Gov. Gavin Newsom warned California’s university leaders Thursday that schools will lose billions in state funding if they cave to President Donald Trump’s demands.

Newsom’s warning comes in response to the Trump administration asking nine universities across the country to sign a compact mandating certain changes in exchange for additional federal funding.

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First reported by the Washington Post and confirmed by The Wall Street Journal Thursday, the proposal — a 10-point memo referred to as the “Compact for Academic Excellence in Higher Education” — reflects a new tactic from the administration, which had previously used investigations and threats to cut schools’ funding as a way to force universities to comply with the Trump administration’s priorities.

Under the reported compact agreement, schools would be required to commit to institutional neutrality, prohibit all university employees from expressing political beliefs on behalf of the university, shut down departments that “punish, belittle” or “spark violence against conservative ideas,” and define and interpret “male, female, woman and man” according to reproductive function and biological processes.”

Schools would also be required to ban all consideration of race, sex or other characteristics in hiring, admissions or financial aid processes; freeze tuition rates for five years; cap international undergraduate enrollment at 15%; require standardized tests for applicants and clamp down on grade inflation. And those with an endowment exceeding $2 million per undergraduate student will be prohibited from charging tuition for admitted students pursuing hard science programs.

The administration reportedly invited the University of Southern California, along with Brown University, Dartmouth College, the Massachusetts Institute of Technology, the University of Arizona, the University of Pennsylvania, the University of Texas at Austin, the University of Virginia and Vanderbilt University to sign the agreement.

According to a copy of the memo published by The Washington Examiner, schools that fail to agree to the mandates listed in the compact choose to “forego federal benefits,” while those that agree will benefit from the “extraordinary relationship with the U.S. government,” including access to student loans, federal grants, research funding, international student visa approvals and preferential treatment under the tax code.

But Newsom’s office condemned the compact Thursday, calling it a “hostile takeover of American universities” and said the agreement “ties access to federal funding to radical conservative ideological restrictions on colleges and universities.”

Under the agreement, schools will be required to annually certify that they are adhering to the requirements, conduct an anonymous poll of faculty, students and staff to evaluate their performance, and make the results public. Schools that violate the agreement will “lose access to the benefits” of the agreement for at least one year.

But for the University of Southern California, and any other California universities invited to agree to the reported compact, school leaders are stuck in a difficult place — risking federal funding if they don’t agree with the Trump administration’s demands and state funding if they do.

“If any California university signs this radical agreement, they’ll lose billions in state funding — including Cal grants — instantly,” Newsom said in an all-caps statement Thursday. “California will not bankroll schools that sell out their students, professors, researchers and surrender academic freedom.”

Newsom’s office said the agreement would “impose strict government-mandated definitions of academic terms, erase diversity and rip control away from campus leaders to install government-mandated conservative ideology in its place” and any institution that resists “could be hit with crushing fines or stripped of federal research funding.”

While most California school funding comes from the state and local governments, the U.S. Department of Education disperses billions of dollars to California schools annually. California received about $8 billion in funding for K-12 education and about $7 billion in funding for higher education in 2024.