University of California, Santa Cruz (UCSC) is facing significant financial challenges as it grapples with a higher-than-expected $107 million deficit for its fiscal 2024. Chancellor Cynthia Larive recently announced that layoffs and budget cuts are on the horizon as the institution seeks to address its budget shortfall.
Financial Struggles
The shortfall in funds for fiscal 2024 came in worse than projected, forcing UCSC to dip into its reserves to cover the deficit. The $107 million deficit in core funds, which include state appropriations, tuition, and fees, has raised concerns among campus leaders. Chancellor Larive emphasized the severity of the situation, stating that the gap is significant and surpasses initial Budget Office projections.
Layoffs and Budget Cuts
In response to the financial challenges, UCSC is implementing cost-saving measures, including reducing spending by $17 million for the fiscal 2025 year. This reduction will involve cutting back staff levels, with most of the reductions coming from eliminating unfilled positions. However, Larive acknowledged that some layoffs would also be necessary to address the budget deficit effectively.
Despite the current cuts, UCSC officials anticipate ending the fiscal 2025 year with a structural deficit of $126 million. The core funds deficit is projected at $111 million, even after the $17 million in cuts already being implemented. Chancellor Larive indicated that more actions would be taken in the coming years, including extending the hiring slowdown and the possibility of additional layoffs in selected areas.
Causes of Deficits
UCSC attributes its deficits to various factors, including rising salaries, insurance costs, utilities, and declining enrollment. The university specifically noted a decrease in enrollment of higher-tuition paying groups, such as out-of-state and international students, during the pandemic years. Fall enrollment saw a 1.8% drop to 19,478 students between 2021 and 2022, according to federal data, further exacerbating the financial challenges faced by UCSC.
The deficits have taken a toll on the university’s financial health, with fiscal 2024’s deficits being covered by one-time campus reserves. However, these reserves are diminishing due to accumulated deficits, prompting UCSC to take immediate steps to address the core-budget shortfall. The university plans to scrutinize discretionary spending on hiring, contracting, travel, and other areas, while exploring further spending reductions and new revenue opportunities.
Path Forward
Despite the financial hurdles, Chancellor Larive remains optimistic about UCSC’s ability to overcome these challenges and make progress for the campus in the long term. She emphasized the importance of addressing the deficits while pursuing advancements for the university. Larive expressed confidence in the institution’s resilience and ability to navigate the financial difficulties it currently faces.
As UCSC works towards financial stability, campus leaders are committed to making strategic decisions to address the budget shortfall and ensure the university’s long-term viability. By implementing cost-saving measures, exploring new revenue streams, and carefully managing expenses, UCSC aims to emerge stronger from its current financial challenges.
