Trump's 'attack on higher education' creates budget risks at U of A, CFO says

University of Arizona financial officer John Arnold told faculty senators there’s no doubt the university has to reduce expenditures and certain units will have to take cuts. He also stated the Trump administration’s “attack on higher education” has created risks in fiscal year 2026’s budget.

“There’s just been a significant attack on higher education across the country that we’re dealing with, and that has created some financial risks and uncertainty around budgets in fiscal (year) ’26,” said Arnold, the UA’s chief operating and financial officer, at Monday’s Faculty Senate meeting.

Some of those challenges — potential major changes to federal funding agency budgets and staff — have already happened, and the UA doesn’t yet know how that’s going to impact the flow of grant dollars and other funds to the university, he said.

Arnold, who presented a report on university finances, pointed to the federal government wishing to change how facilities and administration or F&A research costs work; the reduction of federal research funds; the stop work orders or termination of federal research projects; uncertainty around Pell grants — federal student aid for undergraduate students; and effects from the state’s education budget.

Since the Trump administration was sworn in Jan. 20, numerous proposed changes to the federal funding landscape have occurred, including: the National Institutes of Health capping its F&A cost rates at 15%; the U.S. Agency for International Development cancelling foreign aid programs, including four cancelled at UA; the National Endowment for the Humanities cutting projects, including cancelling eight UA humanities projects; the U.S. Department of Education’s letter to universities demanding they stop race-conscious programs and activities or lose federal funding; and more.

When asked what are the projected impacts to the UA from the federal government’s proposed cuts to indirect research costs, and if the loss will affect faculty and staff, including research and non-research positions, Arnold said UA administrators don’t know what the federal government will do, but have modeled out various scenarios and are trying to prepare for them.

Arnold didn’t divulge any details of what the scenarios or plans to prepare for them are.

“Fortunately, the University of Arizona, I think, is better situated than some other universities because of the diversity and depth of our research portfolio, but I’ll speculate a little bit — if there are deep cuts to research and to federal dollars, my guess is it will impact all aspects of the university,” he said.

“Question was, ‘Will it impact both research and non-research positions?’ There’s so much crossover there, and often times, faculty have both research and non-research funding,” he said, pointing to his finances report and saying $130 million is the estimated indirect or F&A costs.

He also said it is important to look at the operating side of the university when a grant is cancelled, saying administrators will have to sort through the fixed and variable costs, the latter of which might go away after termination. “In many cases, it’s really unique to each grant,” he said.

“We’ve been preparing to refinance some of the university’s debt for a long time, and this was the week that was scheduled for that — turns out, thanks to the Trump tariff initiatives, this has turned into one of the worst and most volatile weeks we could have picked,” said Arnold.

“So we’re monitoring the situation closely, and hopefully we’ll be able to get a deal done. But if not, might have to delay a little bit, because what’s going on with with the federal government and the impacts on the market,” he said.

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The UA's budget deficit, dating to fall 2023, was brought down to $65 million between January and July 2024, was a planned deficit for FY25, Arnold said. “Then in fiscal ’26, which starts July 1 of 2025, we plan to be operating with a balanced budget,” he said.

Regarding the 3% modeled cuts each college was asked to incorporate in their budget plans for FY26, Arnold said administrators are working through those with the college deans, financial officers, and division leaders on how to prioritize spending, generate additional income and reduce expenditures. He said they are developing a series of metrics for the cuts by looking at “measures of efficiency” and “measures of academic outcomes.”

The deficit will end on June 30, but will be balanced out in FY26’s budgets that have 3% modeled cuts to certain units, UA spokesperson Mitch Zak confirmed Tuesday.

“There’s no question, we have to reduce expenditures. And so, will some units take cuts? They will,” Arnold said. “Will some units go into fiscal (year) ’26 with growth in expenditure authority? There’s some fast-growing colleges on campus that need additional faculty that support students that are coming in. … We’re not doing across-the-board (cuts). We’re really trying to weigh each situation on the circumstances and make the best decisions we can in conjunction with academic leadership.”

Arnold’s report on university finances includes the UA’s FY25 budget — $2.99 billion — broken down by different revenue sources, including the largest chunks coming from:

— 29% or $878.7 million: Grants and contracts brought into the UA’s research enterprise, which counts for the largest portion of the budget.

— 27% or $816.1 million: Net tuition and fees, the second-largest source of revenue.

— 13% or $381.3 million: State appropriation or budget, the third-largest source.

The University of Arizona Global Campus or UAGC brings in 8% ($238.9 million) and net auxiliary revenues, which include the student union, athletics, parking, campus store and residence halls, bring in 8% ($232.8 million).

A faculty senator asked why the UA was investing $20 million in strategic research areas, including space sciences, water and energy, biomedicine and health care, and mining, as announced by Garimella in early March.

UA President Suresh Garimella responded, saying the money comes from the university’s Technology and Research Initiative Fund approved for a particular vision around research areas, and it’s not possible to redirect them. “It energizes campus, I think, especially during difficult times (and) it’s nice to be able to work towards something big and visionary,” said the president.

Arnold also discussed the UA’s cash reserves, which are measured by the number of cash-on-hand days it has, saying the way for the university to measure its deficit is the change in its cash reserves. Arnold said the UA’s cash reserves will likely be less at the end of this year as the university is reducing its deficit. The auxiliaries, such as parking, student union and residential life, generate money and tend to have cash reserves, he said.

In November’s Arizona Board of Regents meeting, the UA’s projection for the end of FY25 was 76 days of cash on hand. This falls below the ABOR’s minimum, which is 143 days. Arnold did not give a number Monday for the current days’ worth.