The University of Arizona is in the midst of a financial overhaul as UA officials and the Arizona Board regents scramble to rein in overspending that went under the radar for years.

Let’s review.

On Nov. 2, Lisa Rulney, then the UA’s chief financial officer, presented a shocking update to the board of regents, revealing that the school had a significant deficit in their cash reserves. She exposed that school units, particularly the administration and athletics departments, had been overspending heavily with minimal oversight or knowledge. 

The aftermath of Rulney’s announcement has been a whirlwind of changes and revelations that Arizona Luminaria last summarized in December. Since then, numbers and budgets have shifted, and the university’s new CFO, John Arnold, is remodeling the school’s operational infrastructure. 

The university is Southern Arizona’s largest employer, so layoffs loom over the whole Tucson community and tensions are at an all-time high as UA leaders roll out cuts while facing intense criticism. 

Faculty, staff, students, community members and now Arizona Gov. Katie Hobbs are among these critics, denouncing UA President Robert Robbins, school administrators and the board of regents for their poor leadership and response to the financial crisis.

The ensuing calls for accountability and reform have resulted in various leadership and personnel changes to both the UA and board of regents. Here, Arizona Luminaria has compiled a quick breakdown of some of the developments. The UA also now has a financial update page with more extensive details.

University Arizona Senior Vice President for Business Affairs and Chief Financial Officer Lisa Rulney listens to a member of the public at the call to the audience portion of the Arizona Board of Regents on Nov. 16, 2023. Rulney resigned on Dec. 13. Lisa Rulney, vicepresidenta senior de Asuntos Comerciales y directora financiera de la Universidad de Arizona, escucha a un miembro del público en la llamada a la audiencia de la Junta de Regentes de Arizona el 16 de noviembre de 2023. Rulney renunció el 13 de diciembre. Credit: Michael McKisson

What led to the crisis?

The issues became public after Rulney’s presentation on the state of UA’s finances at the Nov. 2 special board of regents meeting to discuss university governance and operations. She revealed the school’s projected days cash on hand — a metric for liquidity, or the total unrestricted cash immediately available to the school — was far lower than the board of regents’ requirements.

The university had overspent by $140 million and only had 110 days cash on hand, which was 30 less than the minimum requirement of 140. Rulney’s original projection for Fiscal Year 2024 days cash on hand was 97 but new projections are even lower.

Initially, following Rulney’s announcement, Robbins gave a limited glimpse into the factors that led to the UA’s financial situation, including athletics department loans and strategic initiative spending. Since then Arnold has taken over as UA CFO and is working alongside Robbins to understand, mitigate and repair the university’s financial problems. 

Here are some of the insights Arnold has reported in reports and meetings with faculty, staff and the board of regents:

  • The school’s budgeting practices as well as decentralization in budgets and operations, without sufficient reporting and oversight measures, allowed overspending to go under the radar. “Lack of reporting is really what hid the overall spending problems,” Arnold said in a Jan. 29 leadership forum. 
  • The university’s tuition discounting attracted more students who paid less tuition and required more staff to support the school’s growing student body. “The revenue didn’t come with the students that we needed,” Arnold said.
  • Pandemic funding lowered operating costs in 2021, artificially inflating that year’s days cash on hand number, so when that metric took a steep dive in 2022 he and the board of regents assumed it was “noise in the system” due to COVID and UA administrators’ substantial investments in strategic initiatives.
  • Inflation-related increases have made personnel and operations more expensive.
  • And 2023 was unusual in that there were 27 payrolls versus the normal 26. This happens once approximately every 11 years, Arnold said at a Jan. 29 board of regents meeting.

Right now, UA leaders are focused on cutting the annual budget, overhauling the university’s financial infrastructure and increasing revenue.

What are the numbers now?

  • The UA faces a projected $177 million annual shortfall — meaning a $177 million deficit every year without intervention — and 70 days cash on hand for the end of Fiscal Year 2024. This is according to a Feb. 9 financial oversight report.
  • $116 million, or two-thirds of the deficit, comes from departments that are over budget. The report says 61 of the 81 (or 75%) reporting units are in a budget deficit. That’s a 90% increase from $61 million last year. Gary Rhodes — a UA professor of higher education and leader of a faculty committee helping with the university’s financial plans — is skeptical of these numbers. “I don’t know anyone in any unit that’s experiencing a 90% increase in their expenditures,” he said in a Feb. 19 faculty senate meeting.
  • The athletics department alone makes up $32 million. 
  • Strategic planning expenses and “unallocated leases/utilities/institutional costs make up $27 million.
  • The University of Arizona Global Campus makes up the remaining $2 million.

Arnold said the university’s “spending patterns are dangerous and we’re going to have to turn that cost curve over the next several months” but they’re currently able to cover operating costs and aren’t in imminent financial danger, he said during a Jan. 29 leadership forum. 

What has been done so far?

UA officials have already implemented several temporary measures to slow spending through the end of the fiscal year — which ends June 30 — while they develop a way out of the school’s structural deficit. This includes:

  • A temporary hiring freeze with some exceptions for positions like senior vice president and tenured or tenure-eligible positions.
  • Temporary compensation freezes with some exceptions for staff retention or changes in duty.
  • Restrictions for purchases over $50,000.
  • Restricting travel for senior administrators including direct reports to Robbins. 
  • The deferral of some non-capital projects like the planned UA Museum of Art.

Over the past months, Robbins has also announced a series of cuts and cost reduction measures. The list is likely to grow as UA officials work on “rightsizing” budgets.

Some of the cuts are more symbolic than substantive.

The board of regents announced compensation cuts for Robbins in a March 4 statement. That includes a cut of 10% to his base pay — lowering it from to $816,008 to $734,407. Robbins will also forgo bonuses or “individual at-risk and multiple year performance compensation. In 2023 Robbins received $132,500 in “at-risk compensation.” 

Some faculty, staff and students have repeatedly asked Robbins to resign since the crisis went public in November. The university doesn’t have a permanent No. 2 position right now after Provost and Senior Vice President for Academic Affairs Liesl Folks left in May 2023. Ronald Marx is serving as interim provost while the university runs a search to hire a replacement. Finalists are scheduled to visit campus in April.

Other cuts and savings include:

  • The school has tapered its strategic initiative funding from $15 million in Fiscal Year 2023 to $3 million in 2024. Funding will end by 2025.
  • Thirteen positions at the vice president, vice provost, and vice dean level have been identified for elimination or reclassification.
  • The athletics department increased ticket prices.
  • The Office of the Provost permanently eliminated currently unfilled or soon-to-be vacant positions, saving $27 million.
  • UA officials suspended the competitive grant programs in the Provost’s Investment Fund, saving $1.5 million per year.
  • UA officials suspended the Strategic Priorities Faculty Initiative, saving $475,000 per year.
  • UA officials delayed the President’s Postdoctoral Fellowship Program’s next cohort, saving $400,000 next year.
  • UA officials eliminated the eSports program, saving $300,000 per year.
University of Arizona President Robert Robbins at the Arizona Board of Regents meeting in Tucson on Thursday, Nov. 16, 2023. Credit: Michael McKisson

What’s next?

University officials set specific goals to reverse the current spending trajectory over the next 18-36 months, including a reduction in administration, “rightsizing” of college and division budgets, restructuring the athletics department and restructuring the university’s online platforms.

  • Arnold requested that colleges and divisions prepare financial plans that would cut annual spending by 5%, 10% and 15% over the next 18-36 months. Arnold said at a Feb. 27 staff council meeting that “there are likely to be layoffs” but that these decisions will be made at a departmental level, not across the board.
  • News about layoffs and departmental cuts will likely come in late April as new budgets for Fiscal Year 2025 are finalized, according to a March 4 financial update.

Officials also announced some new expenses related to cutting spending.

  • UA officials are working with Huron consulting group on a new budget model for implementation on Jan. 1, 2025, according to a Jan. 29 financial update.
  • The board of regents is hiring two firms to evaluate the University of Arizona Global Campus and the Athletics Department.
  • And the United Campus Workers of Arizona has hired Howard Bunsis to do an independent audit of the school’s finances and said the new report will be available in April, according to the union’s media representative Maria Sohn Hasman.

Why is Gov. Hobbs involved in this?

The governor became publicly involved when she slammed UA officials, repeatedly citing leadership’s failures in a Jan. 25 letter to Fred DuVal, the board of regents’ chair at the time, and Arnold that she posted on X, formerly known as Twitter. In the letter, Hobbs requested two reports: a detailed plan outlining the major strategies and tactics “to resolve the financial issues at the university” and a report with the “rationale and process” behind the Ashford University acquisition. 

A month later, Hobbs made a statement demanding an in-person meeting with the Arizona Board of Regents and University of Arizona leadership to “discuss next steps,” saying the board “failed in their oversight role.” The governor’s statement came after Regent Lyndel Manson and DuVal publicly berated the UA Faculty Senate during a recent board of regents meeting. 

Under state law Hobbs, as governor, is an ex-officio member of the board of regents, serving while she holds office. And the regents are appointed by the governor to serve 8-year terms.

After the in person meeting on March 6, Hobbs released the following statement:

“From day one when the financial mismanagement at the University of Arizona became public, my goal has been to restore the public’s faith and trust in this institution. There is a long road ahead of us to fix the financial mismanagement and ensure the university emerges from this situation stronger than it was before. Now is the time for ABOR and university leadership to step up to ensure that this situation is not just resolved, but resolved in a way that propels this university forward.”

Who is being held accountable?

There have been several leadership changes, from resignations to salary cuts, in the aftermath of the financial crisis.

  • Lisa Rulney stepped down from her positions as UA chief financial officer and senior vice president for business affairs on Dec. 13, 2024 during a board of regents meeting following public outcry for her resignation. Almost a month later, local media outlets reported she was still working at the school as the UA’s senior advisor for business operations, while retaining her same salary of $506,325. Robbins announced she would stay in this role until the end of her employment contract in June, according to a Jan. 1, 2024 email to UA stakeholders.
  • John Arnold, Arizona Board of Regents executive director, took over for Rulney as the UA’s interim CFO on Dec. 13, 2023. Hobbs and other UA stakeholders expressed concern about the possible conflict of interest of Arnold holding a role at the UA while maintaining his job with the regents. The board of regents announced Arnold would be taking a leave of absence from his board duties to focus on helping the UA, in a press release on Feb. 29, 2024.
  • Fred DuVal stepped down as chair of the board of regents after Hobbs publicly criticized his decision to seek legal action against UA Faculty Senate Chair Leila Hudson, in a Feb. 26 statement. DuVal remains on the board and said, “By resigning as board chair, I want to do my part to create space for collaborative efforts toward real solutions,” in the official announcement. Board member Cecilia Mata took over the leadership role.
  • Desireé Reed-Francois took over as UA’s Athletics Director on March 3 after former director, Dave Heeke, stepped down on Feb. 2. During Heeke’s tenure, the Athletics Department took out $87 million in loans since 2019, much of which has gone unpaid. Reed-Francois signed a five-year contract with an annual base salary of $1 million that will increase to $1.2 million in her fifth year.

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Carolina Cuellar is a bilingual journalist based in Tucson covering South Arizona. Previously she reported on border and immigration issues in the Rio Grande Valley for Texas Public Radio. She has an M.S....