Four weeks ago, we wrote to the community to share an overview of expense categories we were evaluating to identify budget-reduction measures in response to federal government actions. Today, we are writing to share an update on the persisting financial impact of federal actions for Brown, and to explain how we plan to address these actions.

 

When we wrote at the beginning of the summer, we feared we might have to announce large-scale layoffs and other major expense-reduction measures. However, recent developments have improved the financial outlook for Brown's budget in the past month. The agreement with the federal government announced July 30 restores funding for the University's federally sponsored medical and health sciences research, mitigating one area of significant financial impact for our community, and the passage of federal bill H.R.1 (also known as the One Big Beautiful Bill Act, or BBB) and other policy developments will impose fewer costs on Brown than originally expected.

 

Altogether, we now expect that federal actions will have a negative impact of $30 million on the Fiscal Year 2026 budget. Although this is still a significant number, it is far better than the impact we feared a month ago, which ranged from $40 million to well over $100 million for FY26, with the higher number reflecting what would have occurred if federal funding from the National Institutes of Health (NIH) had not been restored.

 

While this is good news for the Brown community, significant financial challenges remain from federal actions affecting higher education institutions across the country. We expect to see a significant decline in federal research funding from such agencies as the National Science Foundation, Department of Energy and National Endowment for the Humanities; there is a persisting threat of deep cuts to indirect cost reimbursements for research grants to higher education; and other federal policy changes will affect tuition revenue. 

 

For these reasons, Brown like other institutions is facing the difficult reality of rethinking how we fund our academic and administrative operations, and doing so in ways that preserve the strength of our teaching and research. For Brown, this work will include reductions in services, pausing spending on some initiatives, monetizing assets, and calling on departments and offices to do fresh thinking about ways to innovate in their operations, including through a level of staffing reductions that is lower than previously expected, but still will be felt in very real ways. These steps are described in further detail in this letter, along with information about the financial context for these actions.

Although we still face serious financial obstacles, Brown’s financial picture has improved in the past month for two primary reasons:

First, some of the components of the federal tax and spending bill H.R.1 (BBB) and other policy changes will have smaller adverse impacts than we originally feared. For example, the tax Brown pays on net investment income (primarily through the endowment) will remain at 1.4%, while previous versions of the federal bill proposed significantly higher rates. In addition, courts have blocked federal attempts to limit indirect cost reimbursements to 15% for research grants to higher education institutions for now.

 

Second, as mentioned above, with the University's recent agreement with the federal government that resolved three ongoing reviews of Brown's compliance with federal law, the University will soon be repaid the more than $50 million owed for expenses on active grants from the NIH. Our faculty also will have access to grant renewals and new awards. This resolution will help us protect the jobs of the many members of our staff whose positions are funded by NIH grants, and will play a significant role in retaining faculty in these fields.

 

Even as many across our community of faculty, students, staff and alumni continue to have questions about the agreement, we have heard from many across campus how critical it is that the agreement has restored Brown's capacity to sustain life-saving research and the educational experience we provide to our students. This is essential for the future of our community and our institution.

 

These recent developments also mean that it is less likely the University will have to rely on debt to support its operations. Brown took out loans of $300 million in April and $500 million in July to protect the University against worst-case financial scenarios. These included the possibility of multiple years without federal funding (Brown learned through media reports in April of $510 million in threats to federal funding); the loss of tax-exempt status or accreditation, which is a threat faced by several other universities; and the potential for a national economic recession driven by tariff increases.

 

Although it was unlikely — and remains unlikely — that Brown would experience all these adverse financial impacts, we felt it was prudent to have the capacity to sustain the University’s operations if we did. We are evaluating whether we need to have as much debt as we currently have, even as we plan for the persisting implications of federal actions affecting colleges and universities across the country.

 

These developments have softened the impact of federal actions, but they have not eliminated them. Challenges still remain. A significant number of incoming international students — primarily master’s students — will be unable to obtain visas in time for the fall semester, reducing tuition revenue. We also expect to be impacted by changes in Pell Awards for low-income students. This is in addition to the deep budget cuts to research in the federal spending bill, which will affect all research universities.

 

While the cumulative negative impact of $30 million on the FY26 budget is far better than we feared a month ago, we anticipate that the range of federal actions will impose an annual burden that is likely to grow in Fiscal Year 2027 and beyond. Therefore, we must plan for actions that will reduce expenses now and into the coming years.

We worked with the President's Cabinet and a faculty committee this summer to determine a set of budget measures that will offset the projected additional losses this year resulting from federal actions, with priority given to protecting Brown’s academic mission. Although our initial planning focused on actions that would offset losses of $40 million to $60 million (with any losses in excess of $60 million to be covered by short-term private loans), we have been able to reduce the target to $30 million, or about 1.7% of the University’s operating budget.

 

A set of five budget actions has been aligned with steps that will contribute to ongoing efforts to reduce Brown's structural operating deficit for FY27. These measures will be administered centrally to cover $15 million in expected losses resulting from national federal impacts (each of these is described in further detail later in this later):

The remaining $15 million will be achieved by reducing other unrestricted expenditures campus-wide by 2.5%. One of the most significant decisions in developing the strategy to close the $30 million budget gap was to divide expense reductions between central University actions and giving academic and administrative units the ability to decide how and where to reduce spending in their own areas. These cuts are expected to include personnel and operating costs such as travel, events and contracts. Because all members of our community will be affected by these budget reductions, we want to describe in some detail how they will be implemented.

Last week, members of University leadership at the Cabinet level — the deans and vice presidents who oversee operations of academic and administrative departments and offices across the University — were given revised FY26 budget targets that, together, will achieve the overall target of a 2.5% reduction. However, the level of the reduction varies across areas: The cumulative result is 2.5%, but percentage reductions identified for individual units vary. In general, areas that are core to Brown’s academic mission of education and research, or that generate revenue supporting this mission, have been assigned smaller budget reductions than others, while some areas received larger budget reductions.

 

Cabinet leaders have discretion in how to allocate budget reductions across the units in their areas and have been asked to prioritize mission-critical activities. They have been given guidance to work with their teams to develop budget plans by mid-August, which should allow us to share an overview of the combined results of approved budget actions with the full campus at the beginning of September.

 

We recognize that these unit-level plans will inevitably involve some reductions in the size of Brown’s staff. However, due to the hiring freeze that has been in place since March, Brown currently has nearly 350 positions that are budgeted but currently unfilled. Where possible, we are encouraging unit leaders to focus on eliminating these budgeted but currently vacant positions, rather than eliminating filled positions through layoffs. The hiring freeze will be lifted after the new unit-level budget plans are implemented, with the expectation that the budget plans realize expense reductions on a permanent basis that were accomplished in the short-term by the hiring freeze.

 

Unfortunately, we anticipate that some layoffs will be necessary. Even if the number of staff reductions is relatively small, we know that any layoff is painful for those who are affected. For those staff, we are committed to provide support and resources through separation agreements, covering severance pay and outplacement services.

 

We also know that this will be a time when some units have to reconsider how they work, and we feel it is important to support those efforts as a community. As units necessarily scale back work in some areas, it may be necessary for all of us to prepare to shift expectations of the ways we have worked with colleagues from other departments and offices in the past, particularly as units reorganize and/or restructure their operations.

 

Regardless of the level of staffing changes, it is important to note that Brown is proceeding with the compensation increases announced in June for all faculty and staff. The only exceptions are members of the President’s Cabinet, who will receive no compensation increases for FY26 (in addition to other highly compensated individuals who voluntarily agreed to a salary freeze), and each of the three of us, who have taken a voluntary 10% salary cut.

 

We want to thank all members of our community for the efforts maintained over the past several months to slow expense growth and delay expenses, which helped manage budget challenges in the latter part of FY25 as well as the beginning of FY26. These temporary actions helped us navigate a period of financial volatility in the short term until we could put permanent actions in place to address the structural deficit and new losses from federal developments.

With regard to the other budget actions listed above, the decision to consolidate to a single health care provider, Blue Cross Blue Shield of Rhode Island (BCBS), was announced to the campus on July 30 and will take effect January 1, 2026. This transition to a single medical plan provider allows the University to negotiate more favorable rates and terms for our community.

 

Brown’s plan to sell some of its non-strategic real estate holdings on College Hill will help meet housing demand off campus, and it will fuel projects in the Jewelry District to drive Brown’s long-term vision for revitalization in that area. The new redevelopment of properties in the district is expected to complement the more than $500 million Brown has invested over the past 15 years in economic development in that part of Providence.

 

In the areas of information technology and facilities, reductions in the FY26 budget for renewal projects are expected to be relatively modest due to the critical nature of ongoing improvements, but they remain part of concerted efforts to reduce overall expenses. However, we also will pause a number of "net-zero" building upgrades and campus decarbonization efforts for FY26, with plans to restore this work in phases beginning in FY27 to achieve Brown's net-zero emissions targets.

In the area of philanthropy, Advancement is temporarily increasing its emphasis on pursuing current-use gifts instead of endowed gifts to prioritize giving that has an immediate positive impact on the budget. Current-use fundraising priorities will include efforts to support specific areas that are unlikely to receive federal funding in the coming years, such as research into health and socioeconomic disparities, and climate change and sustainability, as well as scholarship in the humanities and the arts.

 

In addition to these measures, work teams launched as part of the Financial Health Initiative announced last year to address the deficit in Brown's operating budget will continue to serve throughout this academic year. Some of the cost-cutting measures outlined in this letter are a direct result of their work. Further efforts are focused on streamlining and automating processes, increasing funds coming from revenue-generating contracts and identifying other strategic actions to generate cost savings.

 

Because the federal impacts are expected to increase into the next year, we also plan to take several steps this year that will not affect the University’s operating budget until FY27. These include recommending to the Corporation of Brown University that we maintain the endowment draw at Brown’s upper limit of 5.5% through at least FY27; imposing tight restrictions on faculty searches in the coming year; and closely managing the size of the Ph.D. cohort that will start in the fall of 2027. Academic departments and programs will receive additional guidance and information on the latter two initiatives in the coming weeks. The Academic Priorities Committee has been working over the summer with the Office of the Provost to develop new targets for Ph.D. programs.

The financial challenges faced by Brown and many other colleges and universities continue to be daunting. The federal actions of the past few months, many of which are now codified in legislation, have established a reduced funding framework for much of what we do, though we continue to closely monitor ongoing shifts in federal policies.

 

What remains constant is our commitment to sustaining our mission. And we likewise remain dedicated to engaging in the thoughtful and collaborative efforts needed to find new ways of working with fewer resources, but always mindful of the reasons that members of our community have chosen to work, study and live at Brown. We have a shared commitment to the core values that drive the way we seek to advance knowledge and discovery in the world.

 

In the coming weeks, we will share further communications about the work we will do together as a community to implement the actions outlined in this letter, and in a manner that remains true to Brown's mission and our values.

 

Sincerely,

Christina H. Paxson, President

Francis J. Doyle III, Provost

Sarah Latham, Executive Vice President for Finance and Administration