Gov. Hobbs: Don't cut students' financial aid to fix U of A's money mess

PHOENIX — Gov. Katie Hobbs said Monday the University of Arizona should not deal with its newly disclosed money crisis by cutting financial aid for students as UA’s president is considering.

Hobbs said she is still looking for answers from UA officials about how its estimate of cash on hand for the current fiscal year was off by about $240 million. The school expects to have 97 days of cash on hand versus the 156 days that had been projected and the 140 days’ worth required by the Arizona Board of Regents, which oversees the state’s public universities.

UA President Robert C. Robbins told the regents at least part of the problem relates to financial aid UA has had to provide to attract students.

“That costs money,’’ he said, pegging it at about $300 million a year. And not all of it was based on need, with “a lot of it in merit support,” Robbins said.

“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,’’ he said.

Hobbs, however, said she does not like the idea of dealing with the university’s financial problems by cutting aid.

“I think it’s important that we make college as accessible as possible for Arizonans,’’ the Democratic governor said. “I don’t think financial aid should be the answer.’’

It may be that changes cannot be avoided. Regent Larry Penley, addressing Robbins at a board meeting earlier this month, said the UA has “overspent’’ its scholarship money.

“Complete remodeling of the scholarship, financial aid issue has to occur before this gets underway next year,’’ Penley said.

Hobbs is interested in more than the cause of the problem and potential solutions.

She also wants to know where members of the Arizona Board of Regents were as the UA’s fortunes fell, she said.

“I’m certainly concerned about this coming to light now and the potential lack of oversight by ABOR,’’ Hobbs said. “It’s something that we’re looking into. This is a problem and it certainly should have come to light sooner.’’

Hobbs did not respond to a reporter’s question Monday on whether Robbins should be fired.

She said she is looking into whether the problem is limited to the UA or is part of a larger issue affecting Arizona State University and Northern Arizona University.

All this comes following disclosure of the $240 million difference in the estimated cash on hand.

The regents got their first official look at that just two weeks ago when Lisa Rulney, the UA’s senior vice president and chief financial officer, walked board members through the revised numbers.

She told them that had she used a different method of calculating all this that she — and they — would have seen the problem some time earlier.

“The difference is we all would have been talking about this trend a few months earlier than we are today,’’ Rulney said. Now the university is four months into its budget year.

Hobbs, who by virtue of her position as governor is a member of the board, was not at the meeting.

Rulney told the regents the problem has to be addressed from the perspective of the whole university, including whether some projects in the UA’s capital plans will need to be set aside.

There’s also the possibility of a hiring pause across the institution, although she said, “There are only specific units that have acute issues.

“So a hiring pause, if implemented across the entire institution, would have an impact on our mission,’’ including how the UA proceeds with grants and contracts, Rulney said.

Salaries also came up as an issue. “The last several year’s we’ve had a 4% salary increase program,’’ Rulney said. She said that’s important because every unit within the university has talked about “the competition for talent.’’

“So we have felt it was important to make investments in our employees,’’ Rulney said. “But with the cash issues we are facing and the need to build back central reserves we may have to have a different tact for fiscal year 2025.’’

Even if the university can avoid cutting financial aid, students may need to pick up some of the burden, officials said.

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Robbins, in speaking to the regents, noted the university has a four-year guarantee it gives to incoming students, promising a fixed rate of tuition for eight consecutive semesters.

“That’s a great differentiator for us,’’ he said. “But if it’s going to cost us money — which it does — than I think we’ve got to look at it,’’ Robbins said. “That’s another hard decision.’’

Robbins emphasized that while there may need to be a university-wide solution, this isn’t a university-wide problem.

“There are a few units across the university that are struggling, not the least of which is athletics,’’ he said.

The UA president said he and others assumed when they started using overall university cash on hand to support athletics that there would be an increase in revenues.

“It’s just turned out not to be the case,’’ Robbins said.

It started with the collapse earlier this year of the Pac-12 conference.

USC, UCLA, Oregon and Washington moved to the Big 10, with Arizona, Arizona State, Colorado and Utah headed to the Big 12 to create a 16-member conference.

“That situation may not get better before it gets worse,’’ said Robbins.

“We’ve got plans to address this issue to build back the central reserves,’’ he said. “And I’m confident we’re going to be successful.’’

Still, Robbins said, this isn’t just a UA problem.

“I don’t know of an athletic department in this country that’s not losing money,’’ he said. “Even The Ohio State University had to borrow $50 million from the university to fund athletics.’’

Robbins did not suggest the Legislature might provide an increase in state aid. That is unlikely to happen, what with the state government budget facing a $400 million gap between revenues and expenses for the current fiscal year and another $450 million gap for the new budget year that begins next July 1.

So that means finding new sources of cash.

“I think philanthropy is going to be a really important part of this,’’ said Robbins.

He said those outside donations would not be used for actual operating costs.

“It will free up some of the money that we currently use from our reserves to fund scholarships and things like that,’’ Robbins said.

Those reserves, he said, also have provided funding for “big, moon-shot programs.’’ Robbins said outside dollars will mean such programs won’t have to be funded from the central university budget.

But that gets to another piece of the school’s financial problems.

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

Penley said something needs to happen — and soon.

“You’re going to have to terminate people, stop purchasing, or do something else,’’ the regent told Robbins at the board meeting. “Clearly, you’re going to have to have a hiring pause.’’

All that will be difficult, Penley noted.

“This is really going to hurt the university and hurt the faculty to do what is necessary to reach the minimum policy required days on hand of cash that you must have,’’ he said.