USC faces over $200 million budget deficit amid financial challenges

The University of Southern California, located in the United States, is grappling with a significant budget deficit as it ended Fiscal Year 2025 with a shortfall exceeding $200 million. This situation marks a sharp increase from the previous year's deficit of $158 million against a total budget of $7.4 billion. The interim president, Beong-Soo Kim, highlighted that despite budget reduction efforts and a hiring freeze, structural challenges led to an unanticipated escalation in financial gaps. The growing deficit has been exacerbated by shifting federal funding policies which cut research, hospital support, and student financial aid under the Trump administration. Kim projected persistent revenue losses, specifically a potential $300 million decline in federally sponsored research funding, and cautioned against reliance on past levels of federal support for financial stability. The situation is dire; without decisive actions to address the ongoing structural deficit, the university risks eroding its cash reserves, hampering its future planning and capital projects. As a result, layoffs are imminent as the university seeks to manage this deficit. In response to the budget crisis, USC has implemented measures including a zero-merit increase for the upcoming fiscal year, termination of third-party services, and cuts to discretionary spending. Kim noted that further cost-saving strategies would be needed, such as selling unused properties and consolidating overlapping functions. However, these measures alone would not suffice to reverse the structural deficit or withstand the new federal funding landscape. The university aims to transform its operating model to address deep financial challenges effectively. Kim emphasized the need for urgent action, stating that delays would worsen the situation. In doing so, USC plans to adhere to guiding principles that prioritize its core academic mission, construct a sustainable operating model for the future, act swiftly to dispel uncertainty among faculty and staff, and execute layoffs as compassionately as possible. Kim has committed to engaging with university community members to gather feedback and address concerns as part of this challenging process.