FYI, and not making any judgement, but this is how they pay for office space and for research that is too esoteric/risky to get external funding.
However, salary for tenured professors is guaranteed regardless.
So, if you are a tenured professor, you can choose to do esoteric research that will not get a government grant, but you won't have any grad students.
It actually works out because the less practical, more theory oriented profs do not really need grad students. Whereas the more practical, application oriented profs need grad students to do all the work and they end up "setting up shop" like little companies---and get grants to pay for the students (mainly tuition, also a small stipend).
Not that I'm defending it, but it has a kind of internally consistent logic.