Financial Headwinds
Last updated
Background
Higher education is in a time of instability; institutions across the country, including the University of Minnesota, are facing real and immediate financial pressures—flat state funding, declining federal support, inflationary pressures, and past underinvestment in critical areas such as workforce development, mission support, and facilities.
We must accept this uncertainty and have created the FY26 budget to address the reality of this moment. By making difficult but necessary decisions now, we are positioning the University for a bold future, enabling us to continue serving Minnesota, its residents, and people everywhere.
Proposed Budget
A financial model that relies on maintaining academic programs and activities at current levels is not sustainable, nor is attempting to be great at everything. The FY26 budget proposes a careful prioritization of a smaller scope of work, which includes a smaller workforce, to position the University to strengthen its academic offerings while controlling rising costs associated with support functions.
In addition, tuition is likely to increase above the rate of inflation, but at levels that maintain relative rankings among peer institutions and emphasize the value proposition of a University of Minnesota degree.
The proposed budget would reinvest resources in compensation for our workforce, operating needs, including buildings and other infrastructure, innovation, and the priorities outlined in the Maroon, Gold, and Bold strategic plan.
Frequently Asked Questions
Why is the University making changes to its budget for FY 2026?
The University is responding to a combination of flat state funding, declining federal support, inflationary pressures, and past under-investment in critical areas such as workforce, mission support, and facilities. Given this, a financial model that relies on maintaining academic programs and activities at current levels is not sustainable.
Will there be tuition increases?
Tuition and fees may increase above the rate of inflation for the first time in many years to offset flat state appropriations and support necessary investments in faculty and staff compensation, student services, and infrastructure that has experienced significant underinvestment.
Even with tuition increases, the actual cost of a degree for low- and middle-income students after financial aid is lower at the University of Minnesota than at any other four-year college in Minnesota.
Our investments in student financial aid complement state programs and are particularly important for those in the $80,000-$120,000 family income range, just beyond the state’s North Star Promise program threshold.
What are tuition trends at the University?
The University has kept costs low for families and is committed to doing so going forward. Tuition at the Twin Cities campus, adjusted for inflation, is 7% lower than it was 10 years ago, and the net cost is 39% lower for less-resourced students.
Even with the proposed increase, in-state tuition will remain 3% lower than it was 10 years ago across all student income levels.
What does “scope reduction” mean?
A scope reduction will result in the consolidation or elimination of certain programs or services. Reducing scope in certain areas will enable the University to strategically reinvest in and strengthen its core academic offerings, mission support, faculty and staff, infrastructure and student services.
Are layoffs expected as part of the budget reallocation?
Yes. The University plans to reduce its workforce over time.
Does the proposed budget include merit increases?
Yes. Investing in our workforce is necessary to support robust teaching, research, and discovery. The budget proposal includes an overall 3% pool for merit-based compensation increases. Annual salary increases are aligned with performance over the past year.
What is the market adjustment pool?
It’s money to be used by campuses, colleges, and units to address positions that are most behind the market in pay or where there are retention issues. A 1% market adjustment pool is proposed in the budget for the upcoming fiscal year. Campus, college, and unit leaders determine how best to use these funds based on the needs within their area.
Why are you awarding merit and pay increases while cutting staff?
For years, some parts of our workforce's pay increases have not kept pace with the market. Adjustments are necessary to attract and retain talent in mission-support functions that are crucial to the University’s future.
How does this budget align with the Maroon, Gold, and Bold strategic plan?
The budget proposal supports the strategic plan by funding key initiatives and aligning resources with institutional priorities, ensuring long-term sustainability and academic excellence.
How will changing tariff rates impact purchasing University goods?
Changes to U.S. tariff rates may create uncertainty and confusion for University units procuring whole goods, parts/components, raw materials, and other items from suppliers outside the U.S. You are encouraged to review this FAQ document and to contact the Controller’s Office for additional assistance as needed ([email protected]).