The University of Chicago’s financial statement for the 2025 fiscal year (FY2025) is now out. In an article in Forbes, the University portrayed this year’s achievement as a major success, noting a reduction of its budget deficit by $128 million. On Thursday, December 11, the University’s leadership will hold a town hall about last year’s results, the current year’s budget, and the future. It behooves the University community to scrutinize the data from last year in order to arrive at the town hall better equipped to understand and critically engage the presentation.

My focus in this article is not on financial matters regarded in isolation. My concern lies at the intersection of University finances and policy. UChicago stands on the threshold of major changes: a further retrenchment from earlier commitments to the arts and sciences; drastic reductions in doctoral education; an expansion of the College; and major new investments in computational and data sciences, artificial intelligence, and climate science. These plans follow upon two decades of transformation that earned the University eminence in areas of new investment but also changed fundamental aspects of practice and brought the University to the brink of financial disaster. 

The trade-offs that the University is now making—the curtailing of ambition across dozens of departments in order to finance new endeavors—clearly result from this history. 

Do the results of FY2025 suggest that any lessons have been learned?

I don’t think so. The measures that the University is taking to finance its latest endeavors are exactly those it has employed since 2006: increase the student population of the College, diminish doctoral education, shrink the endowment, borrow. The result has been not simply broad-based precarity, but a shrinking of the University’s ambitions across multiple areas of historic eminence.

In what follows, I briefly review the sources of University revenue in FY2025 in order to pose the question of whether the improvement of this year on the previous one can be sustained. Second, I cite different ways to measure the deficit and discuss their utility. Third, I place the history of FY2025—in particular, its combination of borrowing and drawing on the endowment beyond the trustees’ “TRIP formula”—in the context of the last 20 years. I conclude by urging that the University’s longstanding practice of spending down assets at the same time as it borrows is going to cripple its future. On the threshold of institutional expansion, our financial assets are now smaller than they were in 2004.

This Year’s Deficit Decrease May Not Be Replicable

Comparing FY2024 and FY2025 operating revenues as recorded in the financial statements, three factors suggest that the gains the University made in reducing its deficit may not be replicable in future years.

The worrisome categories are “[o]ther income,” “[a]ssets released from restrictions,” and “[p]roceeds from issuance of debt instruments.” 

Revenue classified as “[o]ther income” increased by almost $500 million from 2024 to 2025. The exact sources of “[o]ther income” are not defined, but one can at the very least say that this is not income from “[t]uition,” “[g]overnment grants and contracts,” or any other regular and therefore itemized source. In the absence of further information, the increase in revenue from this source does not seem likely to be sustainable. 

Neither does the extraordinary extent to which UChicago has spent down its endowment. One source of “[a]ssets released from restrictions” are endowment funds that the trustees negotiate to convert to funds available for immediate use, thereby sacrificing future purchasing power for immediate need. UChicago has been spending down its endowment in this way since at least 2009. The results, detailed in the attached spreadsheet, have been crippling. 

Finally, it is not sustainable for the University to continually add to its long-term debt and, therefore, to the burden of interest payments on its annual budget. Cash paid for interest in FY2025 was over $190 million, more than 150 percent of the budget of the Division of the Humanities in FY2022, including faculty and staff compensation, graduate student support, and all supplies. We could literally fund a division with what we pay in interest.

The results of FY2025 may not be replicable. Where do they leave us for the future?

The Deficit Is Not One Number. How We Measure It Matters.

The financial statements offer two different figures for the University’s deficit:

These figures have different utilities and draw on different assemblages of information, as the tables in the financial statements make clear. My own view is that “[n]et cash used in operating activities” better captures cash flow from operations and so isolates predictable year-to-year operational costs and expenses from items that fluctuate according to market conditions and result from purely financial activities. (This is not to say that financial activities are not essential to sustaining operations!) Within the second framework, for example, endowment payout is treated as cash flow from investment or financing activities. 

What is more, viewing the deficit within this framework helps one see the role that borrowing and endowment payout play in reducing a cash deficit from operating activities to a more market-friendly figure in terms of “deficiency of operating revenues over expenses.”  Briefly put, one can diminish the gap between the one measurement and the other through financial activities. These might be generally beneficial, like investment gains, or even detrimental to future health, like excessive borrowing and massive draws on the endowment, but “[e]xcess (deficiency) of operating revenues over expenses” treats them as salient to a limited annual accounting perspective.

In short, activities that diminish the University’s long-term financial health may, by contrast, be helpful in the present moment for the narrow purpose of the University’s marketing itself to the financial markets. We have been doing these activities for too long and have long been paying the price for such recklessness.

The University of Chicago Consumes Itself

Let me now seek to place the trends of the last two years in a long-term perspective. As many know, by 1990, a concern had developed that the University’s model—its focus on research and doctoral education; the small size of its undergraduate College; and, therefore, small number of living alumni—would become financially unsustainable. UChicago needed more tuition, so the thinking ran, and it needed more alumni in a position to give. A decisive transition was made under President Hugo Sonnenschein (r. 1993–2000). The number of undergraduates would grow, and the University’s commitment to doctoral education—to being the teacher of teachers and the source of the next generation’s researchers—would diminish.

The attached spreadsheet details the consequences of the decisions made in that era along two lines. I have taken all data on numbers of students from the University Registrar’s public database of enrollment reports. 

From a peak of 2,613 doctoral students in the Divinity School, Division of the Arts & Humanities, and Division of Social Sciences  in 2004, the University has already slashed that number by nearly 60 percent, registering a decline nearly every year for more than 20 years. As a consequence, entire areas of research have effectively been abandoned, de facto if not de jure, as fields of doctoral education. Over the same period, the number of undergraduates grew relentlessly, from 4,539 to 7,569—an increase of 66 percent.

Clearly, the University has pursued the extraordinary reorientation in priorities that it charted in the 1990s with singular focus and drive. Financially, at least, life should have been golden. It is not. What happened?

Essentially, the University elected to spend and borrow at such a rate that it has made itself (financially) poor. On the borrowing side, even as the University drastically reduced its expenditure on doctoral education and massively increased its revenue from undergraduate tuition, it also borrowed staggering sums to renew and, above all, to expand its endeavors in applied science. Between 2004 and 2025, the University’s long-term debt expanded by 577 percent, from $867 million to $5.015 billion.

On the spending side, as the attached spreadsheet’s simple plot of payout and value reveals, over the same period the University also diminished its savings. The University has literally spent down its endowment. In fact, it has completed a trifecta: it has taken “regular” payouts larger than the trustees’ own formula advises; it has taken additional payouts in support of operational expenses; and it has “released from restrictions” vast sums of accrued value.

The results of this practice may be viewed in the following bar graph of net financial assets, calculated crudely as the value of the endowment minus notes and bonds payable.  According to the Bureau of Labor Statistics’s CPI inflation calculator, measured in constant dollars, the University’s net financial assets in 2025 ($4,099,989) are smaller than they were in 2015 ($4,179,899) and, indeed, smaller than they were in 2004 ($4,293,646).

A note on the TRIP formula for endowment payouts: The formula gives recommendations toward predictability of income and stable purchasing power. To achieve this, it recommends taking a higher payout from the endowment under bad market conditions and a lower payout under good ones, “with the objective of a 5.0% average payout over time.” But the University has taken regular payouts of more than 5 percent for many, many years. Next, starting at least in 2013—the first year it is itemized in the Financial Statement—the University has been paying a portion of the operations costs of “Alumni Relations and Development” via special payout beyond the formula. Other ad hoc payouts for operational costs are itemized in the years in which they occurred. Finally, between 1 July 2006 and 30 June 2025, the University counted as operating revenue over $2 billion in assets “released from restrictions.” 

According to this very crude measure of financial health, the University of Chicago is poorer today than it was a decade ago and poorer still than it was in the mid-aughts.

Of course, some things the University purchased when it spent down its endowment were non-financial assets. It owns these, and it could borrow against them to finance its plans for expansion. But the extraordinary volume of the University’s current indebtedness makes this imprudent. Nevertheless, the University has informed the financial markets of its intent to borrow another $300 to $500 million over the next two years.

The University also intends to continue down the path it charted in the 1990s, expanding the College and cutting doctoral education. But the University’s history shows that these measures, even when accompanied by extraordinary success in development, will only result in financial strength when practiced in the context of fiscal discipline. 

I, for one, am worried. In my view, the University’s practice over the last 20 years has not only weakened notable areas of historic strength and diminished the professional lives and pedagogical horizons of faculty and students; it has left us poorly situated to sustain even the new endeavors that commenced since 2006. The University now launches a new era of ambition with fewer financial resources than it possessed in 2004. The trade-offs will be costlier, the risks greater, the results will rest on a weaker foundation.

Clifford Ando is the Robert O. Anderson Distinguished Service Professor in the Departments of Classics and History at UChicago and an Extraordinary Professor in the Department of Ancient Studies at Stellenbosch University.