University of Arizona’s financial health is “fragile, hard choices are inevitable”

Published: Nov. 7, 2023 at 10:08 PM MST
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TUCSON, Ariz. (13 News) - The University of Arizona faces a financial crisis.

Robert Robbins, the President of the University of Arizona, informed the Arizona Board of Regents about the university’s fragile financial health and how they plan to move forward.

The university is considering hiring freezes, pausing planned projects, and budget cuts to help reverse its cash flow.

“We found great success in the students we attracted because we invested a lot of money in student success and attracting students, primarily through financial aid,” Robbins said.

How did the university get here in the first place? According to Lisa Rulney, the Senior Vice President for Business Affairs and Chief Financial Officer for the University of Arizona, this results from planned investments and other investments that they knew were critical for the mission.

Rulney also addressed the board about the issue at hand. She said in addition to financial aid, research investments, critical expenses, and a combination of significant unexpected costs are a few reasons for a drop in its cash liquidation.

Also, rising costs due to its mission success, its associated increase in activity, and inflationary increases are outpacing the university’s revenue gains. The reason is a combination of significant unexpected demands. She mentioned examples like marketing, personal retention, I.T. infrastructure for cyber security, safety expenses, utility increases, and legal expenses.

“We take this very seriously, just as you do,” Rulney said. “I have regret as well, I look forward to being able to report more positive news in the future.”

The amount the university spends on research investment is also a big factor. However, both Robbins and Rulney said these investments are crucial in taking the university to the next level.

“We made a bet on spending money,” Robbins said. “We just overshot.”

Right now, the university has about 97 days’ worth of cash on hand. This is the lowest it has seen since fiscal year 2013. This is why the board of regents believes the university should be in “panic mode.”

“We must focus on the institution as a whole,” Rulney said. “The institutional decisions would be, things like whether are we going to move forward with all of our projects in our capital plans, should we have a hiring pause across the institution?”

Robert J. Herbold, who is on the Arizona Board of Regents, said the university needs to turn the problem around now.

“This is no longer a let’s get to it when we can, it’s a let get to it now,” Herbold said. “We will take the heat with you. You have to have more optionality you have to have more tools in your chest.”

Robins and Rulney both said the university already has a plan in place on how they will tackle the problem. According to Rulney, they must take a university-wide approach to rebuilding its central reserve.

“Given the four-year decline, we can’t have a fifth,” Herbold said. “I know you understand we got to turn this around.”

Rulney said for FY 2024, they have already implemented a 2% budget cut across the institution

They are considering pausing capital projects, hiring freezing, not implementing a salary increase program for FY 2025, additional revisions to the budget process, and possibly further reallocations.

The university will also identify targeted methods for specific units that are facing issues. Rulney said to assist with this effort, they are creating dedicated teams to help reverse the trends.

“I think philanthropy is going to be a really big part of this,” President Robins said. “Philanthropy is not money we would use for the operating budget. It will free up some of the money we currently use from our reserve to fund scholarships and stuff like that.”

Rulney said they are taking the concerning situation very seriously and will keep working to restore its cash level.

Even though the University has disclosed how the problem came about and how they will deal with the issue moving forward.

The Arizona Board of Regents requests a corrective action plan in writing by December 15, 2023.

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