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What can other colleges learn as University of Arizona seeks to solve financial crisis

The University of Arizona continues to look for ways to get its financial house in order. The university has been dealing with what leaders have called a "financial crisis" for a few months now. The school has asked academic units to come up with three different plans for cutting their budgets, ranging from 5% to 15%. Layoffs are also on the table.

Late last month, Gov. Katie Hobbs sent a letter to the chair of the Arizona Board of Regents and the group’s executive director, John Arnold, who’s also serving as interim chief financial officer. In it, she said the situation is no longer just about finances, but is about "a lack of accountability, transparency and, at the end of the day, leadership.’"

She also called for Arnold to transfer out of his position with the university as soon as possible, citing the regents’ oversight role.

The Show spoke with Michael Vazquez, senior investigative reporter with the Chronicle of Higher Education, for more.

Full interview

So how significant sort of in the broad scope of the higher education world? Like how significant is the situation in which the University of Arizona finds itself.

MICHAEL VAZQUEZ: I would say folks around the country have taken notice and not just because of the size and prestige of the University of Arizona, but also because of how surprising this all was. That when I spoke with the chief financial officer, the interim chief financial officer last week, he readily acknowledged it just a couple of years ago, the University of Arizona was cash rich and was actually dipping into its savings, its reserves to make certain strategic investments.

So if you imagine your own household budget and you've got a flush savings and you start digging into that savings, maybe to do some renovations to your home and to take that trip to Europe, you always wanted and these things that seem strategic for the betterment of your life, but then all of a sudden you're broke and, and, and things have to be cut down substantially and, and there are these painful belt tightening moves that are happening and, and so there's almost like a state of whiplash, like economic, financial whiplash. And because of that, I think that that's perhaps the most striking thing that has attracted interest nationwide.

Are other schools, maybe other university systems taking note and maybe examining their financial modeling in the wake of, you know, the models that led the UA so far astray?

VAZQUEZ: I'm not aware of any specific institutions that are, are drilling down in the Arizona situation for their own self-preservation. But I would not be surprised to see that happening as we move forward. Number one, because higher education, as we all know, is one of the most competitive universes out there and, and institutions are always trying to get a leg up on each other and rise to spots in the rankings. But, but underneath all of that, perhaps ego-driven competition, there is a fear of what comes next just when it comes to the higher education landscape. Generally, there are a lot, or there are a lot of places around the country where colleges are seeing shrinking enrollments, there are demographic issues. You have some parts of the country that are just losing population.

But also there's a wider issue of just less people of college age are entering into the system. There is going to be hard times for at least some institutions. And so if you're running a college in 2024, getting ready for hard times is really your responsibility and there are certainly lessons to be learned from Arizona.

Yeah. Is there a sense in the higher education world about what the UA might look like when this is over? Like when cuts that have to be made are made in layoffs that have to be done are done, like what the school might look like and how it might be different than what it's looked like in the past?

VAZQUEZ: I think that's the million dollar unanswered question. And one of the things that happens when a college goes through a financial crisis and, and we've heard it from the University of Arizona already, are these reassurances that students won't be harmed. You know, that, that, that, that basically the, the presentation that the chief financial officer had last week that there was a slide that said, you know, here's what we're not gonna do. You know, here's the things, you know, we're, we're not gonna reduce need based aid for, for folks who, you know, students who are coming from, you know, low income or middle income families and, and they need that aid probably to complete their degree.

And so I think that's a good exercise to draw some red lines in terms of, you know, here's the things that we are going to intentionally protect. But you could argue that the student experience has suffered already that just, just the financial uncertainty alone probably increases student stress levels and being a college student on its own is just stressful.

And additionally, there was this piece of information that was mentioned to me by an employee last week, that for spring semester, this course that it's a course in, in exploring your major and it was taught by academic advisors because the University of Arizona has a ton of majors to choose from. There's a course that students usually can take that will kind of guide you through your options. Well, let's explain this major. Let's explain that double major/minor/what it, whatever it might be. And, and that course was canceled. And what I was told by an employee was, it was canceled because they asked the advisor to teach for free. And the advisor said no.

And so now you have students in spring semester who are maybe sorting through those same hundreds of possibilities of majors, but they're not getting the guidance from this course that was always offered. And so it, it can be the situation unfortunately, of death by 1,000 cuts and, and, and we don't know what, what things are gonna look like on the other side. And I think that why it's so scary.

Right, Michael, before we let you go, I'm curious about sort of the reaction to the, the interaction between Gov. Hobbs and the Board of Regents and its executive director/UA interim chief financial officer. The governor didn't really mince her words in that letter. What kind of reaction has that generated in the, in the higher education world?

VAZQUEZ: I think it's fascinating and, and probably there's some probable benefit there given the confusion that I think still exists when it comes to, how did we get here? How did the University of Arizona get here? There have been, there has been some inconsistent messaging coming from the university in terms of explaining when this shocking news comes out, you know, all of a sudden we're broke, like we were doing great. All of a sudden we're broke and, and when that news comes out, there has been some inconsistencies in the messaging.

There was even inconsistencies at first back in November with the dollar figure that was told to the public. At first, it was a $240 million shortfall and then that was dramatically revised down. And so there, there's a lot of unknowns here.

And when you have a, a board, you know, the Arizona Board of Regents, when you have board members who are primarily perhaps exclusively, I'm not 100% certain, but, but certainly at least primarily appointed by, you know, previous Republican governor. And then you have a Democratic governor. It, it does create an element of checks and balances in terms of the governor has, has no perhaps loyalty to the board of that's appointed by her predecessor. And when things get weird, you sort of want checks and balances when things are uncertain.

And, and ultimately, I think the public and the students and university employees all deserve the truth, whatever that is and, and real details. And this, there's gonna have to be some drilling down here to, to really figure out what happened.

I would say that the, the back and forth between the governor and, and the university and the board perhaps increases confidence among, you know, higher edu, higher education community in general that maybe we will get to the bottom of this, because the flip side of it is that when you have a leadership that's all on the same team, you know, when maybe you have a governor who's appointed on the board and, and there's this intense loyalty on all sides. When everybody's on the same team, sometimes they create a, the cover up game and then you don't really find out what happened. And so in this instance, the cover up game is less likely to occur.

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Mark Brodie is a co-host of The Show, KJZZ’s locally produced news magazine. Since starting at KJZZ in 2002, Brodie has been a host, reporter and producer, including several years covering the Arizona Legislature, based at the Capitol.