Univ of Southern California faces layoffs amid $200M deficit, cites 'shifts in federal support'

The University of Southern California is facing layoffs amid a deficit of more than $200 million, according to the institution's interim president.

USC Interim President Beong-Soo Kim wrote in a letter on Monday that, along with their "peer institutions, we are experiencing significant shifts in federal support for our research, hospitals, and student financial aid, along with potential decreases in international student enrollment.

"The ultimate impact of these changes is difficult to predict, 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 continued. "While we will continue to advocate for the vital importance of research and our academic mission, we cannot rely on the hope that federal support will revert to historical levels."

Kim added that the "external challenges come on top of a recurring, structural deficit in which the expenses generated by our operating model have significantly outpaced revenues for several years."

The university had an operating deficit of more than $200 million for fiscal 2025, up from the $158 million deficit from the prior fiscal year. This was after the institution had "implemented a number of temporary measures – including school and unit budget reductions, a hiring pause, and other actions involving much hard work and sacrifice," the interim president said.

"Left untamed, this recurring, structural deficit erodes cash reserves, constrains future planning and capital needs, and is simply unsustainable," Kim wrote.

The university is also implementing "a zero-merit increase for FY26, ending certain third-party services, and additional discretionary spending and travel controls," in addition to "selling unused properties, consolidating duplicative functions, and adjusting compensation for the most highly compensated members of our community," he said.

Kim added that the university cannot rely on these measures alone, nor on "increased tuition revenue, draw more from our endowment, or take on additional debt," as these options "would simply shift our problem onto the backs of future generations of Trojans.

"To deal decisively with our financial challenges, we need to transform our operating model, and that will require layoffs," he said.

Sanjay Madhav, an associate professor of practice at the USC Viterbi engineering school, told the Los Angeles Times that the university leadership had made a “series of poor decisions” in recent years.

These decisions included constructing the Bloom Football Performance Center, for which ground was broken in November 2024; installing enhanced security measures after the 2024 protests over the Israel-Gaza war; and opening the university's Capital Campus in Washington, D.C., in 2023.

“The administration has made a lot of irresponsible financial decisions,” Madhav said, who is part of a union organizing effort for non-tenure track professors. “The regular employees, they ultimately pay the price for the poor decisions.”

Other universities have had their federal funding pulled by the Trump administration or are facing the threat of such funds being withheld, including the University of California, Stanford University, and Boston University. They have all made staffing cuts or other adjustments as a result.

USC has had at least 57 research grants, worth a total of $17.5 million, terminated after the federal government began pulling already-awarded money from colleges and universities across the country, according to a report in May by thestate.com 

School spokesperson Jeff Stensland said at the time the terminated grants accounted for less than 3% of USC’s $633 million in sponsored awards.