Quick Take
UC Santa Cruz reported a $95 million deficit for the 2025 fiscal year, exceeding spring estimates by $14 million but falling below initial projections, due largely to one-time funding sources. With reserves nearly depleted and ongoing structural budget issues, university officials say cost-cutting and revenue-generating measures are underway as they brace for another $80 million shortfall in 2026.
UC Santa Cruz officials reported finishing the 2025 fiscal year $95 million in the red, lower than the university’s original deficit projections at the start of the year but still $14 million higher than it had estimated in the spring.
The reduced deficit is “largely attributable” to one-time funding like state dollars and $16.2 million in capital gains the school realized from selling investments, according to a quarterly financial report the school published this week. Without those one-time funds, the deficit could have been millions higher.
Tuition revenue was $7.9 million lower than projected because enrollment was below what the school had budgeted for the year. Tuition revenue from nonresidents was also $6 million lower than budgeted. Finally, because the overall enrollment was lower, core student fees came in about $7 million below budget as well.
The university initially estimated a $111 million deficit at the start of the previous fiscal year before lowering its projections to $81 million in May. Officials said the spending reductions they’ve implemented so far will “hopefully” start to lower costs this coming 2026 fiscal year – which they expect will end with an $80 million deficit.
The university has been struggling to address a structural deficit that first started in 2020. Officials say rising expenses – primarily labor costs – and stagnant revenues from student tuition triggered years of negative balances. They’re reducing costs through hiring freezes, not filling open positions and trying to increase international student enrollment, as international students pay full tuition at more than $80,000 a year. California residents pay more than $40,000.
The university ended the 2024 fiscal year with a larger deficit than projected as well, as about $107 million. At the time of that announcement, Chancellor Cindy Larive said that the school had used money in its reserves to ease past deficits. She added that because the reserve funds were diminished, the campus needed to make reductions.
Florence Bouvet, an economist specializing in University of California finance at the state’s Legislative Analyst’s Office, told Lookout that UCSC’s 2025 budget shows it has “very limited” unrestricted reserves left, at about $205,000. She said those funds are in the undergraduate education and administrative units – which “leaves little capacity to continue using reserves to bridge recurring deficits.”
Campus spokesperson Scott Hernandez-Jason declined to confirm the reserves’ amount and didn’t provide someone to answer questions about the report, like how UCSC plans to pay off the deficit.
“The core fund deficit is simply the gap between our final revenue and spending over the course of the year,” he wrote via email. “The total Fund Balance in core funds ended the year in the negative with non-core fund balances helping to bridge the gap. The campus will work to restore the non-core fund balances after the core funds deficit is closed.”
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