Nineteen states and the District of Columbia sued the Energy Department on Friday over the agency’s move to limit the use of its grant funding for “indirect costs” such as buildings, equipment and personnel.
DOE announced in May it would cap indirect costs at 10 percent for state and local governments, a departure from longstanding practice of negotiating those rates on an organization-by-organization basis.
The states said in the lawsuit, filed in the District of Oregon, that the sudden policy change would blow a major hole in their budgets, forcing them to “lay off staff, significantly scale back or halt research, and abandon critical projects.” Among the programs affected would be clean energy generation, weatherization assistance grants and emergency preparedness programs.
The states argued capping indirect cost rates violates federal assistance law and is arbitrary and capricious, noting DOE provided no evidence to back up its conclusion that the cap would “improve efficiency” and no explanation for why it set the limit at 10 percent.
