"The decision comes as part of the NSF’s years-long effort to offload several of its astronomical research facilities to free up millions of dollars each year for future projects, such as the Large Synoptic Survey Telescope that is under construction in Chile."
Has the NSF's own budget been cut, so that it's forced to do this, or is this more of just a matter of shifting priorities?
It is largely priorities. Even a decade ago, Arecibo was struggling for its life against newer experiments. Nobody doubts the utility of Arecibo, it is largely a question of finite resources and prioritization.
I have a soft spot in my heart for Arecibo and many other experiments, so I'm secretly joyful each time it is saved, but it is important that promising young experiments not be starved by established ones without cause.
In order to bring new telescopes like LSST online, something has to be cut. NSF has tried to offload these older telescopes to consortia of universities who can still use them.
The maintenance budget line doesn't go up when they build new facilities. So yes, it's forced. The decision on what to close is then made using scientific priorities and maintenance cost.
Has the NSF's own budget been cut, so that it's forced to do this, or is this more of just a matter of shifting priorities?