Cuts are coming across the University of Arizona campus following a financial update Monday afternoon.
University departments should begin to expect cuts between five to fifteen percent over the next 18 to 36 months, according to UA officials. The move comes after Arizona Board of Regents Executive Director John Arnold, who also serves as the university’s interim Chief Financial Officer, shared that 75% of reporting units are spending more than they have.
“We’re overspending by a lot,” Arnold told faculty senators during a meeting Monday afternoon. “To solve that, there are going to be layoffs. Well, what do you think administrative restructuring and consolidation means? That means people are going to lose their jobs and that's just the reality.”
Before any interventions, the university is expected to be at a projected $177 million deficit for fiscal year 2024. This would leave the projected days cash on hand at 70 by the end of June. The Board of Regents requires universities to maintain a minimum of 140 days cash on hand.
How did UA get here?
During the meeting, Arnold pointed to a lack of a unified structure across university departments like business/finance, facilities management, human resources, and more.
“We’ve worked in such a decentralized decision-making structure,” Arnold said. “We need to really go out and build a University of Arizona administrative structure.”
In addition, Arnold pointed to a growth in investments made to students, but a stagnation in net tuition revenue. According to the presentation, institutional financial aid grew by a forecasted $173 million between fiscal year 2018 to fiscal year 2024. Yet, net tuition revenue per student has remained at just over $12,000.
Now, the university will examine a new financial aid model over the next several weeks. Arnold assured leaders that there would be no changes to the financial aid that is currently offered to students.
“We need to put hard restrictions on what we're going to do on the financial aid side and put budget limits on that so again, the university can plan for what's going to happen instead of being just subject to market whims.”
Arnold also cited inflation and the COVID-19 pandemic as impacts. Athletics was also listed as an external factor that contributed to how the university got to where it is. As it stands now, if there are no changes, athletics is projected to overspend by $32 million for fiscal year 2024. To address this, hard caps on spending will be set, revenue outcomes will be enhanced, administrative functions will be centralized, and the budget for athletics will be reset to zero.
“We haven't seen any sustainable revenue growth in athletics for six, seven years now,” he said. “We need to get after that and see if we can change that. Does that mean the cost of hotdogs at McKale are probably going up? The answer to that is yes.”
UA President Robert Robbins emailed the campus community shortly after Monday’s financial update telling students that for the university to remain strong, changes need to be made.
“Fixing these challenges will require timely, strategic, and sometimes difficult decisions,” Robbins said. “We will address these challenges head-on, implement effective solutions, and keep our University on an upward trajectory.”
5-15% cuts across campus, layoffs expected
Arnold told leaders that the university will be working with them over the next several weeks to re-examine their budgets and structures. However, each unit should expect individualized evaluations based on their needs.
“I do not believe in across-the-board cuts. We are not going to do across-the-board cuts,” Arnold said.
However, the university will be re-evaluating staffing models–meaning there will be layoffs.
“Are our staffing models correct? And if they're not, then we're going to have to address it,” Arnold said.
Robbins reassured leaders that they plan to tackle administrative bloat first by rightsizing positions such as Vice Presidents and Vice Provosts as well as others.
The university has also contracted three independent, external audits to examine athletics, the University of Arizona Global campus, and UA’s finances. A new budget model is expected to be in place by Jan. 1, 2025.
Gov. Katie Hobbs’ Letter
In a press conference following the financial update, Arnold said he will remain in his role as both interim CFO and ABOR Executive director until there is a transition.
“This current model is important for right now. We needed to get to the bottom of this as quickly as we can. That's not sustainable long term.”
His response comes after Governor Katie Hobbs called for an external, independent company to resolve UA’s financial issues due to a conflict of interest in having Arnold in both roles. In her letter, Hobbs also noted that if there were no improvements, a leadership change would be needed.
However, Robbins noted that he is committed to the university and plans to stay as long as the regents want to keep him.
Following the financial update, faculty senators questioned Robbins and Arnold’s plan to address the financial crisis. Some senators were concerned about what values would be centered as units are evaluated for cuts. Faculty Senate Chair Dr. Leila Hudson called for the safeguarding of academic units at this time.
“Start with administration and athletics move to auxiliary and support units and academics last. Academics are our engine,” Hudson said.
The chair called on the faculty senate to regain confidence after a formal request for a vote of no confidence in ABOR was made.
“The lack of confidence can be cut with a knife. As I've been telling people the vote of no confidence meter is off the charts,” Hudson said. “I'm a contrarian. Now is the time for confidence.”
The formal request for a vote of no confidence will be sent to the Committee of Eleven, the oldest committee within faculty governance, for further evaluation.
Hudson’s optimism for confidence in shared governance was not shared by all faculty senators.
“I want to feel the chair of the faculty’s optimism but I really don't,” Dr. Carol Brochin said. “It's really hard not to feel like I'm on a sinking ship.”
Brochin noted that she has already begun to see cuts in areas like e-sports. Interim Vice Provost Ron Marx said he decided to cut that program to save $325,000.
“It was too bad for the students and I felt badly about that, but where am I going to get what $325,000?” Marx said. “These are the hard decisions we all have to make and by blaming one group and not another group just doesn't make sense. We're all to blame. We're all to solve.”
Regarding concerns about layoffs, Arnold said that is just the reality of the situation.
“Do I like that? I hate it,” Arnold said. “I walk around my office and I meet people and they come up and introduce themselves. In the back of my head, I say that person’s probably going to lose their job.”
“If we are going to protect academics and we’re going to protect the student mission, if we’re going to move the university forward, we’re going to have to make those kinds of decisions. I’m sorry. It’s terrible.”
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