By Howard Fischer
Mail | X: @azcapmedia

PHOENIX — Gov. Katie Hobbs said Monday she doesn’t believe the University of Arizona should be balancing its newly disclosed budget shortfall by cutting financial aid, which is being considered.

The governor said she is still looking for answers from UA officials about how its estimates of the cash it had on hand for the current fiscal year was off by about $240 million. What that has done is left the school with a projection of just 97 days of cash on hand, versus the 156 days that had been in the plans.

And UA President Robert Robbins, in speaking to the regents, said at least part of the problem relates to what the university has had to do to attract students.

“That costs money,” he said, pegging that at about $300 million a year. And not all of it, said Robbins, was based on need, with “a lot of it in merit support.

“We found great success in the students we attracted because we invested a lot of money in student success and attracting students, primarily through financial aid,” said Robbins.

Hobbs, however, said she did not like the idea of dealing with the university’s financial problems by cutting aid.

“I think it’s important that we make college as accessible as possible for Arizonans,” she said.”I don’t think financial aid should be the answer.”

But it may be that changes cannot be avoided. Regent Larry Penley, addressing Robbins at a board meeting earlier this month, said the UA has “overspent” its scholarship money.

“Complete remodeling of the scholarship, financial aid issue has to occur before this gets underway next year,” he said.

The governor, for her part, is interested in more than the cause of the problem and potential solutions.

She also wants to know where were members of the Board of Regents, which has oversight of the three state universities as the UA’s fortunes fell.

“I’m certainly concerned about this coming to light now and the potential lack of oversight by ABOR,” Hobbs said.

“It’s something that we’re looking into,” she continued. “This is a problem and it certainly should have come to light sooner.”

But Hobbs did not respond to whether Robbins should be fired.

The governor also said she is looking into whether this problem is limited to the UA or is part of a larger issue affecting Arizona State University and Northern Arizona University.

In the meantime, the regents have directed UA to come up with a “corrective action plan” by Dec. 15.

All this comes following disclosure about that $240 million difference in the estimated cash on hand.

The regents got their first full-blown look at that just two weeks ago when Lisa Rulney, the UA’s senior vice president and chief financial officer, walked board members through the revised numbers.

She told them that had she used a different method of calculating all this that she — and they — would have seen the problem some time earlier.

“The difference is we all would have been talking about this trend a few months earlier than we are today,” Rulney said. Now the university is four months into its budget year.

Hobbs, who by virtue of her position is a member of the board, was not at the meeting.

Rulney, in her presentation to the regents, said the problem has to be addressed from the perspective of the whole university. And that, she said, includes whether some of the projects in the UA’s capital plans will need to be set aside.

Then there’s the possibility of a hiring pause — across the entire institution. Whether that is fair, however, is another question.

“I told you there are only specific units that have acute issues,” Rulney said. “So a hiring pause, if implemented across the entire institution, would have an impact on our mission,” she said, including how the UA proceeds with grants and contracts.

Then there’s the question of salaries.

“The last several years we’ve had a 4% salary increase program,” Rulney said. She said that’s important because every unit within the university has talked about “the competition for talent.”

“So we have felt it was important to make investments in our employees,” Rulney said. “But with the cash issues we are facing and the need to build back central reserves we may have to have a different tact for fiscal year 2025.”

And even if the university can avoid cutting financial aid, students may need to pick up some of the burden.

Robbins, in speaking to the regents, noted the university has a four-year guarantee they give to incoming students, promising a fixed rate of tuition for eight consecutive semesters.

“That’s a great differentiator for us,” he said.

“But if it’s going to cost us money — which it does — than I think we’ve got to look” at it, Robbins said. “That’s another hard decision.”

Robbins sought to stress that while there may need to be a university-wide solution this isn’t a university-wide problem.

“There are a few units across the university that are struggling, not the least of which is athletics,” he said.

The UA president said he and others assumed when they started using cash on hand to support the program there would be an increase in revenues.

“It’s just turned out not to be the case,” Robbins said.

It started with the collapse earlier this year of the Pac-12 conference.

USC, UCLA, Oregon and Washington moved to the Big 10, with Arizona, Arizona State, Colorado and Utah headed to the Big 12 to create a 16-member conference.

“That situation may not get better before it gets worse,” said Robbins.

“We’ve got plans to address this issue to build back the central reserves,” he said. “And I’m confident we’re going to be successful.”

Still, Robbins said, this isn’t just a UA problem.

“I don’t know of an athletic department in this country that’s not losing money,” he said. “Even the Ohio State University had to borrow $50 million from the university to fund athletics.”

Robbins did not even suggest the Legislature might provide an increase in state aid. That is unlikely to happen, what with the state facing a $400 million gap between revenues and expenses for the current fiscal year and another $450 million for the new budget year that begins next July 1.

So that means finding new sources of cash.

“I think philanthropy is going to be a really important part of this,” said Robbins.

He said those outside donations would not be used for actual operating costs.

“It will free up some of the money that we currently use from our reserves to fund scholarships and things like that,” Robbins said.

Those reserves, he said, also have provided funding for “big, moon-shot programs.” Robbins said outside dollars will mean they won’t have to be funded from the central university budget.

But that gets to another piece of the school’s financial problems.

“We made a bet on spending money,” Robbins said. “We overshot.”

Penley said something needs to happen — and soon.

“You’re going to have to terminate people, stop purchasing, or do something else,” he told Robbins at the board meeting. “Clearly, you’re going to have to have a hiring pause.”

And all that, Penley said, will be difficult.

“This is really going to hurt the university and hurt the faculty to do what is necessary to reach the minimum policy required days on hand of cash that you must have,” he said.