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| Hyde Park, Chicago on June 25, 2017 |
Case in point: in July, UChicago’s Division of Arts and Humanities announced plans for a reorganization that would cut its number of departments in half, among other things. The announcement came “just three months after UChicago Arts and the Humanities Division rebranded as a consolidated division.” In mid-August, the Division’s dean, Deborah Nelson, announced a reduction of PhD admissions for some departments and a full “pause” in others. A week later, Nelson announced that the pause in PhD admissions would cover the entire Division, with a couple of exceptions.
Nelson used a boilerplate pressure phrase to not define the fiscal problem: “The status quo is not an option.” She make the faculty the cause of the expanded freeze: “Nearly all faculty leadership agreed that instead of admitting students to only a select number of departments, they preferred a broader pause for the division so we can spend time this coming year to collectively assess and better navigate the challenges we face.”
Some faculty do not agree.
“In the humanities, there is the view that the University doesn’t want to produce new knowledge,” said Andrew Ollett, a professor of South Asian languages and civilizations. Ollett declined to serve on a working group, instead mobilizing faculty to collectively raise concerns over the proposed changes.
If the division’s reorganization cuts Ph.D. and language programs, Ollet says, it would signal “the end of [his] department, which is by most considerations the best program for South Asian studies in North America.”
One big job of university administrations is to keep destructive forces from ricocheting into great bystander units in the academic core. That isn’t happening here.
U.S. universities have a lot of different problems right now, but the immediate context is that for the first time in postwar history, a Republican President, Donald Trump, started cutting knowledge creation at the top (NIH) and not the bottom (NEH). His people have decimated funding for Big Science, chopping at least $12 billion in NIH grants so far, proposing huge reductions for next year, and disrupting grant income in multiple ways at all federal funding agencies.
Courts have blocked the cuts about two dozen times, but when appeals reach the Supreme Court, they are re-enabled (like the $783 million in DEI-related cuts unfrozen on August 21st). The Trump Administration has created ten dimensions of fiscal risk for universities. If the cuts aren’t reversed through a combination of Congressional action and public opposition, they will force a fundamental restructuring of academic science. But the main restructuring news so far has been universities cutting the humanities—and related qualitative disciplines.
It’s a Trumpian bank shot. You cut science and then the universities themselves take out those little woke cultural fields.
But why is this happening? What, financially, do cuts to STEM funding have to do with doctoral programs in the humanities?
Were the link “shared sacrifice,” surely we’d be hearing about cuts in UChicago’s Divisions of Biological Sciences, Physical Sciences, Molecular Engineering, and Medicine?
Were it “let’s not waste this crisis and cut some weaker academics,” they wouldn’t start in Arts and Humanities. For better and worse, UChicago has been a national powerhouse in the humanities and social sciences for a hundred years, and still is. (For example, listen to Matt Seybold’s “The Chicago Fight and ‘Criticism, Ltd.’ and related episodes.)
Were it “let’s cut only secondary functions to protect the academic core,” they wouldn’t start by freezing doctoral programs. Doctoral programs are the cornerstone of basic research, and UChicago along with Johns Hopkins are the major U.S. universities formed around graduate rather than undergraduate education. UChicago has seemed to me, as an outsider, always to be a place where intensive thinking was sacred, where the first thing that matters was doing great basic research. Freezing doctoral admissions strikes at the academic core.
Were it “let’s cut where the money is,” they’d start the freezing and merging in the big science divisions.
Were it, “let’s dial back our outsized investment in the arts and humanities,” they would be confusing UChicago with some other wealthy university.
On this last issue of existing humanities support, here are two of our traditional figures, using data submitted by the universities themselves via the NSF’s Higher Education Research and Development (HERD) survey, mandatory for all recipients of federal research funds and last updated for FY2023.
Figure 1
This figure shows total R&D expenditures for selected “Ivy Plus” universities, all under attack from the Trump Administration (except the University of Chicago). Universities cover much of their research costs through their own “institutional funds.” UChicago reports spending less of its own money covering these costs than these comparable universities.
The next figure, based on HERD’s Table 58, takes the institutional funds category, removes science and engineering spending from that source, and then disaggregates non-S&E spending by discipline.
Figure 2
That year, UChicago spent a minute amount of its own money on research in the humanities: $698,000. This is much less than that spent by these peers.
The Division of Arts and Humanities has a fiscal problem, which is not too much investment but too little.
Even so, perhaps the Division is losing a lot of money overall. But this theory isn’t supported by the excellent work done by classics professor Clifford Ando that has appeared in the Chicago Maroon. (Ando has created an impressive collection of analyses that exemplifies the kind of independent inquiry into one’s academic working conditions that I wish were common.)
Figure 3. The budget of the Division of the Humanities in pie charts, FY2022.
UChicago’s annual revenues (excluding its medical center) are a bit over $3 billion a year. Its most recent operating deficit is $221 million. The Division of Arts and Humanities (FY2022) spends $114 million, which is 3.8% of the University overall expenditures. It is almost entirely self-supporting. In FY22 it made a small surplus of about $1.2 million, counting the receipt of University Transfers of about $8.4 million.
To the implicit claim that Arts and Humanities needs to stop the bleeding, one would say that there’s really no fiscal bleeding to stop.
The current freeze falls on doctoral programs. They cost about $53 million in FY2022. Could you save $30 million by suspending half of them? No, because Graduate Tuition brings in $46.4 million a year. The net cost of the division’s graduate programs is under $7 million a year.
Maybe the university wants to zero out the central administration’s $8.4 million subsidy? But that saves an amount too small to fix any financial problems.
You’re no doubt getting tired of this guesswork, but the dean seems to be turning the Division upside down without publicly specifying a fiscal problem that belongs to that Division.
My first point here is that there’s no visible rationale for any cuts to the Division of Arts and Humanities. If Nelson or another administrator has withheld data that show one, they should disclose it.
**
Here we get to a second issue, which is UChicago’s STEM ambitions and the costs of research. Ando has repeatedly documented a wider reorientation of University strategy that invests in normal Big Science and Big Tech and rather casually disinvests in the humanities. The Division has already lost half its graduates students over the past 20 years, while these STEM field cohorts have doubled. It’s not clear why that isn’t enough downsizing already in these low-cost fields, unless you assume that the goal isn’t simply to find money to plug the operating deficit but to redefine UChicago as a standard-issue research university focused on STEM prestige, commercial science, and the corporate-facing professional schools.
Going back a ways, administrators did seek a higher applicant rejection rate to boost rankings (see Chapter 2), increased the size of each incoming undergraduate cohort, upped the student-faculty ratio, grew the share of courses taught by non-tenure-track faculty, and ramped up capital investments that would directly serve the STEM reputation. Ando tells the strategy’s financial history in “University Leaders and Their Plans: A Pathology,” and has calculated the heavy impacts on UChicago’s debt load, which appear in his piece on financial pressure.
Figure 4 Debt Load as a Percentage of Net Financial Assets
The result is that UChicago must scramble for unrestricted revenues to apply to its high debt service, over 11% of total revenues (column AH row 5). Note that the University reports interest payments as half of that, 5% of expenses, but this figure must include the medical center, as is close to Ando’s figure when he includes the hospital revenues in his calculation (AH:4).
However, I don’t think this high debt is enough to force the current cutbacks. Other wealthy universities also have high debt service –Stanford is over 7% (AH:16), Princeton is at 10.5% (AH:14). Rich and famous universities do carry on under these conditions, in part for the bad reason that they can chisel away at what makes them special, and in part because bond raters accept this use of a big asset base coupled with very high tuition charges.
The real problem lies elsewhere: the broken funding model for STEM research at universities, which governments and universities won’t acknowledge, much less fix. In FY 2023, U.S. research universities spent almost $28 billion in their own funds to subsidize research. I estimate that on average 95-98% of that covers unfunded costs of extramural research, and extramural is also almost entirely STEM research. (See Stage 2 for the general calculation, or here or here or here; Johns Hopkins and Princeton in Figure 2 are outliers in the other direction).
Since these funding truths are stupidly controversial, I hasten to add as always that I make this point not to cut STEM research but to fund it properly with public money. That means “full costing” of sponsored research. There should be more STEM research, and universities need to have the money to claw back research now being locked up in the closed science structures of corporations like OpenAI. By staying silent, universities have made their shortfalls worse.
The enormous losses incurred by sponsored research puts a huge financial burden on the big science schools as they constantly compete with each other. They spend 25 cents on the dollar of research expenditures, though this share is lower for some top private universities, including UChicago (Table 22).
Meanwhile, In FY2023, UC San Francisco spent $505 million of its own funds to support research, UPenn spent $643 millon, UMichigan spent $679 million, UWisconsin-Madison spent $543 million, UNC-Chapel Hill spent $408 million, Yale spent $405 million, Harvard spent $489 million, UFlorida spent $389 million, Vanderbilt spent $358 million, and UChicago spent only $47 million.
Running a very similar model for research funding, UK universities are now going broke from it. As in the US average, they typically lose 25 pence on the pound. The sources of fiscal crisis of British universities are pretty damn obvious in this official slide from the UK government’s Office for Students, generated through Transparent Approach to Costing (TRAC) program.
Figure 5 TRAC full economic costs surplus/(deficit) by activity, 2023-24 (UK higher education institutions)
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But as in the US, nothing is being done.
My conclusion from Figure 4 above is that it actually locates the cutoff for STEM affordability under our broken and deceitful funding model.
In the figure, Ando has lined up UChicago against the richest and most venerable research empires on the face of the earth. (The main exception is Notre Dame, and as impressive as that university often is, it is not playing the same STEM game as the others. Dartmouth is also a bit of an undergrad-oriented outlier, and Cal Tech, though a dominant STEM school, is small and has a smaller revenue denominator). The nine other universities are the only universities on the planet that can afford the current US research model. UChicago has turned out not to be one of them.
The best conclusion is that though UChicago has wanted to be at the top of the most prestigious STEM fields, which include “molecular engineering and astrophysics; . . . computer science . . . quantum computing and climate science” (Ando, “Pathology”), it can’t afford it out of pocket. It’s rich, but the US research funding model screws every university except the top 9-12 private universities that already dominated US research in 1925.
If wealthy and outstanding UChicago can’t afford the science funding model, then perhaps finally the model should be fixed.
You’d think. Instead, we have the Cuts Theater in the Arts and Humanities Diversion.
**
I have a third point, which emerges from asking why UChicago’s senior and middle managers are looking in the wrong direction for fiscal answers. Setting aside the usual suspects, like the humanities being every university’s 97-pound weakling, it may be that UChicago’s senior managers misunderstand indirect costs on extramural grants—every reader of this blog’s favorite subject!!
Check out this 2017 slide (Ando, “Race to the Bottom”):
Figure 6
The then-Provost says building a building to hire more faculty will mean more extramural grants and thus more indirect cost (IDC) recovery--true!--adding, “substantially offsetting the debt service.” False!
The statement treats IDC on a given grant as a net profit rather than a net loss. But IDC is a loss, since sponsors never pay the total costs of conducting the research, which are always greater than the IDC the grants bring in. This is demonstrated by the existence of every research university’s Institutional Funds payment for research, like the $46.7 million at UChicago in FY2023 at varying IDC recovery rates, from 64% on down.
This figure may smaller than those of the other Ivy Plus universities—I’m guessing—because UChicago has pushed some facilities costs from expenditures to borrowing. “The university sold $265 million of refunding bonds” last week. So the real total for its Institutional Funds spending on research may be much higher.
In any case, adding new computer scientists adds research losses to the budget. This is good, because it means new knowledge, but new university knowledge means new university costs. Sponsored research does not earn profits for the university. To the contrary, universities are required to subsidize the social production of knowledge.
The humanities are minimally unprofitable in a context in which all research must lose money. If a provost wanted to cut their losses they would transfer lines from computer science to East Asian Languages and Civilizations.
As Ando puts it,
Contrary to much vernacular opinion, faculty in humanistic fields and the interpretive social sciences are the only faculty in the arts and sciences who systematically pay for themselves: they do not need expensive buildings; they do not require substantial material infrastructure or expensive data sets for research; and the provision of instruction in their fields is cheap.
All this is true. Cutting the Arts and Humanities will save no money, increase fiscal inequity, and weaken the university without building a strategy for protection against Trump
I don’t want to end with the epistemic injustice generated by this long-time coverup of research losses. But it should always be in the record. Ando again describes this well:
The University has undertaken extraordinary quantities of leveraged spending in ways that benefit select units, while others, who have achieved high international ranking with little aid from capital spending, have instead suffered from a withdrawal of operational support in order to finance those endeavors. The present moment of reform brings that long trend to a crisis point.
There is real injustice in asking more from the already relatively unsupported Division—while inflicting unjustified damage on cultural and social knowledge.
I do want to end by inviting UChicago’s senior admin to lead multi-university action in common against the real problem here, which is a heavy science funding model now further toxified by the Trump cuts. If STEM funding drops by 1/3rd for 2-3 years, UChicago’s deficit of $220 million or so will double. This status quo is not sustainable.
Cuts won’t help you. Only fighting will.
6 comments:
You are seriously stupid — totally duped by Ando’s fictions. Just look at the “data” you repeat by using his pie charts (which don’t cite to any source by the way) and calling it “excellent work.” Look at the numbers. How could graduate tuition possibly bring in $46M? PhD’s do not pay tuition; the 150-200 MA’s are not paying $230,000 each in tuition. Ando can’t read a financial statement, which for accounting purposes show’s PhD tuition as revenue in one column and as an expense in another — because that’s how financial statements work. Do you also really think that the expenses for 400-450 graduate students (where phD’s are paid a stipend and benefits of around $60,000, and MA’s get no stipend) are greater than that of the salaries for about 420 faculty? Whose salaries range between $100,000 and $350,000? The Humanities Division does not pay for itself, it receives a big portion of its budget from the university. In fact, its real budget is about twice what Ando claims it is with his magic math.
Your article is so sloppy that you should be embarrassed. Before you cite as excellent analysis a bunch of lies, why not do basic research to verify the information. Among other
Cont’d — among the misrepresentations you make or repeat are: 1) that the Dean “announced” plans for a repeat that would cut its number of departments in half. Whaaa? Where do you get that from? (besides an article in a student newspaper by undergrads that repeat other misrepresentations.). The dean charged a series of faculty committees, there are written charging documents (not cited here), and the charge to the committee looking at the structure of the division was to look at how things are organized now and see if there are better structures than 16 separate departments, which causes an enormous burden for faculty who must serve as department chairs, directors of graduate studies, directors of undergraduate studies, committee chairs, hiring committee members, PhD advisors, and on and on. She advised them to look at where faculty research is going and where the fields are going and to present some ideas about whether there is an organizational structure than the one developed during the Cold War, and that may result in realigning departments because they no longer reflect faculty research interests. How is this “announcing” plans for a reorg that “would cut” the number of its departments in half? You’re playing a game of telephone by repeating initial untruths without bothering to do the research yourself. So sloppy, so lazy.
2) You quote a couple of faculty members to cast doubt on the dean’s statement that faculty LEADERSHIP advocated for a one year pause of PhD admissions (not programs — students in years 2-9 of their PhD are still there and going strong). Faculty chairs advocated for this, as did a faculty committee providing ideas about PhD programs. I’m sure a few faculty disagreed, but the dean rightfully relies on department chairs to represent their faculty. 3) You claim that the humanities are being singled out — Hunh???? UChicago’s president and provost sent long communications to all faculty explaining their plans for the entire university. Other divisions and schools have already announced plans that they are undertaking. The humanities are not being singled out (just as they do not pay for themselves or have a budget of $115M or have announced cutting half its departments). I applaud your desire to defend the humanities, which are so vital to everything we do. But your sloppy failure to do the least bit to verify your claims results in something that is harmful to any defense. Indeed, it is quite Trumpian — saying something is “true” and repeating fabrications of others as “truth” — did ya hear that they were eating cats and dogs in Ohio, too?
missed these great comments until now- many thanks. If either of you anonymous people have actual contrary data to Ando's please do send it or post it. I'd be happy to revise my own analyses with other data. If you have news of other U of C divisions being treated like the humanities I'd love to see it. (I will post one new story below.) If you are happy with the consultation and governing processes on the division, and with their outcome, I'm obviously not going to stand in your way. I do object to the contempt you heap on both Ando and the undergraduate journalists. They are trying to understand what is going on at the University of Chicago, given the evidence they have and the best arguments they know how to make, and to dismiss rather than engage with their efforts is obviously not respectful of them or of academic ideals.
Sun Yu, “UChicago sells prized institute amid high debt and low returns” *Financial Times* September 29, 2025
The University of Chicago, renowned for producing world-leading research in economics and finance, is selling a prized research centre as it struggles with heavy debt and lacklustre endowment returns.
Proceeds from the $375mn sale of the Center for Research in Security Prices — founded in 1960 by two UChicago professors — would be added to the university’s endowment and invested to boost returns, a spokesman said.
The transaction, expected to close in the fourth quarter, comes after UChicago last month announced $100mn in spending cuts and plans to suspend or scale back several PhD and graduate programmes in an effort to rein in a deficit that ballooned to more than $200mn in recent years.
UChicago is known for its “school of economics” — an economic approach centred on neoclassical price theory and the belief that free markets are more efficient than government regulation. The university has produced some of the finest minds in the history of finance and economics, including Myron Scholes, who developed a groundbreaking model for options pricing, Eugene Fama, who created a leading framework for analysing portfolio returns, and free-market economist Milton Friedman.
Data amassed by the CRSP provided the foundation for research that won the 2013 Nobel Prize in economics. Analysts said the sale reflected the financial pressures the institution was confronting.
“The fact that they have to sell a celebrated part of the university now is very telling of how poor their fiscal situation is,” said Hunter Lewis, co-founder of Cambridge Associates.
UChicago’s strains came after its $10bn endowment — a critical source of revenue — delivered an annualised return of 6.7 per cent over the 10 years to 2024, among the weakest performances of any major US university.
The private university has taken a more conservative investment approach than many peers, with greater exposure to fixed income and less to equities since the global financial crisis in 2008.
“If you look at our audits and rating reports, they’ve consistently noted that we had somewhat less market exposure than our peers,” said Ivan Samstein, UChicago’s chief financial officer. “That led to less aggregate returns over a period of time.”
Yet UChicago was not risk-averse when it came to digital assets. The university’s financial statement shows it invested $64mn in cryptocurrencies in 2021. Samstein said the value of those holdings had “well more than doubled” since their acquisition (the school stopped publishing the value of the position after 2022). The investment has not yet generated any distributions, but Samstein said it was “not designed for cash flow.”
end part 1
Sun Yu Part 2:
An aggressive borrowing spree to expand its research capacity also weighed on the university’s financial health. UChicago’s outstanding debt, measured by notes and bonds payable, climbed by about two-thirds in the decade ending 2024, to $6.1bn, as it poured resources into new fields such as molecular engineering and quantum science.
“UChicago had a planned period of significant investment in both programmatic and capital areas to drive the university’s eminence,” Samstein said.
But the move has also put the university under financial stress. “The borrowing generated buildings,” said Clifford Ando, a classics professor at UChicago who has studied the institution’s financial situation. “With the buildings come operational expenses that the university has not figured out how to fund.”
UChicago’s budget deficit jumped tenfold between 2021 and 2024, sparking concerns over its financial health.
Rating agency Fitch said in a May report that the university’s available funds relative to debt were “somewhat modest” compared with peers with similar AA+ ratings.
Federal funding cuts have exacerbated the university’s financial situation.
Since President Trump took office, federal agencies have rescinded about 65 grants awarded to University of Chicago faculty. The immediate impact on fiscal year 2025 revenue was projected at $10 million to $15 million, with the longer-term shortfall potentially exceeding $40 million beginning in 2026.
“The profound federal policy changes of the last eight months have created multiple and significant new uncertainties and strong downward pressure on our finances,” said UChicago president Paul Alivisatos in a message to faculty last month.
To shore up its finances, the university last month unveiled the cost-cutting plan, which includes pausing the growth of faculty, reducing PhD enrolment, scaling back capital projects and paring back funding for research centres as part of an effort to close the deficit by 2028.
Katherine Baicker, UChicago’s provost, said the university was “taking the time to wind things down” while it continued to invest in areas of higher priority, such as quantum computing.
“It is a slower spending growth than it would otherwise be,” she said.
In the long run, said Lewis, UChicago must control debt and improve its endowment return to restore financial health.
“The sale itself doesn’t solve the structural problem at all,” he said.
https://www.ft.com/content/4501240f-58b7-4433-9a3f-77eff18d0898
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