Action Plan

University of Arizona Financial Action Plan

Dr. Robert C. Robbins
President
University of Arizona
December 13, 2023

Regents –

Thank you for the opportunity to provide an update regarding the University of Arizona’s financial position and a plan of action to address our drop below the Arizona Board of Regents’ requirements for Days Cash on Hand (DCOH). The University’s DCOH shortfall is a critical issue to be addressed. However, more importantly, it has served as a warning sign alerting us to a more significant, university-wide structural issue. Put another way; our DCOH shortage is a symptom of an underlying condition that must be treated to ensure the University's overall health and the ongoing success of our mission.

Following several years of heavy investment in our university’s successful strategic plan, our DCOH shortage results from a university-wide structural deficit. The University’s expenditures have outpaced its revenues, and the institution has covered the difference with reserves. The University has also historically lacked the central budget and expenditure controls necessary to monitor institution-wide finances effectively in real-time.

Our initial review has determined immediate actions are required to recalibrate our financial path, address the structural deficit, and replenish an appropriate level of reserves. Longer-term solutions will be necessary to implement ongoing cost-reduction measures and structural changes that address our budget decision-making frameworks and accountability controls and create operational efficiencies.

Our financial action plan is based on input and feedback from faculty, student, staff, and administrative leaders across the University. The strategy includes necessary steps to positively impact the University’s financial position and organizational structure and ensure the ongoing success of our teaching, research, and outreach mission.

Financial Actions

Immediate Actions Over the Next Six Months

Expenditure Reductions
Immediately reduce spending in the second half of FY 2024.

  • Hiring and Compensation Freeze: $16M in savings

    • Implement a hiring freeze in all university units through June 30, 2024, and reassess continuation as part of the FY 2025 budget.
    • Implement a compensation freeze to include all compensation and pay structure adjustments.
  • Immediately Restrict Purchasing: $5M in savings
    • Require Senior Vice President approval for significant purchases.
  • Defer Nonessential Capital Projects: $9M in savings
    • Defer all capital projects funded with internal unrestricted resources where construction has not begun until cash reserves and financial position have improved.
  • Immediate Conclusion of Strategic Initiatives
    • Investments in our strategic plan have always had planned phase-outs that are now concluded.
  • Freeze International Travel for Senior Administrators
    • All internally funded international travel for central and unit-level senior administrators is prohibited through the remainder of FY 2024 and will be assessed for continuation in the FY 2025 budget.

Actions Over the Next 18 Months

  • FY 2025 Base Budget Reductions

    • Reduce the FY 2025 base budget to address the over-allocation of budget throughout the University and reduce or eliminate non-critical spending – with a particular focus on Colleges and Divisions spending in deficit.
    • Target overhead and administrative functions for larger reductions to protect our teaching and research functions.
  • Eliminate FY 2025 Salary Increase Program and Pay Structure Increase
    • Salary increases and scheduled pay structure changes will be delayed until future years.
  • Eliminate the Tuition Guarantee Program Beginning in the Fall of 2025
    • The Tuition Guarantee Program will continue for all current students and those admitted in Fall 2024.
  • Recalibration of Undergraduate Non-Resident Merit Aid Beginning in the Fall 2025
    • Fully maintain need-based aid for Arizona resident students.
    • Fully maintain aid awards for currently enrolled students.

Institutional Controls and Financial Triggers

Eliminate Activity Informed Budgeting (AIB) and transition to a Centralized Planning Budget Model in FY 2025

  • Immediately eliminate AIB as a component of the University’s decision framework for allocating funds.
  • The existing base budget, including reductions the second half of FY 2024, will be used as a starting point for FY 2025, with budget reductions determined by central administration based on analysis of individual unit budgets and conversations with unit leaders.

Financial Management Accountability

  • Require all units to continue submission of financial plans that align with available resources. Individual budget unit leaders will be held accountable for all budgetary decisions, including preserving reserves.
  • Encourage and enable units to increase cash reserves for strategic investments.

Monthly Unit Budget Reviews

  • Implement immediate monthly administrative review of budget units, creating uniform oversight of unit revenues and expenditures, allowing for mid-year budget corrections.

Reorganization of Administrative and Service Control Structure

  • Restructure unit controls for common administrative services beginning in FY 2025 to eliminate redundancy and create operational and financial efficiencies. Reporting structure for local managers within the functions of Information Technology (IT), Human Resources (HR), Marketing and Communications, Business and Finance, and Development will shift from individual units to central administration by function.

    • This will begin with IT employees this year.

Athletics

Address the financial sustainability of intercollegiate athletics with direct oversight from central administration. The scale of the financial challenges facing our Athletics Department will take multiple years to remedy, given the ever-changing national landscape for collegiate athletics. Work already has begun with our Athletics Department to bolster revenues through ticket sales, maximizing media rights contributions, increasing philanthropy, and reducing costs through centralizing administration functions.

University of Arizona Global Campus (UAGC)

UAGC’s operating expenses, systems, assets, and cash are included in the current FY 2024 budget. Greater efficiencies will be created by eliminating administrative service redundancies and overlapping academic programs as UAGC is integrated into the University’s overall operations. This is already in process and reflected through recent organizational structure and leadership changes.

Moving Forward

One early data point that triggered this discussion was a decline in the number of Days Cash on Hand at the university. Given that it's the middle of a fiscal year and significant spending has already been done, in the short term we expect that number to decline further. All the immediate steps being taken by the university to stem the deficit spending will help limit further erosion in the Cash on Hand number, and ultimately, recent trends will reverse. That said, the University has significant levels of Cash on Hand and – with the steps that are being taken now – the financial situation is manageable.

Many of the measures outlined in this plan will result in difficult decisions across campus by Administration and College and Division leaders. Still, they are necessary and will be implemented as committed. To ensure our community is informed of these processes, a website outlining our plan will be updated periodically with current information and useful resources.