NCI’s Fiscal Picture and Grant Support for FY2011

On May 6, 2011, NCI Director Harold Varmus sent an email to all NCI grantees regarding NCI's budget and the challenges ahead for the cancer research community. The full text of the email is presented below.

I am writing to bring you up to date on the fiscal picture confronting the National Cancer Institute (NCI) for the rest of FY2011 and to ask your help in making the best possible use of the reduced resources available to us this year.

Three weeks ago, Congress passed and the President signed a full-year Continuing Resolution (CR) for the government for FY2011. While the outcome is not as good for the NIH as we would like it to be - and is short of what the agency could use to take advantage of all of the envisioned opportunities and needs - the outcome could have been worse. (For instance, if HR1 had been enacted, not just passed by the House of Representatives, the NIH budget would have been cut by nearly 5%.) Furthermore, it is a relief to end the protracted uncertainties associated with short term CRs.

Having said that, pending final resolution of the numbers with the Department of Health and Human Services, the total NIH budget of approximately $30.7 billion represents an almost 1% decrease from the NIH budget in FY2010. This drop reflects two major decreases from last year's NIH appropriated budget level: (i) a $260 million reduction (comprised of a $210 million cut to be distributed proportionately among the Institutes and Centers [ICs] and a $50 million cut in support for NIH buildings and facilities), and (ii) an across-the-board reduction of 0.2% for all discretionary programs. For NCI specifically, these two reductions are approximately $35 million and $10 million, respectively, resulting in an NCI budget of about $5.059 billion for FY2011.

In these constrained circumstances, NCI's first priority is to preserve funding for Research Project Grants (RPGs), to ensure that as many new RPGs as possible are awarded to our investigators, especially our young investigators, to allow them to pursue new ideas. Over the past two years, we have made about 1,250 competing awards of RPGs per year, exclusive of awards made with funds from the Recovery Act (ARRA). This year, for reasons that will be explained below, we will be unable to achieve these numbers; but, by trimming virtually all NCI budget categories, we believe we can award approximately 1,100 new RPGs, while also absorbing the costs of approximately 138 grants initiated with ARRA funds.

We are facing an especially difficult situation at the NCI this year because of several factors that contribute to an increased commitment base. When combined with the smaller budget for FY2011, the enlarged commitment base has reduced the funds available for making new awards. The largest factor is a substantial increase (approximately $40,000) that occurred in the average size of our competing RPGs in FY2010. In addition, as implied above, NCI made a decision in FY2009 to use appropriated dollars in FY2011 and FY2012 to extend some of the grants that were originally awarded with ARRA funds. Furthermore, the money available for new RPGs has been further reduced by costs associated with the ongoing construction of a new administrative facility in Shady Grove, Maryland, a project that can't be stopped or suspended without much greater losses, although we have been able to cut some costs in existing construction contracts.

NCI has been hit harder by the confluence of such budgetary events than many of our sister ICs. For example, most other ICs sustained increases in the average size of their competing RPGs in FY2009 and were able to absorb that increase in FY2010, whereas the analogous change at the NCI did not occur until FY2010, requiring us to absorb the increase in FY2011. As a result, the measures we must take to preserve core funding for RPGs in FY2011 will need to be correspondingly greater. Thus, while other ICs will be reducing their non-modular, noncompeting (Type 5) awards by 1% below the FY2010 level, NCI will fund all of our noncompeting RPGs, both modular and non-modular, at 3% below the FY 2010 level. This will reduce the NCI's cash shortfall for RPGs by approximately $48 million compared to the hypothetical payment of the same awards at their FY 2010 level.

We recognize that this situation may create difficulties for our current grantees, who already face loss of customary inflationary adjustments - which they had hoped for and which they deserve - but it will allow more than 100 investigators to obtain grants that would otherwise not be made and, thereby, to carry out their highly meritorious projects.

To be able to provide enough funds to support 1,100 new RPGs, as well as the grants initiated with ARRA funds, the NCI also will need to make modest reductions (between 2 and 5%) in virtually all budgets for our many activities - including the intramural programs, contracts at NCI-Frederick and elsewhere, the NCI-designated Cancer Centers, and the operating budgets of all NCI components. Unfortunately, there is simply no way to get through this fiscal situation without taking these largely unprecedented steps. However, for competing awards, the other Institute Directors and I have agreed that the average cost should be as close to FY2010 levels as possible, acknowledging that ICs can't completely control the average costs.

These adjustments still leave us operating at a slight deficit, but one that we believe is manageable. We will continue to track the budget closely and expect to realize savings during the rest of the fiscal year. And if Congress passes the President's budget proposal for FY2012, we will aim to restore the levels of noncompeting awards to what they would have been if the NCI had not taken measures this year that are more severe than those taken by other ICs.

As you can see from the foregoing analysis, this will be a difficult year for the NCI. I am asking for your help and forbearance as we deal with the consequences of reduced appropriations and an increased commitment base, while also trying to maximize the number of competitively awarded research grants. At times like these, we need to make a concerted effort to use our still-considerable resources - more than $5 billion this year - in the best possible way to sustain the pace of discovery, broaden our understanding of cancer as a biological phenomenon, and turn our increased knowledge into better ways to prevent, diagnose, and treat cancers of many types. I am confident that we can do this while we adapt to this year's budgetary stringencies and attempt to improve the situation in the years to come.

Thanks for your understanding and for your devotion to the cause of cancer research.

Harold

Note: This message is a slightly edited and updated version of a memorandum sent to all NCI staff on April 27th.