President Scholz gave the following report to the board of trustees on Monday, June 1, 2026.
Good afternoon, trustees.
These are not easy times for higher education. You're going to hear a detailed picture of our long-run financial projections from Jamie Moffitt later this afternoon. But in my remarks, I want to do some stage setting.
International enrollments around the country have fallen sharply due to visa restrictions. In global politics, research funding has been upended. State budgets are facing tremendous challenges due to the withdrawal of federal support, putting university appropriations at risk. Institutions that are able to do so have responded to these developments by increasing the one revenue source they can control, namely enrollment.
At the same time, public trust in higher education has fallen.
In some communities, the value of the degree is being questioned and inflation, AI, and economic uncertainty. The decision to attend college out of state has become even more fraught. For the last decade, the UO has welcomed an average of 2,400 nonresident students in our first-year class each year. For two years now, our out-of-state enrollment has dropped below this level, with the Fall 2026 class expected to be over 500 students below this norm. One year can be an aberration. Two years is a pattern, and I believe we have to treat it as a new reality. The number of high school graduates in the United States will decline over the next decade, further reducing the number of college-eligible students.
As a result of these developments, we're facing an estimated structural budget shortfall of roughly $65 million. I'm going to give a grossly oversimplified summary of where this number comes from to help anyone listening to better understand it. To use round numbers, suppose we are 500 in the meeting to order projection. An average out-of-state net tuition is $40,000. That would result in a $20 million shortfall next year due to the smaller first-year class you'll see in the financial projections later this afternoon. Our actual estimate is a shortfall for next year expanded to $23 million once other factors are included, but the drop in first-year nonresidents represents the bulk of this deficit. ...
We truly want to avoid having to cut budgets every year.
In light of the factors I mentioned earlier, there's no reason we can assume that the environment next year will jump back to prior levels. We need to assume that the recruiting environment for nonresident students has changed.
So this is a big change. As I mentioned earlier, for the prior ten years, you averaged 2,400 nonresident students. In our first-year class next fall, we expect 1,888 nonresident students next year. This number of nonresident students is lower than any of the prior ten years, including the fall of 2020, which was the height of the COVID pandemic.
Well, lower. We will treat this new number of 1,888 as a new normal.
So what are the implications of this? So getting back to my simplified discussion of our projections. In the fall of 2027, we are assuming another entering first-year nonresident class of 1,088 students. The tuition revenue from these students will be about $20 million less than what we have seen in the last decade.
That last tuition will be added to the $20 million that we're losing from the class that entered last year in the fall of 2026. So cumulatively, we'll be down $40 million. However, not all of the students from the entering class in the fall of 2026 will stay. We already built year over year attrition into our projections.
So the actual loss of tuition in the second year might be closer to $18 million, leaving us with a $38 million gap that year. ... We expect this pattern to continue with the new smaller classes rolling in each year.
So in the fall of 2028, we will have another small class of first-year students that results in $20 million less tuition, a second-year class that will be down $18 million, and a third-year class that will be down, let's say, around $16 million due to further attrition for a total gap of $54 million.
Finally, in the fourth year that would be the fall of 2029, we would see a fourth smaller class entering. First year classes rolled in with a likely gap of something around $69 million of tuition. Rather, $20 million, $18 million, $16 million, and let's assume $15 million. In the long-term projections that we will discuss this afternoon, we're projecting a gap of $73 million in fiscal year 2031.
Once other factors are included, discount this to the present and you get roughly a little over $65 million. This is the present value of the anticipated budget deficit once all of the new smaller nonresident classes have fully phased in.
Now the reasonable question to ask is if this is the structural or steady-state deficit won't be fully rolled in until four years from now, why do we need to address it now? There's at least two reasons. One is it's extremely challenging and stressful for everybody to cut budgets every year. It creates enormous uncertainty and hardship.
Two, it takes time to implement budget cuts given contracts and those periods. Many actions that we take this year can take years to be fully implemented, and the longer we wait, the bigger the cuts need to be. While we have enough liquidity to use up some of our reserves during this process, we do not have a large level of reserves. Currently, our E&G Fund is projected to end the year with around $124 million, which represents 9.3 weeks of operating expenses.
We'll continue to better understand the market, our position in it and what we could do differently. But what I have seen so far, our deficit is not a failure of execution. There's a human tendency to want to assign blame when things do not go the way that we like. But the higher education landscape is changing. Our enrollment management team worked tirelessly this past year. They held 37 admitted student receptions around the country five days with 4,000 participants. Our student ambassadors who give tours around campus are remarkable. We expanded the Clark Honors College and launched new programs for first-year students like the Provost Undergraduate Research Assistantship program. Our people did excellent work doing the same things and more than what we've done in previous years.
So how will we address the deficit going forward? We will reach better decisions through consultation than we can ever reach alone. Just as important, a collaborative process builds shared understanding and shared commitment. When the choices ahead are hard and some of them will be, want a community that has helped shape the decisions and is invested in seeing the university through.
That is why I believe in shared governance. I'm very grateful to the Senate for developing and staffing the Academic Modification Advisory Committee, or AMAC. Shout out to the Senate President Dyana Mason, who we'll hear from shortly.
Our work will require difficult conversations and tradeoffs. It will be an opportunity to clarify what matters most to focus our efforts and position the university for long-term strength. We will not make final decisions over the summer or in early fall. We plan to report on our budget actions at the December board meeting, and I offer two principles I think should be at the core of your future.
We should elevate and invest in research strategies that can meet the needs of our communities and industry, enhance our academic reputation and distinguish the UO. We will hire strategically with a view to making the UO known for leadership and excellence in specific areas of research. We can't do everything, but by focusing thoughtfully, we can continue to do some things exceptionally well and further enhance the distinction that benefits our students and the entire university.
We should also continue to invest in the quality of the student educational experience and make the University of Oregon a destination of choice for more students. We should aspire to make the our places irresistible for students, building on what makes the UO distinctive and meaningful to students.
The University of Oregon is remarkable and it will remain remarkable, and there is much to celebrate. Last week we announced our new Vice President for Research and Innovation. Bethany joins us from the University of Rhode Island, where she served as vice president for research and economic development and a professor of cell in molecular biology and oceanography. In a full circle moment, she returns to the UO 26 years after earning her Ph.D. in chemistry through work in our Institute of Molecular Biology. She has a tremendous record of accomplishment at URI, and we are excited about her joining us at the UO.
I want to thank Geri Richmond, who led the division so ably as interim vice president through the transition. So thank you, Geri.
There's much more as we close the year. Two of our faculty colleagues, Kate McLaughlin and Lynn Stephen, were just elected to the American Academy of Arts and Sciences. Kate, who directs our Ballmer Institute for Children's Behavioral Health, and Lynn, a professor of anthropology, now join more than a dozen UO colleagues in the academy. This is a wonderful recognition that reflects the talent of our faculty.
We're celebrating the groundbreaking on the new Children's Behavioral Health building in Portland on June 11, which will help advance the work of the Ballmer Institute and the Prevention Science Institute. And the state legislature has backed funding for the building and created a new Child Behavioral Health license. Oregon is the second state in the country to do so. The first cohort of our students will graduate on June 12.
As we heard in our previous trustee meeting, the second building of the Phil and Penny Knight Campus for Accelerating Scientific Impact is now open, sharply increasing our capacity to move discovery from the lab into the world.
I've attended multiple events across campus this spring that celebrate our research enterprise, and I always leave them inspired by what our faculty and students are doing to advance knowledge.
Our athletes are finishing the year in style as well. Our track and field program wrapped up a Big Ten Triple Crown, sweeping cross-country, indoor track, and outdoor track and field for both men and women. That's six conference championships, more than any other school in the Big Ten, and they're set to compete in the NCAAs right here in town next week.
Steve scooped me in acknowledging the Super Ducks baseball team, who won the regional and are off to Texas to compete in the next level of NCAA tournament. ...
We will welcome another year of the Oregon Bach Festival back to campus, one of the cultural treasures that make this place what it is. Despite a full week of travel during the festival, Melissa and I are planning to attend four of the performances. ...
Commencement is in two weeks. It's a joyous time of year as undergraduate and grad students celebrate their hard-earned achievements and look to what's next. Our speaker is Marley Matlin, the Academy Award-winning actor and lifelong advocate for the deaf community who fought barriers her entire life. By refusing to let others define what she could do, there's a personal thread here too. Her youngest daughter is a member of this year's graduating class, and so it's a wonderful note to end the year on.
So yes, we have a challenging road ahead. I know it's hard on everybody. Our faculty and staff will continue to support students, advance their teaching and research, all while managing the uncertainty of the moment. I see that. I'm incredibly grateful for that.
As we look forward to our 150th anniversary this fall, we honor our history and look to the future. The University of Oregon has navigated challenging seasons over its 150 years. World wars, the Great Depression, dramatic funding changes, political upheavals, and pandemics. Always providing exemplary teaching, research, and service to the great state of Oregon, we will navigate this season of challenges as well, and we will do so with our eyes on the next 150 years.
I'm confident in the creativity, resolve, and resourcefulness of the community.
Thank you.