financial crisis, afford to “accept” a $40 million grant if it would cost the system $20 million? Could universities recruit faculty if there was a question about the ability of the system to support their grant-funded research? All research universities are facing the same questions.


By comparison, the University of California system has indirect costs rates ranging from 47-54 percent.

Low said the proposal “seeks to shift the burden of federally funded discovery to tuition paying students and state taxpayers.”

“We are monitoring the progress in Washington and remain hopeful that the value of university research here in Maine and across the country is reflected in the final version of the federal budget,” he said.

The idea of shifting those costs back to the university is similar to other “skin in the game” arguments – advocates argue that an agency will cut its costs if they are paying for the costs themselves.

A similar situation is playing out in Augusta right now, as the governor presses to shift the currently state-subsidized K-12 administrative costs back to the local districts and have the state only pay for teacher salaries and benefits.

Bishop also noted a few other areas for the trustees to monitor, including the possibility that the government will require new audits of student loan information and student privacy safeguards.


Some changes wouldn’t directly affect the system, but would wind up costing their employees or students more.

There is a proposal to end the tax benefit of employee tuition benefits, traditionally a non-taxable benefit. Today, the system disburses $2.5 million a year for dependent and employee tuition, officials said.

Other proposed cuts and potential impacts include:

n Federal Work Study. The Trump administration is recommending significant cuts to this program. Systemwide, the federal work study total amount is $5.9 million dollars, or about 2 percent of student aid.

• Significant cuts to TRIO, an early intervention program for low-income state residents. The system gets $5.5 million in TRIO funds.

• Elimination of Student Educational Opportunity Grants, which represent $4.2 million.


• New costs to the system if a proposal to reverse the exemption for foreign employees to pay federal insurance contribution act (FICA) taxes. Officials estimate it would cost the system “several million dollars” a year to pay their half of the FICA taxes for those employees.

• Elimination of the National Oceanic and Atmospheric Administration’s Sea Grant program. UMaine receives $1.2 million a year from NOAA to run its Sea Grant program, and leverages another $600,000 from the state and other sources.

Bishop said she did not think some of the proposed cuts would actually happen.

“I can’t imagine the indirect costs will go away,” she said, though she expects at least significant cuts to the Sea Grant.

Noel K. Gallagher can be reached at 791-6387 or at:

Twitter: noelinmaine

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