Prof Brendan Crabb (AAMRI President & Burnet Institute Director) 
Prof Geoffrey Donnan (Florey Institute Director) 
Mr Harold Mitchell (Florey Board Chair) 
Prof Rob Shepherd (The Bionics Institute) 
Prof Garry Jenning (Baker IDI Director) 
Prof Doug Hilton (Walter and Eliza Hall director) 16th April 2014. Photo by Jason South.

Victoria's heads of research have warned of a crisis. Photo: Jason South

Victoria's top medical research institutes face a funding crisis, with costs of research ballooning as state government support has flatlined.

A decade after annual government funding for indirect costs of research such as power bills was capped at $26 million, the state's medical research institutes say they are struggling, with rising running costs limiting their capabilities. Institute chiefs say the state's ability to compete nationally and on the world stage has been compromised.

At the Walter and Eliza Hall Institute in Parkville, electricity bills increased by $400,000 last year - a figure director Doug Hilton said would comfortably cover the cost of hiring three additional cancer researchers.

The Florey Institute of Neuroscience and Mental Health, which recently moved into two purpose-built buildings in Parkville and Heidelberg as part of a $200 million building upgrade, has laboratories that are only partially full. Florey director Geoff Donnan said there was capacity for 800 in the institute's laboratories, which currently had only 600 scientists.

And at the Baker IDI Heart and Diabetes Institute, director Garry Jenning said he had lost two researchers of international renown in the past month because interstate institutes were able to offer more competitive salaries.

''This is just so wrong. I'm calling it a crisis,'' said Harold Mitchell, chairman of the Florey. ''The government has to respond.''

The Association of Australian Medical Research Institutes has asked the Napthine government to double its $26 million a year. The push comes as the nation's peak science body, the CSIRO, has been modelling scenarios under which it could lose up to 20 per cent of its $757 million in annual funding in the May federal budget.

In Victoria, all 13 medical research institute members of the Association of Australian Medical Research were operating in deficit.

''It's at the acute problem stage,'' said Brendan Crabb, association president and director of the Burnet Institute.

''Health and medical research is the jewel in Australia's industrial crown and Victoria is the place where almost half of that is done,'' Professor Crabb said.

The medical research sector employs about 9200 people in the state, 40 per cent of the sector's national workforce.

The pressure to cover indirect costs associated with medical research in Victoria has increased as the state has secured more funding from the National Health and Medical Research Council, while the state funding to support the research has remained static.

In 2004, medical research institutes shared in $25 million from the Victorian government, representing about 27 cents for every dollar secured in research grants. However by 2011, a cap of $26 million on state government support combined with an increase in dedicated research funding meant state support for indirect research costs fell to 14 cents in the dollar.

In a pre-budget pitch, directors of some of the state’s top institutes have come together to put their case, pointing in particular to Queensland and New South Wales which have almost double the cent-per-dollar support of Victoria.

‘‘Victoria is dropping the ball,’’ Professor Donnan said. ‘‘We can’t offer the salaries or pay for the grants that researchers have, while other states are able to make much better offers.’’

A spokesman for innovation minister Louise Asher declined to comment in detail on the issue ahead of the May 6 budget.

‘‘This is one of the many programs currently under Budget consideration,’’ he said.