This would massacre most major R1 universities. Stanford, Harvard et al basically run entirely on NIH/NSF indirect cost reimbursements. Everything from librarians and computer clusters to real estate and lab space are paid out of these funds – there are no endowments that cover them.
Last year, $9B of the $35B that the National Institutes of Health (NIH) granted for research was used for administrative overhead, what is known as “indirect costs.” Today, NIH lowered the maximum indirect cost rate research institutions can charge the government to 15%, above what many major foundations allow and much lower than the 60% that some institutions charge the government today. This change will save more than $4B a year effective immediately.