Financial Updates

University Financial Updates

Ensuring Financial Health and Success

The University of Arizona is implementing immediate actions and longer-term solutions to ensure strong financial health and the ongoing success of our teaching, research and outreach mission.

Latest Updates

ABOR Report on UAGC Submitted to Gov. Hobbs

On Feb. 20, the Arizona Board of Regents provided a report regarding the University of Arizona Global Campus (UAGC) to Governor Katie Hobbs. This report provides information about the rationale and process for creating UAGC, steps taken to improve operations, metrics used to measure success, and much more. 

ABOR Oversight Report Submitted to Gov. Hobbs

On Feb. 9, the Arizona Board of Regents provided the “Enhanced Financial Oversight Report” to Governor Katie Hobbs. This report includes major strategies and tactics focused on resolving the University’s financial issues. 

Leadership Forum on the Financial Action Plan

On Jan. 29, 2024, Arizona Board of Regents Chair Fred DuVal, President Robert C. Robbins and Interim Chief Financial Officer John Arnold provided an update on the University's financial action plan to University leadership and shared governance partners.

 

Financial Situation and Action Plan

The University has an annual budget of approximately $2.7 billion. As a result of accelerated spending from FY 2022 to FY 2023, the University experienced a decline of $140 million in cash and investments, when comparing the University's cash position snapshot in June 2022 to its cash position snapshot in June 2023. On June 30, 2023, the University had $704.5 million in unrestricted cash and short-term investments, which translated to 110 Days Cash on Hand, 30 days short of the ABOR-required minimum. Days Cash on Hand is not a comprehensive measurement of the University's financial health. It is one key directional indicator of some systemic financial issues that need to be addressed and it is a factor in the University's credit rating.

The University's immediate financial task is to address and eliminate its structural deficit while ensuring the ongoing success of its teaching, research and outreach mission.

Where We Are Today

There are significant structural budget deficits and real challenges that must be addressed. Fixing these challenges will require timely, strategic and sometimes difficult decisions. We will address these challenges head on, implement effective solutions and keep our University on an upward trajectory.

This is a widespread issue. According to our latest budget review, 61 of the 81 (or 75%) reporting units within the University forecast continued deficit spending.  

The vast majority of the deficit is due to increased spending to enhance and improve our student experience and to strengthen our faculty and staff. This includes millions spent on student merit aid, compensation to retain and attract world-class faculty and staff, and critical strategic investments.

Learn more about the background of the University of Arizona financial situation, including external and internal factors.

Financial Action Plan

Without further action, we would face a projected budget shortfall of $177 million this year. Our budget shortfall would only get worse year-after-year if we took no immediate action to course-correct the overspending trend. We are not going to allow that to happen.

In December, we announced immediate actions to slow spending and to help change the budget trajectory. These actions included the implementation of a hiring and compensation freeze, strict procurement guardrails and travel restrictions. Even with those measures, the latest information provided by college and division leaders indicates that we remain on a path of overspending, further depleting our cash reserves.

Longer-term solutions will be necessary over the next 18 months to implement ongoing cost-reduction measures and structural changes that address budget decision-making frameworks and accountability controls, and create operational efficiencies.

Based on input and feedback from faculty, student, staff and administrative leaders across campus, the University submitted its financial action plan to the Arizona Board of Regents on Dec. 13, 2023.

Action Plan Overview

What We Are Doing:

Actions Already Implemented
  • Implementing hiring and compensation freeze.
  • Freezing international travel for senior administrators.
  • Restricting purchasing.
  • Deferring nonessential capital projects.
  • Concluding strategic initiatives funding.
Actions Over the Next 18 Months
  • Implementing FY 2025 base budget reductions with focus on units spending in deficit, overhead and administrative functions.
  • Delaying FY 2025 Salary Increase Program.
  • Conducting individual reviews of all budget units; ensure ongoing financial accountability.
  • Rebalancing undergraduate non-resident merit aid for new students.
  • Eliminating tuition guarantee in fall 2025 for new students.
  • Eliminating Activity Informed Budgeting (AIB) model; implement centralized planning budget model.
  • Reorganizing administrative services in: Information Technology, Human Resources, Marketing & Communications, Business & Finance, Facilities Management and University Advancement (fundraising).

What We Are Not Doing:

  • Reducing need-based aid for Arizona resident students.
  • Reducing need and merit-based aid for any current students or those admitted for fall 2024 throughout their time at the University of Arizona.
  • Eliminating tuition guarantees for any current undergraduate students first enrolled prior to fall 2025.
  • Instituting furloughs.
  • Reducing retirement benefits.
  • Jeopardizing our teaching and research mission.

Next Phase of the Action Plan Implementation

Launched Jan. 29, 2024

To implement the long-term solutions needed to eliminate our structural deficit and to ensure the University’s long-term financial health, we must act now. We will gain significant operational efficiencies and beneficial structural changes; however, some of our choices will be difficult.

As part of the next phase of our financial action plan, we will implement the following changes.

Restructuring Administration

We will restructure operations across the University, including reducing administrative costs, centralizing certain functions and balancing authority, and implementing a new standard of financial reporting. These measures will improve outcomes through efficiencies. 

Rightsizing College and Division Budgets

We will rightsize college and division budgets. The deficit is a university-wide problem and must be addressed university wide. We will work with each college and division to rebalance resource allocations and to reduce costs. The University has engaged Huron Consulting to assist in the process over the next several months.

Launching a New Budget Model

We will establish a new budget model and process by Jan. 1, 2025.

Modernizing Athletics

We will modernize our Athletics operations from the ground up, including centralizing administrative functions, identifying efficiencies in operations, resetting the budget starting from zero, and installing hard caps on spending and implementing revenue packages. Dozens of athletic departments around the country also are considering similar steps to address ongoing financial challenges. To help us in this process, the University is engaging a global professional services firm to review Athletics finances and operations. 

Ensuring UAGC Efficiency

While the University of Arizona Global Campus (UAGC) has not had a negative financial impact on the University, we will continue working to ensure UAGC is more efficient and effective post-integration, achieving a significant positive financial impact.

Contrary to news reports, it is important to note that UAGC had a positive $47 million cash impact in FY 2023. This fiscal year, we currently project a $2.5 million deficit and, for FY 2025, we project that UAGC will be back to budget positive.

The University is engaging with a global professional services firm to review UAGC finances and operations and to assist in identifying the appropriate steps as we continue the acquisition process.

Faculty and Staff Workload

We will review faculty and staff workload to ensure we are appropriately staffing our University and avoiding the hidden costs of an overstressed workforce.

Retirement Incentives

We will explore the possibility of a retirement incentive program for faculty and staff who are at normal retirement age. In most cases, normal retirement is at age 65 (defined by the Arizona State Retirement System, Optional Retirement Plan and Social Security Administration) with a certain number of years of service to the University. If a retirement incentive is pursued, we anticipate releasing more information after July 1, 2024.

Enhancing Revenues

We will enhance our revenues in the years to come, which means focusing on a new financial model, increasing summer and winter session revenues and exploring all auxiliary revenue opportunities.

The Tuition Guarantee Program will continue for all current undergraduate students and those admitted for fall 2024. The University will eliminate the Tuition Guarantee Program beginning fall 2025 for new undergraduates.

There are no changes to need-based or merit-based aid for fall 2024 admitted students or current students.

Beginning in fall 2025, the University will fully maintain need-based aid for Arizona resident students and will recalibrate merit-based aid for undergraduate non-resident students.

In short, we are fundamentally resetting how we make budget decisions, rightsizing our operations and tapping into new revenue sources to ultimately restore our financial health. 

Moving Forward

Interim CFO John Arnold will work closely with leaders across colleges and divisions and their business officers to implement the new centralized budget system. This process includes a thorough review of budget details and expectations for FY 2025, and the development of individualized strategies and priorities to rightsize spend. Guidance related to those decisions will be communicated by college and division leadership to their respective areas as the financial planning process continues. 

University leadership will continue to work with the Arizona Board of Regents and shared governance partners to inform solutions that will allow us to balance our budget by Jan. 1, 2026, while also minimizing the impact on our students, faculty and staff. We will share regular updates about the financial action plan and budget decisions impacting the campus community.

This process will be transparent, measurable and accountable.

We will take all actions necessary to ensure our University continues to provide an outstanding educational experience for our students, research that drives economies and improves lives, and outreach that benefits millions across the state of Arizona and far beyond. 

Please continue to consult this website if you have questions or would like more information.

Communications

Date Sender/Information Source Title or Subject
Feb. 20, 2024 Robert C. Robbins, President ABOR Report on UAGC Available | ABOR letter | ABOR report
Feb. 14, 2024 Helena Rodrigues, Senior Vice President and Chief Human Resources Officer, and Lanita Collette, Acting Chief Information Officer Centralization of Human Resources and Information Technology Functions
Feb. 9, 2024 Robert C. Robbins, President Financial Update: ABOR Oversight Report Submitted to Gov. Hobbs | ABOR letter | ABOR report
Feb. 1, 2024 Division of Human Resources Leading Your Teams During Financial Action Plan Implementation
Jan. 29, 2024 University Leadership Forum Recording of the Leadership Forum on the Financial Action Plan | ASL version | presentation [PDF]
Jan. 29, 2024 Robert C. Robbins, President Financial Action Plan Update
Jan. 16, 2024 Robert C. Robbins, President Financial Update
Jan. 3, 2024 John Arnold, Ronald Marx, Helena Rodrigues Financial Action Plan Update
Dec. 13, 2023 Robert C. Robbins, President Leadership Update
Dec. 13, 2023 Executive Office of the President A Video Message from President Robbins | video | ASL version
Dec. 13, 2023 Robert C. Robbins, President University of Arizona Financial Action Plan – Report to the Arizona Board of Regents
Nov. 22, 2023 Robert C. Robbins, President University Financial Update
Nov. 11, 2023 Robert C. Robbins, President Financial Challenges

Frequently Asked Questions

Financial Situation

No. The Days Cash on Hand situation is not an operational liquidity issue. The University has no issues making payroll or meeting debt obligations. The Days Cash on Hand shortage, however, is a warning sign resulting from the University's expenditures outpacing its revenues, and the institution making up the difference with reserves.

Yes. A structural deficit is created when expenditures exceed revenues. For the past several years the University's expenditures have exceeded revenues, and this overspending accelerated in fiscal year 2023. In addition to short-term strategies to improve the University's cash position, the University is working to resolve the structural budget deficit.

Over the past several years, the University used its surplus in reserves to make investments in key areas that advance the Strategic Plan; support students, faculty and staff; and elevate the University's impact. That plan has proved effective. However, it has become clear that this level of investment cannot be sustained.

The longer-term issue is that the University's expenditures are outpacing its revenues.

Learn more about the background of the University of Arizona financial situation, including external and internal factors.

For fiscal year 2023, which ended June 30, 2023, the Arizona Board of Regents required the three state universities to have, at minimum, 140 Days Cash on Hand. The University of Arizona ended fiscal year 2023 with 110 Days Cash on Hand, or $704.5 million.

Cash is the common term for how much unrestricted liquid funds, cash and short-term investments, are "in the bank" right now.

  • Cash can change significantly throughout the year given the inflow and outflow of revenues and expenses. For example, the University has an outflow of cash 26 times a year for payroll while there are three significant inflows of cash due to tuition payments in fall, spring and summer.
  • Cash is typically at its highest point at the beginning of the academic year, when tuition payments are received, and again in early spring for the same reason. Conversely, cash is typically at its lowest point at the end of each fiscal year.
  • A snapshot of cash, combined with total expenditures, taken on June 30 each year, is used in the calculation of Days Cash on Hand.

Days Cash on Hand is one of several measures that can reflect an institution's financial health.

  • Days Cash on Hand is a once-a-year snapshot taken at the end of every fiscal year on June 30.
  • Days Cash on Hand is calculated at the end of the fiscal year. It takes approximately one month for final accounting entries to be submitted and another month or two for the annual financial audit to be completed by the Arizona Auditor General. The University typically receives the final official figure somewhere between mid-October and mid-November.
  • Days Cash on Hand is a formula. Basically, that formula is: June 30 Cash Snapshot divided by Final Actual Expenditures multiplied by 365 (days).
  • This formula represents the average number of days the University could continue to operate without additional revenue based on the cash available in reserves on that day. Another way to describe Days Cash on Hand is unrestricted cash and investments that can be liquidated.
  • This formula is estimated at the beginning of each fiscal year as a projection of what cash balances are believed to be at the end of the fiscal year. The actual figure is then calculated with audited values from the financial statements.
  • ABOR currently requires universities to have, at the end of FY 2023, a minimum of 140 Days Cash on Hand.
  • Days Cash on Hand is not a comprehensive measurement of the University's financial health. It is one key directional indicator of some systemic financial issues that need to be addressed and is a factor in the University's credit rating.

No. As a result of accelerated spending from FY 2022 to FY 2023, the University experienced a decline of $140 million in cash and investments, when comparing the University's cash position snapshot in June 2022 to its cash position snapshot in June 2023. Because the University both increased expenditures and spent down cash balances, at the end of fiscal year 2023 a combined increase in cash or reduction of expenditures of $240 million would have been required to return the University to the standard of Days Cash on Hand.

No. On June 30, 2023, the University had $704.5 million in unrestricted cash and short-term investments, which translated to 110 Days Cash on Hand. While this has left the University 30 days short of the minimum number of Days Cash on Hand required by ABOR, it is not a cash problem for the University. Because of the trend of expenditures outpacing revenues, the University is working to resolve the structural budget deficit.

The University's annual budgeted expenditures total approximately $2.7 billion. Appropriations from the state total approximately $350 million, or 13%.

The University uses a forecasting tool to predict the final position of the Days Cash on Hand snapshot. For the last decade, the tool produced accurate results.

The financial forecast process for FY 2023:

  • In March 2023, it was reported to ABOR that the University would have an estimated 156 Days Cash on Hand on June 30, 2023.
  • In November 2023, following the annual audit of FY 2023, the University confirmed the amount of Days Cash on Hand was 110 on June 30, 2023 – 30 days short of the ABOR-required minimum. The financial forecasting tool overestimated by 46 days because it did not account for collective accelerations in spending.

The forecasting tool has been replaced and additional budget controls are being implemented.

UAGC had a positive $47 million cash impact in FY 2023. This fiscal year, we currently project a $2.5 million deficit and, for FY 2025, we project that UAGC will be back to budget positive.

As part of its regular operations, the University lends funds to colleges and units that need an investment, particularly when revenue is reasonably assured but the unit needs a bridge to proceed with immediate needs. Units repay these funds at a low interest rate.

  • Due to the extraordinary circumstances of the last few years, including those resulting from the pandemic, the University supported its athletics operations through one-time bridge loans in the amount of $40.2 million in FY 2021, $14.8 million in FY 2022 and $31.6 million in FY 2023. Prior to the pandemic, Athletics was essentially a financially self-supporting unit.
  • The University provides scholarships for student-athletes. Other than scholarships, prior to the pandemic the University's athletics program had been essentially self-sustaining.

The University of Arizona is independently audited every year by the State Auditor General. The University's audited FY 2023 financial statements earned a clean opinion.
 
The University's financial statements are published on the Financial Services website and can be accessed online.

The University's total reserves include centrally and non-centrally managed funds. While the University has tight controls on centrally managed funds, it has not had the same level of control over the funds that are not centrally managed.

Going forward, leaders will intervene more proactively and earlier using further-improved management and oversight tools.

Next Steps

The University of Arizona Foundation is a nonprofit organization and is separate from the University. Generally speaking, donations are either restricted or unrestricted. Restricted gifts are for a particular purpose and cannot be used for anything else. The overwhelming majority of the gifts that come through the Foundation are restricted and therefore cannot be used to offset the shortfall.

The University is implementing a compensation freeze to include all compensation and pay structure adjustments. The FY 2025 Salary Increase Program and pay structure increase will be delayed until further years.

The University is implementing a hiring freeze in all units through June 30, 2024, and will reassess continuation as part of the FY 2025 budget. More information is available on the Financial Action Plan: Human Resources Guidance page.

No.

No.

No. Granting agencies award money for specific projects and the University cannot legally allocate the money to other areas.

More Resources

Financial Action Plan 

View guidance related to the financial action plan.

Human Resources Guidance

Financial Services Guidance

Capital Projects Guidance

HR Centralization

IT Centralization

Budget & Planning

Resources related to budget and planning at the University of Arizona.

Budget Reports

 

Arizona Board of Regents

The governing body for Arizona's three state universities.

ABOR Website

ABOR Reports