When I (Kramer) came in 1970, grant writing was encouraged but was not part of any hiring letter or contract in mathematics. While a few people did obtain NSF funding for research, it was well understood that many very good mathematicians simply do not get funded. Two events changed my funding situation. In 1988, the Nebraska Research Initiative was funded by the State (initially $4 million, then $8 million and currently $12 million) to create Research Centers. One such Center was the Center for Communication and Information Science, which involved faculty from math, CSE and Electrical Engineering. This provided matching funds (the initial match was around 25% but has been considerably reduced) on any funded grant. Around this same time, the National Security Agency was supporting the type of mathematics (discrete and algebraic) in my area. Thus Magliveras and I, and then Stinson got funded by NSA through CCIS. CCIS was very supportive of computer purchases and this helped immensely in my research. Currently there are strong forces to reallocate resources so that many of the Research Centers including CCIS (which has been quite successful in obtaining grants) have come under pressure to re-invent themselves. How this will all play out is yet to be seen.
Letters of appointment for recent tenure-line faculty typically stipulate that the hiree must make strong efforts to obtain outside funding, and indeed grants have become significant factor in promotion/tenure decisions, in addition to research, teaching and service.
In the last year or so, the College of Arts and Sciences has encouraged formation of interdepartmental research groups that may (if successful) be designated as areas of strength. Discrete and Experimental Mathematics (DEM) is one such group aspiring to become an area of strength. It has received College and Departmental support and was formed with some people from CCIS and includes several applied mathematicians plus others outside math and CSE. Funding for DEM has led to creation of two workshop/conferences, several world-class colloquia and support for course notes that appear on the world wide web.