What’s New
The University of Arizona’s president said this week that the institution has a “major problem” with its finances — a rare pronouncement from a major research university.
The main problem, according to Robert C. Robbins, the president, is that Arizona has $240 million less in cash on hand than officials calculated this past summer.
The Details
In June the university reported to the Arizona Board of Regents that it expected to have 156 days of cash on hand, amounting to about $6 million per day. In October officials realized their financial model had “miscalculated” the projection.
In a meeting with the board last week, the university reported that the actual amount was 110 days for this fiscal year — a $240-million miscalculation, according to Robbins. And the revised model projects just 97 days’ worth of reserves for the next fiscal year.
“I was as surprised as all of you to learn that we didn’t have 156 days’ cash on hand,” Robbins said at a Faculty Senate meeting. “I didn’t realize that our savings account dipped to this level.”
Robbins cited two major problem areas: the athletics department and financial aid.
During the Covid pandemic, the university lent $55 million to the athletics department, using money from cash on hand. The loan has not been paid back fast enough, Robbins said.
Now the athletics department “is going to require some draconian cuts, and we’re just going to have to live with that,” Robbins said. It’s possible Arizona will eliminate some of its 23 sports programs.
In addition, Robbins said, the university has been losing money from its generous financial-aid policies. It costs around $20,000 a year to educate each student, but in-state students pay an average of $5,000, Robbins said. And students with high-school grade-point averages above 3.75 pay nothing.
“We lose money on everyone,” he said. “I have not really understood that as well as I should have.”
The Backdrop
It’s unusual to hear such dire financial projections from the president of a public flagship that is a member of the prestigious Association of American Universities. Flagships tend to be better resourced than are regional and community colleges, which have more commonly faced budget crunches, layoffs, and program cuts in recent years.
But the Arizona president’s comments about miscalculations evoke the recent budget crisis at West Virginia University, also an R1 institution. WVU, which is a flagship but is not in the AAU, is cutting majors and faculty and staff positions to close a $45-million budget gap.
The cause of West Virginia’s financial trouble, according to a Chronicle analysis, was a perfect storm of factors: demographic changes, pandemic challenges, and administrative decisions to finance new buildings with debt, among other things. One key miscalculation was that the university made a big bet on increased enrollment that never came about.
Leila Hudson, an associate professor of Middle Eastern studies and chair of Arizona’s faculty, blamed the administration for prioritizing profit and yield over the university’s financial stability. “This is a crisis of management, not a crisis of revenue,” she said at the Faculty Senate meeting.
What to Watch For
A university spokesperson told The Chronicle on Wednesday that Arizona would “address current budget challenges by reducing expenses and finding additional revenue streams.”
Robbins said during the faculty meeting that the university’s tuition-guarantee program, in which students pay their first-semester rate for all eight semesters, should stop “immediately.”
Hiring freezes are on the table, but only in colleges that are “in structural deficit,” Robbins said.
Robbins also said that the university had been pulling $20 million each year from cash on hand to pay for academic programs and research related to the university’s strategic plan. That was a five-year plan that is now ending, he said.
Katharine H. Zeiders, a professor of human development and family science, spoke against any budget cuts that would hinder faculty members’ ability to teach and perform research. “We must make it very clear to our colleges, to our workers, to our students, that we will not be punished for our administration’s complete mismanagement of our university’s finances.”
