Professor Sanjay Reddy had been bluntly critical for years about how his university, the New School in New York City, managed its finances. He had thought that his status as a tenured professor of economics would protect him.

It didn’t.

He was laid off in June, along with 18 other New School professors, nine of whom also had tenure. The layoffs are part of an ongoing restructuring at the New School that administrators have said will rescue it from a crisis ignited by shrinking enrollment and crippling deficits. Sixty-eight staff members were also let go. Dozens of additional faculty members have left through buyouts and early retirements, which has shrunk the full-time faculty to 387 professors from 430 a year ago.

The dismissals represent the latest round of turmoil at the downtown Manhattan institution, which was founded as the New School for Social Research in 1919 by progressive professors as an alternative to traditional universities. The New School, which has about 8,500 students, has long struggled with finances, but its latest solution, some professors say, puts its legacy and future as a social science research institution at risk.

The firing of professors amid a larger reorganization has become increasingly common at American universities, particularly since the coronavirus pandemic, said Deepa Das Acevedo, a law professor at Emory University and author of “The War on Tenure.”

Universities, she said, are increasingly acting like other employers, finding “complicated and sometimes pretextual reasons” to fire employees, even those with tenure.

“What we’re seeing at the New School is emblematic of the rising pressures on higher education as a labor market and as an industry,” she said.

The New School’s handling of the layoffs has raised questions among hundreds of prominent professors around the United States and world. They wrote a letter calling on administrators to be more transparent about how the decisions were made.

Professor Reddy’s case is “particularly concerning,” says the letter; Joseph Stiglitz, the Nobel Prize-winning Columbia University economist, is the lead signatory. “The criteria used in selecting faculty and staff for termination have not been adequately explained to the wider academic community,” the letter said.

Professor Reddy, 55, stands out because he was the only economics professor to be terminated. His department is not among the roughly two dozen programs being closed or redesigned. In The New York Times and elsewhere, Professor Reddy had repeatedly been quoted as blaming the university’s financial woes on administrative bloat and bad real estate deals, challenging the official line that the defining problem was a faculty that cost too much.

“I felt, and this was probably naïve and misguided, that I should be able to use tenure in this way,” he said in an interview. “This is what tenure is for. It’s within my professional competence as an economist.”

He was stunned, he said, when he was given two options: step down by July 1 and sign a nondisclosure agreement in exchange for 11 months’ severance, or be terminated, with his last day in December. He chose the latter.

Richard Kessler, the New School’s provost, declined to comment on Professor Reddy’s situation, citing privacy rules. But he said that the university had determined that the economics department, which has nine full-time faculty members, “has more teaching capacity than we have need for.”

He defended the layoff decisions as a whole. “It was a remarkably extensive, and I feel, without any qualifications whatsoever, thoughtful process,” he said.

Paul Kottman, a tenured comparative literature scholar and the chair of the master’s program in liberal studies at the New School, was also terminated. He was asked to continue leading his program until his last day in December. The program, he said, had just received praise in a review process, as did his leadership of it.

The layoffs could set a dangerous precedent, Dr. Kottman said, particularly because they are happening in the center of New York City at an institution known for its commitment to academic freedom. “If my tenured position didn’t protect me, then who does it protect?” he said.

In an interview, Mr. Kessler said that the New School felt it had the right to fire tenured employees, even if their department or program wasn’t ending, because it was reorganizing the entire institution.

Before July 1, the New School consisted of four colleges. Now, Parsons School of Design and the College of Performing Arts have become a single, arts-focused college. A second college merges the New School for Social Research, which is the academic graduate school, and the Eugene Lang College of Liberal Arts, the undergraduate college.

The new structure is designed to reduce costs and increase collaboration, said Mr. Kessler, a musician who was formerly the dean of the performing arts school.

There’s disagreement over whether such a restructuring permits the broad firing of tenured professors. The American Association of University Professors, a nonprofit organization, has shaped the national norms of tenure since 1940. It holds that tenured professors, unless they are being fired for cause, should be let go only in the case of a financial emergency, and only as part of the elimination of their academic program or department.

“A bureaucratic restructuring that leads to the selective elimination of faculty members really puts academic freedom in jeopardy,” said Mark Criley, a senior program officer in the association’s Department of Academic Freedom, Tenure and Governance. It particularly imperils professors “who have displeased administrators or trustees or donors,” he said.

But tenure norms are not laws, and the New School said it was abiding by its faculty handbook, which states that tenured faculty may be let go if there are “serious financial considerations or curricular change(s)” that require the university “to discontinue an academic department/program or college/school.”

Professor Reddy, who has been a faculty member for 17 years, disputed that interpretation. “They’ve used a very innovative and elastic legal theory, a heroic legal theory, you might say, to justify this,” he said.

Nearly all of the terminated faculty members were at the New School for Social Research and at Eugene Lang, because they have had larger enrollment declines than the arts-focused schools, Mr. Kessler said. The university has also paused nearly all Ph.D. admissions, which most affects the social research graduate school.

The History Department is among the most affected: Three professors were laid off, and two are taking early retirement under pressure, said Jeremy Varon, one of the retiring professors. Five professors will remain — “not enough to competently deliver a curriculum,” Professor Varon said.

Mr. Kessler said the cuts reflected that the university had already shifted toward art and design. Between 70 and 80 percent of students are coming to the New School “for some form of design education or creative education,” mostly at Parsons, he said.

Yet most tenured and full-time professors, who are more expensive to the university, work in the social sciences and liberal arts. Parsons, by contrast, relies heavily on part-time adjunct instructors.

“At some point in time, any organization has to take steps to bring the expenses in line with the revenues and also figure out how to plan for the future and essentially invest in strength,” Mr. Kessler said.

Koray Caliskan, a sociologist at Parsons who teaches strategic design and management, saw the restructuring in a positive light. The social sciences, he said, aren’t being lost at Parsons, because they are part of the curriculum for design students. The sweeping redesign of the colleges, he added, could open the way for innovative new doctoral programs.

But Judith Friedlander, a former New School dean and the author of a history of the institution, described the restructuring as a frontal attack on the university’s progressive, social research core.

“It no longer represents what this institution stood for and was about,” she said.