UO balances 2025 books, warns of looming deficit

The University of Oregon closed its 2025 fiscal year with a stronger than expected balance, though officials warned trustees this week that rising personnel costs and flat enrollment will push the school back into deficit.

During a Board of Trustees meeting on Monday, Sept. 15, administrators said UO’s main operating budget ended on June 30 about $3.5 million above projections. While officials expect most revenues to slightly increase in fiscal year 2026, they forecast expenses to rise nearly three times more.

The university projects that the mismatch, coupled with largely level enrollment projections, will leave UO with a $21.6 million shortfall in fiscal year 2026 before cuts and a $4 million deficit after cuts.

Quarterly financial report

Jamie Moffitt, chief financial officer, and Brian Fox, associate vice president for budget, financial analysis and data analytics, delivered a report on the fourth quarter of UO’s 2025 finances. The fiscal year ran from July 1, 2024, to June 30, 2025.

The projected final balance in the Education & General fund — the university’s main operating budget — was $119.7 million, up from a third quarter projection of $115.4 million.

Tuition and fees and state appropriations, the fund’s two largest revenue sources, came in on target at $529.1 million and $106.5 million, respectively. 

Miscellaneous revenue categories came in about $800,000, or 1.4%, higher than projected. That uptick is in part due to revenue from indirect cost recovery from federal grants, as well as interest and investment, which both came in slightly above projections, per the presentation. 

Moffitt said UO has not seen a slowdown in its grant expenditures or the resulting overhead reimbursements, though officials expect declining ICC revenue due to federal attempts to block indirect research costs. 

Officials then turned to the university’s fourth quarter expenses. 

Personnel costs came in 0.6% under projections, about $3 million, due to greater use of gift and grant funds and a hiring slowdown as part of the university’s efforts to narrow its $29.2 million budget gap.

“We began last spring making more clear statements to units across campus that we anticipated troubled waters ahead in our budget, and so we started to see a pullback in hiring,” Fox said. 

Service and supply costs, which cover nonsalary, noncapital operating costs, came in 1% under projections, or $1.4 million, primarily due to lower than expected natural gas costs, Fox said.

The university’s thermal heating system runs on natural gas. Trustees have yet to move forward with proposals for transitioning the system to a green alternative. 

Student aid costs came in 10.6% under projections — about $500,000 — due to “utilization of gift funds,” per the presentation. Fox said units were “more conscious” of managing general fund budgets to ensure they used gifts for student aid.

Capital expenditures came in 12.9% or $600,000 under projections due to lower-than-expected departmental expenditures. 

“Folks naturally began to react to the recognition that we have much more challenging budget circumstances,” Fox said. 

Officials ran through gaps between fiscal year 2025 projections and actual balances, including differences in personnel costs that they said were tied to student worker union negotiations and faster-than-anticipated rehiring. 

“We began to signal to this body that our vacancy rates were very, very low and lower than historical levels of the institution,” Fox said. “That shows up as higher than anticipated compensation.”

When board Vice Chair Marcia Aaron asked how projections of personnel costs could be more accurate, given UO’s budget challenges, Moffitt said personnel costs are “very challenging” to project because hiring decisions take place at the school, college and department level. 

When trustee Tim Boyle asked if some units are better or worse actors in terms of budget than others, Moffitt said “most units” are operating within their budgets, and that some face more pressures than others, including from inflation. 

Long-term projections

Though UO’s E&G fund ended $3.5 million above projections last fiscal year, the university faces a “structural imbalance” in 2026 as expenses are projected to outpace revenues, Moffitt said.

Officials project tuition and fees, which make up more than 75% of revenue, to grow at 2.7% next year. The university expects state appropriations to rise 2.6% and other revenues, including ICC funds and investment returns, to shrink by 0.5%.

Officials forecast compensation and benefits, which account for about 79% of expenses, to grow 6.9%. They project general expenses — supplies and services like software and utilities — to rise 4.4%. 

That imbalance will produce a negative run rate of $21.6 million in fiscal year 2026, before any budget reductions. After cuts, officials anticipate a $4 million deficit.

Fox said when nonresident enrollment dropped in 2024, trustees recognized that UO would be “in a pickle” without an uptick the following year. 

Last year, officials introduced a new scholarship program aimed at nonresident students, but the class was essentially the same size as the previous year, Fox said. They were also hopeful the rollout of a new federal student aid process and a “more normal” enrollment cycle would boost growth.

“That clearly did not play out, which is why we came back to this group after the May 1 deposit deadline last year and laid out why we were moving into the structural deficit,” Fox said.

Total new undergraduate enrollment last fiscal year, including transfer students, was 6,055 students. Officials projected 6,183 in June for 2026, and revised the estimate to 6,051 in September. 

“Our assumption was that things would stay flat for another year,” Moffitt said. “We do in the numbers, though, starting in fiscal year 2028 which is two years from now, we do have an assumption that nonresident undergraduate enrollment is bouncing back up to its prior levels.”

The university is also monitoring risks that officials don’t factor into budget models, including increased competition for nonresident students, federal actions affecting international enrollment and student loans and research funding changes

Potential opportunities, officials said, include stronger-than-expected nonresident and international student recruitment and continued administrative and academic operational improvements.

Trustees and officials also discussed the university’s plan to invest $58.6 million into a 20-year side account for PERS, the state’s pension system, on Oct. 1. They hope the account will slightly reduce the impact of the state’s PERS rate hike in July 2025, which raised UO’s personnel costs.