USC to implement layoffs as budget deficit surpasses $200 million

The University of Southern California will move forward with layoffs as part of a series of financial measures to address what interim President Beong-Soo Kim described as a “recurring, structural deficit” in a message sent to faculty and staff on Monday. 

The announcement revealed that USC ended fiscal year 2025 with an operating deficit of more than $200 million — up from $158 million in the previous fiscal year.

Kim attributed the shortfall to both internal and external pressures, including a worsening structural imbalance between the university’s expenses and revenues, weak financial results from USC’s health system, a decline in international student enrollment and potentially steep reductions in federal funding. 

“The ultimate impact of these changes is difficult to predict,” Kim wrote, “but for a university of our scale, the potential annual revenue loss in federally sponsored research funding alone could be $300 million or more.” He noted that similar financial pressures are affecting peer institutions but stressed that “we cannot rely on the hope that federal support will revert to historical levels.”

To respond to these challenges, the university plans to carry out layoffs alongside a slate of additional austerity measures. These include selling unused properties, consolidating duplicative administrative functions and adjusting compensation for the university’s highest-paid employees. 

Other steps already in place include a hiring freeze, school and unit budget cuts, discretionary spending controls, the elimination of some third-party services, travel restrictions and a zero merit-pay increase for the 2026 fiscal year.

Despite a strong year in fundraising, Kim said these actions have not been sufficient to resolve the core financial imbalance. “Left untamed, this recurring, structural deficit erodes cash reserves, constrains future planning and capital needs, and is simply unsustainable,” he wrote. 

He also ruled out drawing further from the university’s endowment, increasing tuition or taking on additional debt — options he described as unfair burdens on future generations of USC students.

While acknowledging the hardship the layoffs will bring, Kim framed the situation as an opportunity to refocus the university’s long-term mission. “Our goal is not simply to reduce expenses, but to build a durable operating model that can fuel USC’s ambitions well into the future,” he said. “The time has come to take the strong actions needed to move forward and move on.”

USC leadership plans to meet with faculty and staff groups in the coming weeks, including the Academic Senate, the Staff Assembly, the Committee on Finances and Enrollment, and school-level leadership teams. 

Kim said he welcomes the discussions, “as difficult as I know they will be.” A website linked in the announcement includes a suggestion box for students, alumni, faculty and staff to propose ideas for how to address the university’s financial problems, and will also be used to share updates.

“I know this is not the news we were hoping for,” Kim concluded, “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.”