Who pays for research at UC Davis? Taxpayers, overwhelmingly, but their margin is shrinking. Of the roughly $247.7 million in research support UC Davis received last year, about 57 percent came from federal sources such as the National Science Foundation, National Institutes of Health, Department of Defense and U.S. Department of Agriculture. State sources, such as the California Air Resources Board, contributed about 9 percent. Combined, they supplied about 66 percent of research funds; in 1998, that figure was about 76 percent. About 15 percent came from industry. The rest came from charitable organizations, private foundations, other universities and other UC campuses. Industry funds research through three mechanisms: contracts, in which the researcher agrees to perform very specific work; grants, in which the researcher commits to conducting a well-defined set of experiments; and gifts, in which the researcher typically promises to do experiments of interest to the giver but is under no obligation to report the results. Compared to contracts and grants, gifts tend to give the researcher greater discretion in how the money is spent. Also, unlike contracts and grants, in which some funds go to university overhead costs, all of a gift goes directly to the researcher's laboratory or department. In academia, successfully competing against one's peers for federal grants is considered the endorsement of scientific ability. Grants and gifts from industry are perceived as being more easily obtained. But as industry support for research becomes a larger piece of the funding pie, the color of its money is becoming less of an issue. Eventually, if industry grants and contracts become more sought after, they may end up becoming more competitive and hence more acceptable.