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The University of Arizona miscalculated available money by millions
The University of Arizona has just 97 days of cash on hand — significantly less than previously anticipated, a recent Board of Regents meeting revealed. The news raised significant scrutiny and raised the specter of deep institutional cuts to restore stability to the university’s reserves.
Since the revelation at the Nov. 2 regents meeting, the faculty has criticized senior administrators for mismanagement, accusing them of losing more than $240 million due to accounting errors and erroneous financial projections.
Now, UA officials have until Dec. 15 to present a plan to regents to restore available money levels for the 120 days required by the board. Details of the plan remain unclear, and the process is fraught with faculty concerns about mismanagement and a lack of transparency. The crisis also caught the attention of state authorities, who highlighted the need for accountability.
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The revelation
In June, UA Chief Financial Officer Lisa Rulney told regents that the university had 156 days of cash on hand. But in November this estimate fell to 97 days.
“The past few months have exposed the depth of our financial vulnerabilities,” Rulney told the board at the Nov. 2 meeting, revealing the surprising financial discrepancy.
She attributed the decline, in part, to a flawed revenue projection model, which exaggerated the amount of money available by about 30%. The UA has since replaced the model.
“I want you to know that when I said we were anticipating 156 days of available money, I was not hiding the ball or trying to obfuscate a problem we have at the University of Arizona,” Rulney said.
Rulney and UA President Robert Robbins also pointed to spending on strategic investments.
“We’re all about spending money,” Robbins said. “We just overcame it.”
Rulney noted that strategic investments focused on helping UA achieve the “fourth industrial revolution” – a reference to an increasingly technology-driven world – and “increasing our rankings.”
Robbins also cited the cost of providing merit- and need-based financial aid, growth in research expenses and a $55 million loan to the athletics program that has not been repaid.
“When we used available money to support athletics, we assumed there would be an increase in revenue, but that turned out not to be the case,” Robbins told the regents, adding that the loan was not repaid “quickly enough.” .”
Another factor, largely absent from public discussion but noted in council documents, was the purchase of Ashford University online for profit in 2020. The deal, made in an effort to expand UA’s online offerings, led to the creation of the University of Arizona Global Campus. Although the purchase only cost $1, the deal clearly added to UA’s financial problems.
“The acquisition of UAGC added US$265.5 million in operating costs, thus increasing the denominator in the days [on hand] cash formula,” reads part of an executive summary provided to the board.
(University officials did not respond to most questions sent by Inside Higher Ed, but did send the following statement about Global Campus: “We will not incur an operating loss in FY25 due to UAGC. UAGC is making one-time investments as part of its transition to the University of Arizona brought in $40 million in cash to fund these efforts while also carrying out amortization and depreciation.”)
Complicating matters further, but not mentioned in the executive summary: the Department of Education aims to recover US$72 million in canceled loans after determining that Ashford defrauded students. It is unclear whether the AU will be responsible for these funds.
The executive summary also pointed out inflationary costs and “market pressures on wages.”
With the problem now in sight, Rulney noted that the university faces difficult choices. In both management’s public remarks and documents provided to the board, officials have indicated that potential solutions include implementing a hiring freeze and selling assets. A four-year tuition guarantee and college financial aid are also at risk; Generous discounts for out-of-state students have reduced tuition revenues.
Faculty Concerns
On November 6, with the campus community still reeling from the news of the dwindling money supply, Robbins addressed the Faculty Senate, speaking for more than 40 minutes. In his remarks, Robbins noted that there was a “miscalculation” in cash reserves.
“I was as surprised as all of you to learn that we didn’t have the money available for 156 days,” Robbins said.
He noted that the path forward is not clear, but warned that “draconian cuts” could be on the way – especially for units with structural deficits, although he did not specify which ones. (UA did not respond to Inside Higher Ed’s questions about programmatic cuts.)
Robbins also indicated that individual sports could be eliminated and even suggested the idea of separating athletics from the university – a seemingly unprecedented move – while maintaining some control.
“I suggested that we move athletics out of the university and have it run by a board, but with the president still making decisions about who the athletic director is,” Robbins told the faculty.
At the Nov. 6 meeting, several faculty members blamed Robbins and Rulney for UA’s financial problems.
“We must make it very clear to our colleges, to our workers, to our students that we will not be punished for the administration’s complete mismanagement of our university’s finances,” said Katie Zeiders, professor of human development and family sciences. She urged faculty members to ask tough questions and come together to resist cuts to programs, jobs and salaries.
Others questioned the Arizona Board of Regents’ apparent lack of accountability.
“As the CFO and president look to get out of this mess of their own making, they need to hear from shared governance as much, if not more, than the Board of Regents. The Board of Regents encouraged and encouraged the short-sighted risk-taking that got us here,” said Faculty Chair Leila Hudson, professor in the School of Middle Eastern and North African Studies.
In an interview with Inside Higher Ed, Hudson suggested that the issue is “a management crisis, not a revenue crisis.” She added that the situation was worsened by a lack of transparency on the part of top administrators, arguing that “the president and chief financial officer have not been direct or consistent in their attempts to explain this sudden crisis.”
Hudson also questioned why faculty members were not informed about the matter sooner, noting that she had attended a meeting of the UA Strategic Planning and Budget Advisory Committee (of which Rulney is a member) the day before the Board of Regents be informed of the financial problems. Hudson said those concerns were not raised at the committee meeting – an omission that represents a breakdown in the practice of shared governance.
She also questioned the acquisition of Ashford University — which she said many faculty members opposed at the time — and the administration’s public silence on that deal, even though it was mentioned as a factor in board documents.
Hudson said the Faculty Senate is considering requesting a forensic audit to better understand the problem, which she argues is worsened by a “lack of accountability” at UA.
Powerful state legislators also weighed in on the university’s major financial miscalculations.
Arizona Governor Katie Hobbs told local media earlier this week that she was “certainly concerned about this coming to light now and the potential lack of oversight” by the Board of Regents. “It’s something we’re looking into,” she said, adding that the AU’s financial problems “should certainly have come to light sooner.”
What is the next?
A university spokesperson did not offer details on the development of the plan to restore the university’s cash reserves, but told Inside Higher Ed that “all options are on the table,” adding, “When mitigation actions are finalized and approved, we will share them.”
Some regents have indicated support for sweeping cuts.
Regent Larry Edward Penley, former president of Colorado State University and former chancellor of the Colorado State University system, emphasized the need for “immediate action” in the next 60 days, including possibly cutting salaries and eliminating several jobs. Penley also made a passing reference to previous state budget cuts of up to 10 percent, telling Robbins he would likely have to cut budgets at all of UA’s colleges.
This worries some faculty members. But when Robbins was asked at the faculty meeting about the possibility of a 10% reduction, the president suggested that the cuts would not be that deep.
In a recent op-ed, board chairman Fred DuVal pointed out several struggles in the higher education sector, including program cuts at West Virginia Universityand furloughs or layoffs at the University of Missouri, Pennsylvania State University and the University of Michigan. DuVal argued that universities face rising costs, often accompanied by a lack of revenue to compensate. Ultimately, DuVal suggested, economic pressures will lead to similar difficult decisions at the AU.
“This is not the time for business as usual. Higher education is being disrupted – like everything else – by technology, demographics and politics. Chairman Robbins has the full support of the board as he makes the difficult decisions this situation requires,” he wrote in an Arizona Daily Star editorial. “He will provide the Board of Regents with a plan to resolve this issue by December 15th. The council believes we need to act decisively and look forward to a plan that does so.”