University of Arizona’s Financial Woes Are a Sign of What’s To Come

The university had miscalculated its estimated cash-on-hand by $240 million.

In November of last year, Dr. Robert “Bobby” Robbins, the president of the University of Arizona (UArizona), announced that the school was in major financial trouble. The university had miscalculated its estimated cash-on-hand by $240 million. 

Worse yet, it was not the result of a natural disaster or black swan. The school had simply done bad math.

According to Robbins, the two main culprits were the school’s financial aid policies and their athletics program. The university made a $55 million loan to their athletic department at the onset of the pandemic that he says they have been too slow to pay back. They also maintain a generous financial aid package, with in-state students paying an average of $5,000 per year (it costs approximately $20,000 per year to educate each student), and those with a GPA above 3.75 receiving a full-ride.

Before moving on, it’s worth acknowledging the role that K-12 grade inflation likely plays in the growing financial burden posed by UArizona’s aid policies. Data continues to show that over the last half decade, high school students are learning less but earning higher grades. As national test scores steadily fell from 2010 through 2022, “The average adjusted GPA increased from 3.17 to 3.39 in English; from 3.02 to 3.32 in math; from 3.28 to 3.46 in social studies; and from 3.12 to 3.36 in science.” Simply put, more students are potentially eligible for the school’s GPA-dependent aid. Data on this front is hard to come by, but it’s worth exploring further. 

As Arizona Gov. Katie Hobbs (D), the Arizona Board of Regents, and university administration deliberate on how to handle the fallout, what’s becoming clear is the damage that these drastic cuts will have on campus. Robbins has already said that severe cuts are coming, including the shuttering of some of their athletic programs and budget cuts across all academic departments. This scaling back will also affect the Tucson community, which relies on UArizona as a major economic powerhouse.

As the dust settles, details presently obscured will come to light. Opining on the specifics of the situation without adequate information would be impolitic. But onlookers have reason to be concerned, not least because the financial crisis taking place at southern Arizona’s premier university is a sign of what’s to come for universities across the nation.

Universities will be faced with a demographic cliff as Americans have fewer children. Indeed, they already are facing one: Even the most liberal estimates show college enrollment leveling off by 2030. While people’s increasing skepticism of higher education is certainly a factor at play, the driving force is our historically low birth rate. Fewer students translate to declining revenue, leading less adept institutions to shut their doors, and better-equipped ones to cull programs they deem unprofitable.

In UArizona’s case, they do not currently suffer from declining enrollment. Arizona is one of the nation’s fastest growing states and thus enjoys advantages that other regions don’t share. That said, in-migration might not be able to keep up with the projected decline in enrollment that will come about as a result of pandemic learning loss. A report published by Common Sense Institute Arizona, a non-partisan think tank, projects that learning loss could lead to as many as 26,000 fewer college graduates by 2026.

One major concern is that a decline in revenue will negatively affect the liberal arts and humanities. Higher-ROI programs like engineering, biology, and business administration will survive the first rounds of cuts, while less “practical” majors like theater and dance will be first to go. On the flip side, these trends will drive colleges into deeper competition with one another, theoretically weeding out “bad” programs of study.

“Bad” here is defined in economic terms, of course. For better or worse, most Americans view college primarily as a means of socioeconomic mobility. In fact, this is the implicit logic of our federal student loan program: A loan is only given for an investment with a high likelihood of economic return. 

Even if most people do not understand university as such, it is difficult for any modern institution to sit comfortably above market forces. (Public institutions are a notable exception to this rule, though even then, many state schools rely minimally on taxpayers for revenue — and there is no guarantee that elected officials will wisely steer public monies towards programs that are socially valuable but don’t “pay off” economically.)

How universities respond to this coming challenge will define the future of American higher education. How they operate, what they cut, and what they continue to fund will have consequences for generations to come. Despite the nuances of UArizona’s current financial crisis, Dr. Robbins and Chairman DuVal’s management will be an interesting case study in how colleges respond to declining revenues. 

College leaders across the nation should pay close attention, especially as Republican lawmakers in Washington and at the state capitol contemplate withholding public support from higher education — either by reforming our profligate federal lending system, or straightforward state-level budget cuts.

Joe Pitts is a senior columnist at 1912. He serves as Chairman of the Board and CEO for the Western Tribune, a 501(c)(3) nonprofit news media company. He founded the company in 2021 alongside Clay Robinson.