Of course, that refers only to general college reserves. It’s also common for various programs to have reserves of their own, earmarked for specific purposes. The college foundation might have reserves dedicated for certain scholarship awards. Some grant-funded programs will have reserves for specific functions and only for those functions. (In the context of multiyear grants, for example, it’s common to have ‘carryover’ of excess funds from one fiscal year to the next. That’s frequently allowed, but that doesn’t give license to transfer the extra grant money to the general college budget.) In cases like those, money comes with strings attached, and violating the terms of the money involves forfeiting the money. You can’t just move it around.
This lack of flexibility actually highlights one of the difficult issues with cuts in grants. If grants are cut by 10%, you don't have the discretation to eliminate 10% of the ongoing projects to make sure that the rest are successful. In the same sense, going after indirects to try and make up these losses would lead to the defunding of other operations.
The modern university budget looks remarkably inflexible to me, which makes planning for adverse financial circumstances appear to be extremely tricky. Not only do you have to cut but what you can cut can be remarkably constrained. This can lead to very poor optics (where something that looks non-essential is fully funded whereas a core operation simply lacks funding).
It is a tough place to be in!