University of Arizona and Arizona Board of Regents leaders on Monday presented a plan to address the university's financial situation, emphasizing the importance of collaboration from everyone on campus.

University of Arizona President Robert C. Robbins presented a plan at a campus forum on Monday alongside John Arnold, interim chief financial officer and senior vice president for business affairs, and Fred DuVal, Arizona Board of Regents chair. Representatives from the Faculty Senate, the Staff Council and other shared governance groups also attended.

Robbins said the update was the result of extensive dialogue with the campus community and a "comprehensive review and analysis of the university’s financial information that provides us with an understanding of where we are, how we got here, and the necessary steps we must take to move forward."

"The University of Arizona remains dedicated to providing world-class education to its students and pursuing groundbreaking research and innovation," Robbins said. "In order to do so, there are significant structural budget deficits and real challenges that must be addressed."

Since joining the university in his interim role, Arnold has worked with college and division leadership, shared governance partners and members of the campus community to thoroughly review the university's financial position.

"The university is not in any imminent danger," Arnold said. "However, spending patterns are dangerous, and we're going to have to turn around that cost curve over the next several months."

According to the latest budget review, 61 of the 81 – or 75% – reporting units within the university forecast continued deficit spending this year. Without further action, the university would face a projected budget shortfall of $177 million.

"We are not going to allow that to happen," Robbins said. "This is one of the greatest research universities in the world. We are going to find a way to solve these problems, together. We're going to do it with integrity, compassion and determination, from our core values. And we're going to do it with transparency and collaboration and cooperation."

How the university got here

The university's financial challenges, leaders said Monday, are due to decades-long budgeting practices, decentralized budget and operations models, lower-than-expected revenues, investment in strategic priorities and increasing costs in athletics, as well as external factors including the COVID-19 pandemic and rising inflation.

Over the past 10 years, the university used three separate budget models, all of which led to significant decentralization, Arnold said. Within those budget models, the university did not properly account for the actual costs associated with operations, which led to ineffective financial decisions.

While the university has experienced record-breaking success in scientific pursuits and other critical areas that benefit its students, faculty and staff, those advancements come at a cost, Arnold said. These include heavy investment in the university's strategic plan, unit-level investment in scholarship and students, and university- funded research. These investments brought the university record applications, the enrollment of academically prepared students, and improved retention and graduation rates.

External factors, such as the COVID-19 pandemic and changes that are reshaping collegiate athletics nationally, also play a role in the university's financial standing. While the university entered the pandemic with a strong athletics operation financially, it has been heavily impacted by these circumstances, Robbins said.

The acquisition of the University of Arizona Global Campus on June 30, 2023, resulted in a positive $47 million cash impact in fiscal year 2023. This fiscal year, UAGC is projected to have a $2.4 million deficit.

UAGC was initially projected to incur roughly $265.5 million in expenses for the current fiscal year, but Arnold said that figure was worked down to roughly $232.2 million in operational expenses. He added that the Global Campus is expected to generate nearly $230 million in revenue this year, leaving the unit to operate at a roughly $2.4 million loss for the year.

Arnold said UAGC is expected to turn a profit of roughly $3.1 million in the next fiscal year, which begins on July 1.

Next steps

As part of the next steps of the university's financial action plan implementation, the Board of Regents is retaining two nationally renowned firms with significant higher education experience to review the university's financial information and provide feedback.

"There will be changes here," Arnold said. "The changes will be far-reaching. Many will be difficult, and they are all necessary. If we do this correctly, these changes will place the University of Arizona on a stronger footing. One that will provide the foundations for long-term success. But know this: Above all, everything we do will be in service of our primary obligation to serve the students and to assure the long-term success of this great and special institution."

Arnold added that the university will also conduct a review of faculty and staff workloads "to ensure we are appropriately staffing our university and avoiding the hidden costs of an overstressed workforce."

Athletics will be restructured "from the ground up," Arnold said, including centralizing administrative functions, identifying efficiencies in operations, resetting the budget, installing hard caps on spending and implementing revenue packages.

The focus of the changes in athletics will be the student experience, Arnold said.

"We love our student-athletes and are so proud of all the work and time and effort they put in," Arnold said. "They represent this university with pride and distinction, and we do not want to mess with that student experience. We are going to start with the administrative side of athletics. We're going to try and protect those students."

Robbins added that the university is also exploring early retirement incentives for faculty and staff, as well as methods to enhance revenue in the years to come, particularly during summer and winter sessions.

Ideas that are not being considered

While the university implements its financial action plan, Robbins said it is important that the university remains committed to protecting its core mission of teaching, research and outreach.

To that end, Robbins announced that the university will not reduce need-based aid for Arizona resident students or need- and merit-based aid for current or accepted students, or eliminate the tuition guarantees for any current or accepted students. He added that there will be no reduction in retirement benefits, and no institutional furloughs.

"It's going to take all of us to solve these issues," Robbins said. "This is a university-wide problem, and it's going to take all of us working together – and I very much look forward to working with everyone in the university to get us back on a positive trajectory."

A recording of the forum is available on the University Financial Updates website.