Projected budget deficit takes center stage at UO trustees meeting

University of Oregon officials on Monday, June 1, spelled out more details behind the $65 million projected budget shortfall announced last month.

The university projects a roughly $23 million budget gap in fiscal year 2027 that is forecast to reach $65 million by 2031, in large part because of an expected drop in out-of-state enrollment, President Karl Scholz and Chief Financial Officer Jamie Moffitt told trustees at the June board meeting. 

About 1,888 nonresident students are expected to enroll in fall 2026, about 400 fewer than the year prior and the lowest number in 10 years, Scholz said during his presidential update. That number marks a grim “new reality” for UO, which relies on those students for tuition, he said.

“Our deficit is not a failure of execution,” Scholz said. “There’s a human tendency to want to assign blame when things do not go the way that we would like, but the higher education landscape is changing.”

The university should act now to avoid the “enormous uncertainty and hardship” of cutting budgets every year and relying on the $124 million in reserves in the UO’s education and general fund — which is enough for 9.3 weeks of operating expenses, he said. The university cut $29.2 million from its budget in fiscal year 2026, terminating 57 employees last fall.

An Academic Modification Advisory Committee staffed by members of the University Senate will help decide where to implement cuts, work that will require “difficult conversations and tradeoffs” and an opportunity to “clarify what matters most” for the university, Scholz said. 

Asked by trustees, Scholz didn’t rule out cuts to tenured faculty or members of the administration.

He reiterated that the work won’t occur over the summer; trustees will receive an update in December, after a “robust period of consultation.” He said students who have commitments to campus jobs next fall will still be employed.

“This is the start of a six-month process and community dialogue about the budget to close our immediate gap and, more importantly, to endeavor to set the university on a course that avoids this becoming a disheartening and debilitating annual exercise,” said Provost Chris Long.

Consultation from committee 

University Senate President Dyana Mason — an associate professor of planning, public policy and management — outlined the new Academic Modification Advisory Committee, which she described as part of a recently developed Senate structure for enabling feedback on budget decisions.

Some faculty, staff and students felt last year’s cuts stemmed from a rushed process that lacked transparency and community input.

This year, the provost will work with deans to develop budget proposals, requiring a “clear rationale” of why a particular department or program might be considered for termination, Mason said. 

The provost will then bring proposals to the committee, made up of faculty, staff and students who will provide Scholz “confidential feedback” over the summer, and then engage in a public comment period in the fall. A small group of trustees will also be informed on the committee’s work, board of trustees Chair Steve Holwerda said. 

The six-month window for the efforts is a minimum for engaging in a consultative process around budget cuts, Mason said. 

“One request I have of you today is to allow this process to take place in a time frame that allows for thorough and appropriate deliberation and intentionality,” Mason said.

Trustees suggested ways to speed up the process to encourage savings for the university. Holwerda said he likes deadlines to accelerate decision-making, which can often get “dragged on for a long time.” Renée Evans Jackman said the committee could separate longer-term items from those subject to immediate action. 

“I challenge you to press the committee in the Senate,” trustee Dennis Worden said. “Can we move faster? Can we move aggressively?”

Mason responded that the committee needs time to shape the future of higher education for the next generation of students, not just the next few years. Graduate student trustee Cy Abbott also chimed in to remind trustees not to “misunderstand our workforce.”

“People will have a chance to be heard on this matter, regardless of what unit they’re from,” Mason said. “Will everybody be satisfied? I’m sure the answer to that is no.”

In her final report before trustees, outgoing UO student government president Prissila Moreno urged the board to involve students in budget decisions.

“I’m obviously not an administrator, and I don’t pretend to have a perfect solution,” Moreno said. “I definitely don’t believe that there is a hidden pot of money waiting to solve these challenges, but that’s exactly why students cannot be left out of this conversation.”

Financial update

Though the university’s educational and general fund is projected to end this fiscal year June 30 about $4.5 million in the black, UO has forecasted moving back into a structural deficit as it estimates a $22.8 million deficit next year, said Moffitt, CFO and senior vice president for finance and administration.

Next year, the university is projected to take in $9 million less in tuition, a decrease of about 1.7%. That amounts to a 0.7% reduction in total revenue, since tuition makes up about 76% of revenue in UO’s general fund, Moffitt said. 

“It’s a really, really big impact,” she said.

Personnel expenses, representing about 80% of UO’s costs, are projected to rise $21.2 million, or 3.8%, in part due to a “a very significant increase” in the university’s benefits costs next year, she said.

It would take about $65 million of “budget restructuring” to balance the university’s revenue and expenses and revenue over a four- to five-year time horizon, she said. The university projects a $73.1 million deficit in its five-year net run rate, which is an adjustment of the original $65 million shortfall to reflect inflation. 

“Our cost structure has been built around relatively high proportions of nonresident students, and that makes us uniquely vulnerable when we see shifts in our enrollment patterns,” said Brian Fox, associate vice president for budget, financial analysis and data analytics.

The cost to the university of waiting to make cuts could be as much as $6 million a month, Moffitt said.

“Each year [reserves are] dropping pretty precipitously until we get to fiscal year [20]29, when, by the end, there’s almost no fund balance at all,” Moffitt said. “That’s if you didn’t take action at all. So obviously we will need to take action.”

State funding is projected to rise 5.5% in FY 2027, slowing declines in other revenues, but the university has “less confidence” about funding in future years, Fox said.

“Much less,” Holwerda added. Scholz had said earlier in the meeting that “forecasts in all sorts of dimensions” suggest the state of Oregon could soon face a recession.

The university is projecting enrollment to remain steady in its base case for future years, and also estimates that revenue from grants will drop next year due to the federal government’s inactivity in issuing them, Moffitt said.

Trustees questioned if future years’ out-of-state enrollment estimates were conservative enough, or if the numbers could sink even lower. In response, Derek Kindle, vice president for student services and enrollment management, said peer schools that compete with UO, like public universities in California, are reaching their maximum enrollment capacity, and highlighted the university’s efforts to recruit in areas outside the West Coast.

“We have essentially a whole other side of the country that we can improve in, with respect to, being in the market or a market leader in some of the spaces,” Kindle said. “However, that takes time. We’re not going to get that in the space of a year, or maybe not even two or three years.”