Governor calls out University of Arizona for mishandling financial crisis, cites Republic investigation (2024)

Gov. Katie Hobbs cited an Arizona Republic investigation on issues behind the University of Arizona's multimillion-dollar budget shortfall in calling for action to reverse the university's "lack of accountability, transparency and leadership."

In a letter written Thursday, she asked the Arizona Board of Regents, which oversees the university system, to bring in a third-party consultant, create "clear lines of distinction between university governance and ABOR" and provide a detailed report on strategies and tactics to fix the financial issues.

"I appreciate the time you took to meet with my staff to discuss the current financial issues with the University of Arizona," she wrote in a letter to Fred DuVal, regents chair, and John Arnold, regents executive director and interim chief financial officer at UA.

"However, less than 24 hours after that meeting another story in The Arizona Republic ... once again illustrated there is no coherent vision, let alone even an agreement on the severity of the problems, on how to lead the university moving forward."

Hobbs' letter was released hours after a special Board of Regents meeting in which DuVal and others said cuts made in December to the UA budget are helping to ease the school's “financial crisis” made public in November. But the school isn’t out of the woods yet, they said.

“Let’s also be clear, the cost curve is unsustainable,” DuVal said. ”Absent change, we will get into trouble.”

DuVal described the university’s plan to reduce its multimillion-dollar budget shortfall as far-reaching. The university has instated a hiring freeze, deferred certain projects and announced the end of its tuition guarantee starting next fall.

Board of Regents Executive Director John Arnold has been at the helm of the university’s finances since December, when Lisa Rulney resigned from her role as UA's chief financial.

Arnold reiterated that the university’s decentralized budget was largely to blame for its financial woes. Going forward, he said he would work closely with UA President Robert Robbins as the university analyzes overspending from certain departments.

Arnold and DuVal defended certain financial decisions made by the university, saying it did not “lose” money but rather invested in projects it “could not afford.” The acquisition of the University of Arizona Global Campus did not cause the budget shortfall, and the athletic department’s massive budget deficit was only one component of the budget headaches, Arnold said.

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Arnold did not mince words about the seriousness of the matter.

“We’re on a cost trajectory that is alarming,” Arnold said.

Arnold said the rebuilding process would take time, but UA was positioned to have the time to make those fixes.

Governor criticizes executive's dual role for regents, university

In her letter, Hobbs flagged Arnold's dual role as a concern, saying there could be "a real or perceived conflict of interest" with Arnold serving as regents' executive director and UA chief financial officer. She urged that he transition out of the UA role as soon as possible.

"While ABOR is the 'owner' of the universities, it also plays a critical role in providing governance and oversight of the institutions. As this financial crisis has already damaged ABOR's credibility in their oversight functions, there must be greater separation between the Board and the university to restore the trust of my office and the public," the letter said.

DuVal said enhanced oversight of individual university finances by the Board of Regents would ensure the budget issues discovered in November never happen again.

Some of those measures will affect the state's two other public universities, Arizona State University and Northern Arizona University.

The new measures increase reporting to the board and require the schools to centralize their budgeting models, a change designed to prevent overspending on programs. The universities will require board approval to spend cash reserves if funds fall below the university's guidelines.

“We found it on our watch, we will address it on our watch,” DuVal said.

The board stood behind the UA president, saying Robbins and his team have worked with "complete and total cooperation."

However, the United Campus Workers of Arizona, the union representing staff at the University of Arizona and Arizona State University, called for Robbins' resignation.

“The University’s financial mismanagement will only be resolved within a culture of transparency, accountability, and honesty — a culture that President Robbins has continually failed to provide,” a statement from the union reads.

The hiring and compensation freeze at UA will last at least through June 30, which the university estimates will save it $16 million. But many university staff members say those cost-cutting measures have come down on them hard, adding additional pressures.

UA staff 'stressed and distraught'

“The environment across campus is people are really stressed and distraught,” said Maria Sohn Hasman, a UA program manager and union member.

The union also called upon Hobbs to increase her oversight of the Board of Regents. As governor, Hobbs is an ex-officio member of the board but has not attended recent meetings.

Staff members say even as they take on more responsibilities, the additional work won’t be met with salary raises.

Possible steps:Hiring freeze, raise delays and merit aid cuts: UA plans to fix multimillion budget shortfall

Max Thomas, a teaching assistant in the physics department, has said there have been times when he opts to keep his heat off in the winter just to save money. Seeing university administrators stay in their roles after the financial crisis came to light is incredibly frustrating, he said.

“I would say most TAs, myself included, feel overworked, and underpaid,” Thomas said. “This financial crisis obviously puts into jeopardy any sort of raises or cost of living adjustments that we hope to see.”

On Dec. 13, Robbins announced publicly that he had accepted the resignation of Lisa Rulney, the university's chief financial officer. Earlier this month, The Arizona Daily Star reported that Rulney remained on the university’s payroll under her original salary. That's inflamed staff and faculty, Faculty Chair Leila Hudson said.

“They felt concerned that the people who had helped create the problem are still in charge of guiding the cleanup,” she said. “And that is what unleashed this new round of emotion.”

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Hudson said faculty feel academic goals have been sacrificed as a result of cost-cutting. She pointed to other possible cuts among administrative costs and athletic spending. Previously, the administration provided a $40 million loan to the athletic department.

"My biggest concern is that we don't start killing academic units by 1,000 little cuts, while we take the time to figure out the true messes," she said.

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Helen Rummel covers higher education for The Arizona Republic. Reach her at hrummel@azcentral.com. Follow her on X, formerly Twitter: @helenrummel.