University of Arizona projects continuing cash strain

Bonds

The University of Arizona expects more strain on its cash flow in the coming fiscal year as it offered a peek at underlying assumptions for its next budget.

In a presentation to a Arizona Board of Regents committee on Thursday, the university’s preliminary forecast of days cash on hand for fiscal 2025 showed it slipping to 67 days, which would be the lowest level over the last 13 fiscal years, from an estimated 73 days in the current fiscal year.

It has been progressively falling since fiscal 2021, when it stood at 173 days. It dropped below the board’s minimum requirement of 140 days in fiscal 2023 when it was 110 days.

The University of Arizona’s preliminary forecast showed days cash on hand falling below the Arizona Board of Regents’ 140 days minimum requirement for a third straight fiscal year.

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The other schools governed by the board provided higher forecasts with Arizona State University projecting 163 days cash on hand at the end of fiscal 2025 and Northern Arizona University projecting about 175 days for both fiscal 2024 and 2025. 

“We do expect fiscal ’25 to be the end of the decline and the path forward when we’ll begin to increase our reserves again starting in fiscal ’26,” Garth Perry, the University of Arizona’s chief budget officer, told the committee. 

The Tucson-based university’s deteriorating finances led to negative rating outlooks earlier this year from Moody’s Ratings and S&P Global Ratings. S&P rates the university’s system revenue bonds AA-minus, and Moody’s rates them Aa2.

In April, the university reported its operating deficit, which was initially projected at $177 million in January, was reduced to $52 million as a financial action plan adopted by the regents board in December was implemented. That plan included enhanced financial reporting and expenditure controls.

University of Arizona Interim Chief Financial Officer John Arnold said the fiscal 2025 budget due out later this month is based on conservative assumptions that the school hopes to outperform. 

“With the University of Arizona’s financial position, we have much more downside risk than we have upside risk,” he said. “We don’t want to overestimate revenues, we don’t want to overestimate profitability.”

Perry said the budget for the fiscal year that begins July 1 includes no salary increases and that the school is prepared for “potential impacts and reductions” from actions taken by the Arizona Legislature, which has yet to reach an agreement on a state budget. 

The university had nearly $1.3 billion of bonds outstanding at the end of fiscal 2023.

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