June 6, 2025

Colleagues,

Today, the University's proposed budget for FY26 was published in advance of the Board of Regents meeting next week. I am writing to provide details of our recommendations and highlight what you will hear during our presentation and discussion with the regents.

Higher education is weathering the most difficult set of circumstances in any of our lifetimes, and signs indicate the challenges we are facing at the state and federal levels are only going to become more significant. As President Cunningham shared in her message earlier this week, our way forward is to prioritize financial stability and strategic investments, both of which require difficult decisions. We will do this by being realistic and proactive in ways that sustain our work, tackle our crumbling infrastructure, and enable our people to thrive.

The challenges we face

While we are on solid financial footing today, the University's current financial landscape is stark and uncertain. We must be realistic with where we are and start to turn the tide to support our employees and infrastructure. In terms of our funding sources, we are facing a 10%-30% reduction in federal funding due to recent terminations and stop-work orders and the likelihood of dramatic reductions to future NIH and NSF budgets. In addition, we are facing uncertain state funding that is likely to result in a 3.5% decrease when adjusted for inflation. In the face of this unclear future, we must build a safety net.

The FY26 budget proposal reflects these realities. Our mission and commitment is to provide world-class education, groundbreaking research, and community-engaged outreach to the people of Minnesota can’t and won’t change. However, to remain a world-class research university, we must adjust our scope to match today’s circumstances.

Financial changes to ensure we have spending power

Bluntly, we all need to exercise continued prudence in spending. We will discuss with the Board our plan to pull two levers to free resources, and will also propose two buckets of strategic investment for their consideration.

The proposed budget includes a tuition increase above inflation and a 7% programmatic scope reduction in FY26 to align spending priorities with projected revenues. It also invests in our people, in administrative areas and in our infrastructure, all of which have suffered from underinvestment for some time.

I know how difficult it is to contemplate the real impacts of such cuts, even when it’s clear that maintaining academic programs and activities at current levels is not sustainable. Centrally, we are also assessing options that include the proposed sale of assets that no longer serve our core mission.

The proposed tuition increase exceeds the rate of inflation, higher than it’s been in recent years. However, the Twin Cities campus ranks 7th out of 18 in resident tuition cost among our Big10 peers and we expect that position to remain stable or shift by no more than one spot. In addition, we remain an excellent value in higher ed, and half of our students graduate without debt. We remain committed to making education accessible, and to ensuring that the students with the greatest need will be supported through financial aid.

Strategic investments to support our long-term goals

The proposed budget presents two pools of funding to address high priority areas: workforce reinvestment initiatives and strategic investments that will align with the Maroon, Bold and Gold strategic plan.

For decades, we have underinvested in employees, and we are proposing a 3% merit increase for eligible employees, and a 1% market adjustment pool, each applied at the discretion of the unit. The Office of Human Resources has more information on each of these changes . In addition, in the next few weeks we will announce a new hiring protocol review process. While we will continue to invest to ensure our workforce is paid at market rate, we do expect a smaller workforce over the next two years. Layoffs have already begun in some areas, and we will see jobs lost through attrition, through ending programs that no longer serve our core mission, and through the changing federal landscape of funding.

At the same time, we are committed to investing in the institution’s goals established through our strategic planning process. We are developing a plan that will allow us to reinvest in mission support functions, compensation, and our physical infrastructure. These investments will keep us strong through the challenges ahead.

Reality check

If approved by the Board of Regents, this proposed budget moves us in the right direction. But it doesn’t eliminate risk. More uncomfortable and likely unpopular changes may be needed in the future. Our challenges are real, and the decisions we make now must position the University for long-term strength. Visit the Rapid Response website for answers to frequently asked questions about this topic.

I am grateful to our leaders across our campuses, colleges, and units who have already modeled budget reductions and have been active and supportive partners in what we have been facing. With all of us pulling in the same direction, I am confident that if we take a thoughtful approach now, the University will not only weather this storm, but flourish in the future.

Thank you,

Gregg Goldman
Executive Vice President for Finance and Operations
& Chief Financial Officer