What to know about the University’s new budget

The Well sat down with Nate Knuffman, vice chancellor for Finance and Operations and chief financial officer, to discuss the changes to the Fiscal Year 2025-2026 Operating Budget and how UNC-Chapel Hill is committed to the long-term financial health of the institution.  

What are the outside financial risks that the University is currently facing?

Carolina, like many of our major R1 research university peers, is facing significant financial uncertainties driven by multiple external factors. The federal funding environment is looking increasingly unpredictable, with potential cuts looming on the horizon. In fact, Moody’s has downgraded the higher education sector’s outlook to negative, signaling broader economic challenges. In addition, the state’s funding environment appears flat, with limited recurring funds and minimal revenue growth projected for the next several years.  

Prior to the Board of Trustees budget presentation, we did an assessment of various financial scenarios, and it is increasingly clear that we must take steps to prepare for potential budget constraints. In fact, earlier this month, Chancellor Lee H. Roberts shared with his leadership team the proactive measures our campus has already undertaken to help mitigate these financial pressures, and he was clear that more budget reduction measures would be on the horizon.  

Though much remains uncertain, the new budget approach is a forward-looking strategy to help the University safeguard our core academic, research and public service mission while ensuring our long-term financial sustainability.  

The Fiscal Year 2025-2026 budget was recently presented to the UNC-Chapel Hill Board of Trustees. How does this budget compare to past years?

During the Budget, Finance and Infrastructure (BFI) Committee meeting on March 19, the FY 26 proposed budget was presented to the Board of Trustees.  

Before the budget presentation we began scenario planning based on potential federal research funding restrictions and anticipated depleted reserves at the state level. Last fall we shared the priorities to drive any additional budget requests in the budget planning process. Given the current environment, we adjusted our plans to narrow the focus to what we are considering the “must-do” items that invest in two budget priorities: Fiscal Responsibility and Return on Investment (ROI) to the state. Our budget proposal already reflected a relatively conservative approach to spending compared to the previous two years.  

During the BFI meeting, the trustees proposed that the administration sequester $50 million, or approximately 4%, in spending to offset the potential impact of possible reductions in federal funding. This proposal requires the administration to identify $50 million in recurring savings for the upcoming fiscal year. These measures provide an additional opportunity to demonstrate fiscal responsibility and to protect our core mission of educating students and conducting research in a time of financial uncertainty. The full Board of Trustees approved the budget, including the $50 million sequestration, on March 20.  

What is the timeline and process for implementing these budget reductions?

In the coming weeks, we will share the first steps in what will be a comprehensive plan to address operational efficiencies and strategic cost-saving opportunities, with a specific focus on continuing to implement shared administrative services. 

The trustees requested that we present the high-level areas where we will seek to find cost savings at the May meeting. A more comprehensive plan will be presented to the trustees in July, allowing for a phased implementation to avoid sudden and disruptive cuts. The University aims to create a runway that allows for strategic decision-making, along with implementation of shared services. 

Throughout this process, we will continue to work with our leadership team and share more information with our campus community as we establish our next steps. We remain committed to our faculty, staff and students, and we will approach any necessary changes with careful thought, while striving to deliver our core mission as efficiently as possible. 

How do we reconcile making budget reductions while simultaneously increasing enrollment and investing in other strategic growth priorities?

We have a commitment and obligation to move the University forward, and that will require additional resources. Any budget management measures will provide a hedge against possible future federal cuts and can also help provide the resources to protect critical investments, anticipate future challenges and ensure we are investing our resources into key strategic priorities that further our mission. Effective fiscal management requires asking difficult questions to ensure resources are allocated to the highest priorities. While this $50 million budget reduction provides a specific target, the practice of thoughtful financial stewardship should be an ongoing process, not just a response to immediate constraints. 

What is going to guide your decision-making?

Any decisions regarding budget reductions will be consistent with the mission and strategic priorities of Carolina. While we encourage all areas to be conservative in their spending, we will strive to avoid across-the-board cuts and to protect activities that are central to Carolina’s mission, add value or are related to compliance or risk management. We will also review any potential reductions in light of their impact on student learning, with priority given to maintaining high-value, high-ROI programs that demonstrate strong outcomes for students, Carolina and the citizens of North Carolina. We will want to make budget decisions that support long-term institutional resilience, including investments in areas of growth, technology, facilities and talent.