July 14, 2025
Dear Faculty and Staff,
One of my highest priorities is ensuring that USC has the strong financial foundation needed to continue delivering on our mission of academic excellence into the future. Today I’m writing to explain some difficult actions that need to be taken to address USC’s structural deficit in our volatile external environment. Although these actions will be painful, I am confident they will position USC for further success as a great research university, and a magnet for many of the best students and faculty in the world.
The Shifting Federal Funding Landscape
Like our peer institutions, we are experiencing significant shifts in federal support for our research, hospitals, and student financial aid, along with potential decreases in international student enrollment. The ultimate impact of these changes is difficult to predict, but for a university of our scale, the potential annual revenue loss in federally sponsored research funding alone could be $300 million or more. While we will continue to advocate for the vital importance of research and our academic mission, we cannot rely on the hope that federal support will revert to historical levels.
Our Structural Deficit
These external challenges come on top of a recurring, structural deficit in which the expenses generated by our operating model have significantly outpaced revenues for several years.
For the fiscal year that just ended in June (FY25), we implemented a number of temporary measures – including school and unit budget reductions, a hiring pause, and other actions involving much hard work and sacrifice – that were effective in slowing expense growth. We also had a very strong year in advancement, reflecting the exciting work taking place across the university and health system. And yet, due to the structural nature of our deficit, along with poor health system financial results this year, we ended FY25 with an operating deficit in excess of $200 million, higher than the $158 million deficit in FY24.
Left untamed, this recurring, structural deficit erodes cash reserves, constrains future planning and capital needs, and is simply unsustainable.
Why Further Action Is Necessary
The university has already taken numerous steps to address these financial challenges, including: a zero-merit increase for FY26, ending certain third-party services, and additional discretionary spending and travel controls. And we are committed to doing much more, including selling unused properties, consolidating duplicative functions, and adjusting compensation for the most highly compensated members of our community. We have created this website to collect suggestions from our community and post updates.
While important steps, these measures will not be enough by themselves to reverse our structural deficit and weather the new federal environment. Nor is it feasible to rely on increased tuition revenue, draw more from our endowment, or take on additional debt. Each of these “solutions” would simply shift our problem onto the backs of future generations of Trojans. To deal decisively with our financial challenges, we need to transform our operating model, and that will require layoffs.
That USC is not alone in having to take these difficult actions does not make this news any less disappointing or painful to hear.
Guiding Principles for Moving Forward
While our current situation is challenging, it also provides an opportunity to refocus on our mission, and rethink how we can advance that mission with more innovative, collaborative, and sustainable approaches. I am deeply grateful to the deans, senior leaders, and their respective teams across the university and health system for leaning hard into this collective challenge. As we undertake this work, we are committed to principles rooted in the USC Mission Statement:
- “Our first priority” – indeed, the reason why we exist as a university – is to educate students, as well as conduct research and engage in creative expression, “through a broad array of academic, professional, extracurricular and athletic programs of the first rank.” We must prioritize and protect this core academic mission as much as possible.
- All of our actions must be “directed toward building quality and excellence in the long run,” so that USC can carry out its mission for “many centuries to come.” Our goal is not simply to reduce expenses, but to build a durable operating model that can fuel USC’s ambitions well into the future.
- We need to take decisive action quickly, because the longer we wait, the more difficult the actions that will need to be taken later, and the longer faculty and staff will be working under a cloud of uncertainty and anxiety. While we will continue to innovate and improve based on “our entrepreneurial heritage,” the time has come to take the strong actions needed to move forward and move on.
- Our “Trojan Family is a genuinely supportive community,” and we are committed to carrying out this process as compassionately as possible. To support our community, we will continue providing support services such as short-term counseling as well as sessions supporting mental health, stress management, and resilience. Access is available by emailing workwell@usc.edu.
Our Commitment to Engage
Over the next several weeks, members of the senior leadership team and I will be meeting personally with members of the Academic Senate, the Staff Assembly, the Committee on Finances and Enrollment, school leadership teams, faculty councils, and other members of our community to answer questions and receive feedback and suggestions. I welcome those conversations, as difficult as I know they will be.
I know this is not the news we were hoping for, but by speaking forthrightly to you, I hope you will understand both the reality of our situation and the deep respect I have for every member of our Trojan Family. By taking these tough actions now, I am absolutely confident that USC can and will emerge stronger, ready to continue transforming lives and benefiting our society for generations to come.
Sincerely,
Beong-Soo Kim
Interim President