Need for Fiscal Stewardship

UO's Financial Outlook

In light of significant economic and demographic uncertainty, it has never been more important to exercise prudent fiscal stewardship and to carefully weigh both costs and investments needed to operate a leading public university. Over the past several fiscal years, the University of Oregon has been navigating imbalances in its operating budget. In 2025, after state appropriations, incoming enrollment and labor contracts had been settled, projections showed the growth in expenses would continue to outpace revenues on an ongoing basis. Because of this, the university took corrective action to address a structural deficit. 

The University of Oregon, like many public employers in Oregon is also facing dramatic increases in state-mandated retirement (PERS) costs as well as increases in healthcare programs, insurance and utilities costs. All of which are rising at a faster pace than net tuition revenue. During the current 2025-27 biennium, school districts and colleges will pay $565 million more into the state-mandated pension program, compared with the previous biennium. Major school districts, cities and other Oregon public universities have completed or are in the process of making structural budget reductions as expenses, including benefits costs, outpace revenue growth.  

As we take steps toward a more secure future, we must balance the needs of faculty, staff, students, and other stakeholders while making critical investments required to remain a leading public university. 

Fiscal Year 2026 Financial Update 

Undergraduate net tuition represents 77% of Education & General (E&G) fund revenue, while personnel services account for 79% of E&G expenses. The University of Oregon is highly reliant on tuition revenue, and particularly nonresident undergraduate tuition to fund its operations. The vast majority of its operating expenses in the E&G fund are compensation and benefits for our faculty and staff.

Quarterly Report 

As of the FY26 quarter two financial report given to the Board of Trustees in March 2026, the university projects a year-end shortfall of approximately $0.5 million. This is a slight improvement on the original forecast of a $2.0 million deficit in the prior quarter. This is after taking significant budget actions during the summer and fall offset a structural deficit.  Net tuition and fee revenue was revised down $5.2 million, reflecting continued uncertainty in nonresident first-year headcount and higher undergraduate remissions. This was offset by a one-time reduction in personnel services, largely attributed to lower benefits costs because the Federal Government has not taken action to approve our FY26 benefits expense rates as well as various adjustments in vacancy rates.

Additional information about the FY26 Q2 report, as well as past and future reports, can be found on the Board of Trustees website where budget reports are presented quarterly. 

We continue to face structural funding constraints

The UO delivers excellence on par with our peers among the nation’s top public universities, despite having far fewer resources than almost all our peers. Simply put, the UO is not funded the same way, nor at the same level, as nearly every other Association of American Universities (AAU) or Big Ten university. 

In fact, the state of Oregon is ranked 46th out of 50 states in funding per full-time equivalent student at four-year universities (2025 State Higher Education Finance (SHEF) Report). Within the state of Oregon, the University of Oregon receives the lowest level of state appropriations, on a per-resident student basis, of all public universities in the state. 

Public Education Appropriations per Student FTE by State at Four-Year Institutions, FY 2025 (Cost of Living Adjusted)

Oregon invests about 59% of the U.S. average in its public 4-year universities.

State appropriations per student FTE among AAU publics, FY 2023

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Comparative university funding within Oregon

UO receives the lowest level of funding per student.

In the 2026 Legislative Session, university and student advocacy, coordinated alongside the Coalition of Oregon Public Universities (OPU), successfully moved the needle from a defensive position to a stabilized one. Faced with initial projections of up to 5% cuts due to state budget gaps and shifting demographics, UO students and staff joined hundreds of peers in Salem for University Day at the Capitol to demonstrate our collective impact on Oregon’s economy and the importance of state funding for higher education. This unified front, combined with an improved February revenue forecast, ensured that the legislature made no cuts to public university base operating funds or need-based student financial aid like the Oregon Opportunity Grant. 

While this moderate net positive outcome during the legislative session prevented the immediate erosion of state support, it did not address the systemic underfunding that keeps Oregon’s public universities ranked below nearly all other states for public funding per fundable student. As we look towards the upcoming 2027 legislative session, we remain focused on improving investments in higher education. However, we are cognizant that the state of Oregon’s financial position remains precarious and significant, long-term reinvestment in public universities in Oregon would have to come at time when demands far exceed available resources. In inflation-adjusted dollars, state funding peaked at the University of Oregon in 1990 and is 35% lower in real terms today, three decades later. 

State appropriations in actual and CPI-adjusted dollars — FY90 to FY25

In the chart below, the orange line shows what the state actually provided each year. The green line shows what those same dollars would be worth in today's dollars — adjusting for inflation.  

Preserving our commitment to academic excellence, while also ensuring a strong future, requires careful allocation of resources — now and into the future.

Increasing dependence upon nonresident tuition

In FY2000, state appropriation funded 44% of the university’s three major revenue sources. By FY2025, that share had fallen to 21%, while the share of revenue from nonresident tuition rose from 32% to 59%.

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Our people are — and will remain — our biggest investment 

Our faculty and staff are the heart of the University of Oregon. The passion and commitment of our talented faculty and staff make us the community we are and provide our students with the exceptional experience of a great public university. 

That is why, even with limited state funding, we invest 80% of our Education & General (E&G) budget in our people. We strive to provide our people with competitive and comprehensive total compensation packages, including generous retirement and healthcare benefits, tuition benefits, and progressive leave policies. We know investing in our people contributes to their peace of mind and is an important means of investing in our shared future. 

Rising retirement costs 

Over the past decade, PERS retirement costs as a percentage of salary have risen from approximately 18% to nearly 24%, adding approximately $17.6 million per year in charges against the E&G fund. Current 2025–27 employer contribution rates took effect July 1, 2025. 

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Benefit costs compared nationally 

Oregon’s benefit expenditures as a percentage of salaries and wages at public four-year institutions (38%) are well above the national average (approximately 31%). These are state-mandated costs the university cannot negotiate. 

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While faculty and staff will always be our biggest investment, we must also invest in research, student scholarships, and other components that allow us to serve our mission as a public research university. 

Healthcare

UO directly pays 95% of eligible faculty and staff health insurance premiums regardless of which health plan they choose and whether they are covering only themselves or their entire family. Our AAU public peers pay an average of 75% to 81% of faculty members’ premiums, depending on coverage category. This difference has a significant monetary impact on the take-home pay of our employees. 

Cost of living

The cost of living in Eugene is lower than the average of our AAU public peers. A recent data set on comparative cost of living at the local level developed by MIT places the Eugene area cost of living at approximately 95% of its AAU public peers.

Retirement

The UO, like other public employers in Oregon, has a more generous retirement contribution program compared to peer institutions. This reduces the amount employees need to withhold from their pay every month in order to build retirement savings. During a recent analysis when looking at just the defined contribution plan at the UO (the Optional Retirement Plan), which is available to faculty and officers of administration, the maximum employer contribution for a new employee’s retirement plan at the UO is 12%, while the average maximum employer contribution of our AAU public peers is 8.4%. PERS, the defined benefit pension plan available to faculty, officers of administration, and classified staff, represents an even larger investment in compensation by the institution, and includes both a pension component and employer-funded individual savings plan that invests 6% of the employee’s salary in a retirement account in addition to funding the pension component of the program. 

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