USC Faces Growing $200 Million Deficit in 2025

University of Southern California (USC) President Beong-Soo Kim announced on Monday that the University was operating at more than a $200 million deficit, becoming the latest California college to face a large shortfall in the 2025 fiscal year.

The deficit marks a substantial loss from last year when USC reported a $158 million loss. While the university was on track to start making up for it, the structural nature of budget planning, poor health system financial results, and potential Trump administration research cuts of around $300 million helped drag USC even further down the financial hole in the past year.

“Like our peer institutions, we are experiencing significant shifts in federal support for our research, hospitals, and student financial aid, along with potential decreases in international student enrollment,” said Kim in a letter on Monday. “The ultimate impact of these changes is difficult to predict, but for a university of our scale, the potential annual revenue loss in federally sponsored research funding alone could be $300 million or more. While we will continue to advocate for the vital importance of research and our academic mission, we cannot rely on the hope that federal support will revert to historical levels.

“The university has already taken numerous steps to address these financial challenges, including: a zero-merit increase for FY26, ending certain third-party services, and additional discretionary spending and travel controls. And we are committed to doing much more, including selling unused properties, consolidating duplicative functions, and adjusting compensation for the most highly compensated members of our community. We have created this website to collect suggestions from our community and post updates.”

In addition to more school and unit budget reductions, a hiring pause, and other actions noted by Kim, the university is set to take action quickly and keep education their first priority. USC also noted that increased tuition or taking more from their endowment would not be acted upon, with the University relying more on cuts and freezes.

A looming deficit for USC

“These measures will not be enough by themselves to reverse our structural deficit and weather the new federal environment,” added Kim. “Nor is it feasible to rely on increased tuition revenue, draw more from our endowment, or take on additional debt. Each of these “solutions” would simply shift our problem onto the backs of future generations of Trojans. To deal decisively with our financial challenges, we need to transform our operating model, and that will require layoffs.”

USC is only the latest California University to experience a large deficit. The University of California system is currently facing a $500 million deficit on their $53.5 billion annual budget. In March, they brought forward $270 million in budget cuts to help close this gap. However, the $12 billion state deficit, reduced funding to the UC system even more. And UC managed to dodge a major federal funding cut bullet earlier this year by ending diversity statements in faculty hiring, avoiding the fate of Columbia University who was gutted by $400 million in research funding by the Trump administration over antisemitism inaction.

The California State University (CSU) system is also facing a major budget crisis, with a $400 million – $800 million deficit being projected for next year thanks in large part to the state cutting around $375 million in support, in addition to $252 million in deferred funding. The CSU system is looking at the elimination of certain degree programs amongst other ways to slash costs. And all of this is before possible federal cuts.

As for USC, they are in a slightly better position as they are a private institution and don’t rely largely on state funding. And, unlike other Universities, they are taking major actions now, rather than awaiting deferred payments and other funding that isn’t set to come in on a fixed date.

“I know this is not the news we were hoping for, but by speaking forthrightly to you, I hope you will understand both the reality of our situation and the deep respect I have for every member of our Trojan Family,” continued Kim. “By taking these tough actions now, I am absolutely confident that USC can and will emerge stronger, ready to continue transforming lives and benefiting our society for generations to come.”

Getting out of the deficit isn’t impossible, as seen by many California Universities digging themselves out of major losses during the Great Recession in the late 2000’s and during COVID in the early 2020’s. Pepperdine University and other private universities managed to quickly rebound from major deficits before. For USC, they’ll need to make those cuts and pull back on spending now to avoid the high amounts both the UC system and the CSU system are facing now.