Frequently Asked Questions

USC is facing a structural deficit in which our ongoing expenses have been outpacing recurring revenues over several years. This imbalance has been exacerbated by recent shifts in federal support. Without corrective action, the deficit will erode reserves, limit flexibility, and undermine USC’s ability to plan for the future.

Several steps have either been completed or are underway:

• A zero-merit increase for FY26
• Reductions in discretionary spending and travel
• A hiring pause
• Ending certain third-party services
• Proposed sales of underutilized real estate
• Consolidation of duplicative functions
• Re-prioritizing spending on capital projects
• Compensation adjustments for the most highly paid employees

Layoffs will also be required to achieve meaningful structural change.

Yes, layoffs are unfortunately necessary to close the gap between ongoing revenues and expenses. Staff and faculty layoff decisions will be made by the schools and units, guided by criteria focused on preserving core academic priorities, operational efficiency, consistency in process and evaluation, and long-term sustainability. The university is committed to treating affected employees respectfully and providing support. These are difficult decisions, and we do not take them lightly.

Yes, faculty roles may be impacted depending on specific school needs and program reviews. Deans and academic leaders will evaluate academic programs and prioritize investments that align with long-term goals. When evaluating faculty positions that may result in non-reappointment or a break mid-contract, schools will follow the provisions outlined in the Faculty Handbook.

While tuition is an important part of our revenue model, we cannot rely on increased tuition revenue to solve our structural deficit. Enrollment pressures, affordability concerns, and changes in financial aid policies limit the university’s ability to generate substantial additional revenue through tuition alone. Therefore, USC must pursue broader financial strategies to ensure long-term sustainability.

Most of USC’s endowment is legally restricted for specific donor-designated purposes like scholarships or professorships. Even the unrestricted portion is governed by a disciplined spending policy (currently 5%) to preserve the endowment’s long-term value.

Drawing more funds from our endowment to cover deficits would reduce future support for students and faculty, and undermine USC’s long-term academic strength. Like other leading institutions, USC must use its endowment responsibly to sustain our mission over generations.

Taking on additional debt would strain future budgets and could harm USC’s credit rating. It is not a sustainable solution to a structural problem. When more debt is taken, payments on the interest of that debt increase the university’s annual expenses.

The interim president, provost, senior vice president for health affairs, deans, and senior leadership are working closely to evaluate tradeoffs and redesign USC’s operating model. Academic leaders are reviewing programs and functions to align resources with the university’s mission and financial reality. Decisions are being made at the school and unit level based on mission-critical priorities.

All individuals impacted by upcoming workforce reductions will receive at least 60 days advance notice, in accordance with the WARN Act. During this period, individuals may or may not be required to work, depending on the needs of their unit, but will otherwise receive their normal pay.

In addition, most benefits-eligible staff will receive severance, outplacement services, and a health continuation subsidy as provided by USC’s layoffs and reorganizations policy. However, some individuals are not eligible for severance, including temporary employees, per diems, resource employees, faculty, those claiming student status (such as teaching or research assistants), and staff hired for a fixed term or for roles funded by contracts, grants, or gifts.

Represented employees will receive benefits as outlined in their collective bargaining agreements.

We have a website with information about support and resources for all employees leaving USC, whether voluntary or involuntary, including those impacted by layoffs. It includes a checklist, offboarding essentials, transition support and frequently asked questions.

USC’s current financial challenges stem from a combination of external and internal factors. Like many peer institutions, we are facing significant external pressures, including rising inflation, increasing insurance and cybersecurity costs, and major shifts in federal funding—particularly reductions and uncertainties in federally sponsored research, health system reimbursements, and student financial aid.

In addition to these broader trends, USC made certain strategic investments that have added financial strain. The university also incurred costs related to the pandemic and litigation, which weakened the university’s cash reserves.

We are committed to conducting a thorough review to better understand these factors and improve financial controls, accountability, and resource management going forward. This work will help ensure that we do not repeat past mistakes and can build a more sustainable financial foundation for the future.

Yes. The health system is undergoing a similar process to improve its operating model and financial margins. This includes cost reductions and organizational changes, which will also involve layoffs. These steps are necessary to ensure the overall stability and sustainability of the university and its affiliated health system.

Yes, USC Athletics is part of the financial resiliency budget process. Athletics has already had some workforce reductions. This is a challenging time for athletics departments across the country. With the settlement in the House lawsuit, money is now being distributed to student-athletes, and all universities in the Big Ten conference will be going up to the $20.5 million cap.

Some layoffs have already occurred. The bulk of the layoffs will be communicated in August. The goal is to complete this process quickly to reduce uncertainty for our faculty and staff, and avoid prolonged disruption.

The university is committed to protecting the student experience and core academic programs, including preserving instructional quality and student services.

We know these are tough times, and resources are available to support our faculty and staff. The WorkWell Center, now part of the Office of Health Affairs, offers counseling and is launching a new webinar series in August about navigating challenging times. They can be reached by emailing [email protected].

You can submit ideas and feedback through USC’s Financial Resilience website, which includes a budget-related suggestion box. Updates and resources will also be posted throughout the coming year as we make progress.