USC Faces Record Financial Deficit Amid Budget Challenges

Categories: College University AthleticsCollege/University NewsEducation

The University of Southern California campus reflecting a financial crisis with empty spaces and concerned students.

News Summary

The University of Southern California has reported an unprecedented operating deficit exceeding $200 million for Fiscal Year 2025, attributed to structural financial issues and declining international student enrollment. The university is planning layoffs, budget adjustments, and austerity measures to address the shortfall, while engaging the community in discussions to find sustainable solutions. With potential losses in federally sponsored research funding and a proposed zero merit raise, staff morale is reported to be low, reflecting wider financial struggles among prestigious research universities nationwide.

Los Angeles – The University of Southern California (USC) has reported an operating deficit exceeding $200 million for Fiscal Year 2025, a significant increase from the $158 million deficit recorded the previous year. The university’s total budget for FY 2025 stands at approximately $7.4 billion.

Interim President Beong-Soo Kim informed faculty and staff of the financial shortfall in a letter dated July 14. He noted several factors contributing to the budget gap, including structural imbalances between revenue and expenses, poor financial performance by USC’s health system, and a notable decline in international student enrollment. The situation is expected to worsen with anticipated cuts to federal funding for research, hospitals, and student financial aid, influenced by policies from the previous administration.

A key point of concern for USC is the projected loss of federally sponsored research funding, which could surpass $300 million on an annual basis. Despite efforts to implement cost-reduction strategies over the past year—such as enforcing a hiring freeze, adjusting budgets across various schools and units, and encouraging reduced spending—these measures have fallen short in addressing the financial issues at hand.

As part of an overarching plan to mitigate the deficit, USC is preparing for layoffs and other austerity measures. Specific numbers regarding the layoffs and the departments affected have not yet been disclosed. However, the university intends to sell unused properties, consolidate functions, and make adjustments to the compensation of its highest-paid staff members.

This fiscal crisis has led to a proposed zero merit raise for the upcoming fiscal year 2026. In addition, discretionary and travel spending will be further tightened, and the termination of certain third-party services has been planned. In a bid to control expenditures, senior leadership has decided against increasing tuition revenue, drawing on endowment funds, or taking on additional debt as potential solutions.

During this difficult time, Kim aims to transform USC’s operational model to find sustainable solutions for the ongoing budget challenges. He has scheduled meetings with diverse groups within the university, such as the Academic Senate and the Staff Assembly, to engage in discussions about these financial issues and to solicit valuable feedback from the university community.

Additionally, USC has launched a dedicated website that allows students and staff to submit their suggestions regarding the financial situation, aiming to foster an inclusive dialogue during this challenging period.

The financial struggles USC is experiencing mirror those faced by other prestigious research universities across the country, including several in the Ivy League and major Californian institutions like Stanford. As staff morale currently remains low, many employees are expressing feelings of anxiety regarding potential job losses, especially within a challenging job market.

The situation at USC continues to evolve, and the administration is taking steps to address the serious financial strain while seeking input from its community. As the university navigates through this budget crisis, the hope remains that comprehensive solutions can be implemented to achieve stability and a sustainable financial future.