As the Interim President at the University of Southern California, Beong-Soo Kim’s biggest priority is to maintain a good financial foundation. But on July 14, he took up the task of writing a rather grim letter to his faculty and staff about the university’s structural deficit, which will directly create an unsettling environment.

Like many other programs, USC has witnessed a shift in federal support with regard to research and student financial aid, which could affect international student admission. “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,” Kim wrote in the letter.

“These 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.” Hence, they had tried out a couple of temporary measures like school and unit budget restrictions and paused hiring, which helped the school keep expenses under control. But because of the structural nature of their deficit and poor health system, they ended FY25 will a deficit of $200 million. That’s much higher than their $158 million deficit in the previous year, and when put together, it amounts to $358 million deficit.

What’s worrying is that if the issue is left unsolved, their cash reserves will erode, and it will become difficult to sustain in the future. So the university must make changes. “The university has already taken numerous steps to address these financial challenges, including: a zero-merit increase for FY26, ending certain third-party services, and additional discretionary spending and travel controls. And we are committed to doing much more, including selling unused properties, consolidating duplicative functions, and adjusting compensation for the most highly compensated members of our community. 

“While important steps, these measures will not be enough by themselves to reverse our structural deficit and weather the new federal environment. Nor is it feasible to rely on increased tuition revenue, draw more from our endowment, or take on additional debt. Each of these “solutions” 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.

“That USC is not alone in having to take these difficult actions does not make this news any less disappointing or painful to hear,” Kim wrote in the letter, which is now available on USC’s website.

While the current scenario the university faces is challenging, Kim has encouraged his staff to see it as an opportunity to refocus on their mission and to look for innovative, sustainable, and collaborative methods. For now, their mission statement is:

• Their first priority is education, conducting great research projects, and engaging in creative expression.
• They want to create a sustainable model. So, reducing expenses is something they are looking at right now, but in the longer term, they want to build a durable approach.
• USC will take decisive actions soon, as they do not want its staff to work under uncertainty and anxiety.
• Because layoffs are unavoidable at this moment, USC believes in carrying out the process with compassion and support.

Outgoing President Carol Folt had been a staunch believer in athletic investment; spearheading a $200 million football performance center, rubber-stamping coach Lincoln Riley’s massive $10 million-per-year contract, and pushing for the school’s Big Ten leap. Visionary, yes—but costly.

Then Folt left. And in walked Beong-Soo Kim, interim president, with some tough decisions to make. In fact, the university eliminated several positions in the athletic department in order to reduce costs. For instance, Exec Senior Associate AD/Deputy AD Paul Perrier, in addition to five other people, was gone. But not everyone at USC buys the whole “federal funding cuts” narrative. Faculty and staff point to questionable splurges: The D.C. Capital Campus opening in 2023, costly new security post-protest, and—yes—the golden goose itself, that Bloom Football Performance Center. Professor Sanjay Madhav opined: “The administration has made a lot of irresponsible financial decisions… and the regular employees pay the price.”

The ripple effect—and what’s next for USC football?

It’s not just USC feeling the pinch either. Stanford slashed $140 million. Boston University laid off 120 staffers. UC froze hiring. All in reaction to looming federal research cuts. What’s next? The university will need to plan how to maximize the resources they have, as well as get elite performances from their athletic department.

For instance, they have invested a significant amount in Lincoln Riley and the football program. Now, they need to be careful with NIL expenditures and success on the field. And the trio of Jen Cohen, Lincoln Riley, and Chad Bowden will need to look into this as the pressure to deliver builds for the 2026 recruiting class. Reports also suggest that the university’s football is getting more financial resources as compared to women’s basketball, which has been a high-profile program the recent years.

For now, we know that senior members of USC’s leadership team, along with Kim, will come together to discuss the future in detail.