Addressing the Financial Implications of COVID-19 for the University
June 12, 2020
Dear Members of the Brandeis Faculty and Staff,
I am writing to provide an update on the significant financial challenges that lie ahead for Brandeis. We are still developing our plans for the fall semester, which we will announce in early July. At this point, however, it is clear we will face financial hardship regardless of the specifics of our fall operations. In this message, I want to begin to explain at least some of the additional steps we must take to mitigate these challenges.
Before I do that, I want to once again express my appreciation for your flexibility and resilience throughout an unprecedented spring semester. It is evident that the values and mission of our university have remained strong, even — and especially — in the face of the present crisis. For this dedication and commitment, I extend my deepest gratitude.
As you know, the COVID-19 Task Force and its eight working and advisory groups have been developing plans that will guide future campus operations and activities. These groups have already helped to shape our “scaling-up” efforts in the science research labs — and I want to thank the more than 120 faculty, staff, and students who have been working on planning several scenarios for the fall semester. I understand how stressful these past several months have been, and how eager everyone is to learn the details of and our expectations for the fall semester, all of which will be announced in early July. I appreciate your patience as we engage in such a complex planning process.
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Since the onset of the COVID-19 pandemic, my senior team and I have been deeply committed to transparency and candor in our management of this crisis. In this spirit, I provide below a thorough account of why we are projecting a wide range of revenue shortfalls and additional expenses in the upcoming year — and why, in consultation with the Board of Trustees, we have determined that specific measures are necessary sooner rather than later to offset these losses. I hope you will join us for a community check-in on Monday, June 15, from 11:30 a.m.–12:30 p.m., where we can discuss these issues in greater detail than I am providing here. More information about the Zoom check-in is included at the bottom of this message.
Context for the Challenges Ahead
Now, more than three months into the COVID-19 pandemic, it is clear the challenges of the current moment will extend well into the coming year and, most likely, beyond. Even as the rate of new infections begins to decrease in Boston, New York, and the most densely populated parts of the U.S., global infection rates continue to rise, and the virus still affects our day-to-day lives in profound ways. As of early June, 13.3% of the workforce, or 21 million people, are out of work in the United States. We are witnessing levels of economic dislocation unseen in the U.S. since the Great Depression.
Thankfully, as I said in my March 30 message, Brandeis entered into this crisis from a position of relative financial strength. Since then, the university took several steps to address the short-term financial challenges associated with the crisis. As we look to the longer term, however, Brandeis will face a significant revenue decline in the upcoming fiscal year, as well as several increased costs associated with the pandemic.
Over the past several weeks, my senior leadership team and I have consulted with the Committee on Strategy and Planning, the Faculty Senate, the Faculty Representatives to the Board of Trustees, and representatives from the Brandeis Staff Advisory Council (BUSAC) about these longer-term projections. The feedback and insight from each of these groups have been invaluable as we have shaped our plans.
In the remainder of this message, I will explain in detail our analysis of the financial losses Brandeis will face in the upcoming year. I will then outline the measures we will undertake in response to these expected challenges.
Anticipated Financial Losses Due to COVID-19
Over the past several months, the national and international responses to the COVID-19 pandemic have effectively modeled the types of trade-offs that are necessary to mitigate the spread of the virus. Rigorous social distancing and temporary business closures have allowed communities to “flatten the curve,” but these measures have also damaged the economy. In order to continue to operate, Brandeis must weigh similar trade-offs.
As I have emphasized in several previous messages, Brandeis will continue operations in the upcoming year. In the best-case scenario, this will require a hybrid of on-campus and online teaching, learning, research, and day-to-day work. As a result of these necessary changes, in the upcoming year we forecast at least $35M in revenue loss and additional university expenses, such as increased financial aid, personal protective equipment (PPE) supplies, and technology infrastructure needed to support remote teaching and learning. This $35M projection reflects the low end of our estimates — depending on the trajectory of COVID-19 spread, state mandates that limit activity or scale of operations, and other factors, this figure could be significantly higher.
These anticipated financial losses are driven by three main areas, including necessary changes in the density and needs of our campus community, increases in campus operations costs, and decreased fundraising projections. I describe each of these areas below.
Changes in the Density and Needs of Our Campus Community. As we prepare for the fall, it is clear that we will have to make significant changes to on-campus life at Brandeis. It is also clear that the day-to-day needs of our students and their families will change, and, in some cases, this will present logistical challenges. The changes fall into three categories:
- Reducing On-Campus Density. While we hope to continue resuming in-person activities in the coming months — as we have begun to do with the recent scaling up of activities in our science research labs — day-to-day on-campus interactions will have to be significantly limited during the upcoming academic year. As I noted above, we will share our finalized plans for Brandeis’ fall operations in early July. But, looking at the big picture, we will likely have to limit on-campus housing numbers to enable appropriate social distancing, expand opportunities for alternative and off-campus housing, and invest in infrastructure needed to accommodate an online teaching and learning option for students and faculty.
- Reduced Student Attendance. We also anticipate that some students and their families may not be able to enroll due to visa restrictions, travel difficulties, health concerns, or other factors. The COVID-19 Task Force is actively planning for these expected reductions in enrollment, which will result in a loss of tuition revenue.
- Increased Financial Support for Students. Since we moved to online teaching and learning in late March, I have been impressed and inspired by the significant support from faculty, staff, alumni, parents, and friends for the Student Emergency Grant Fund. The fund has provided undergraduate and graduate students in need with significant financial assistance. In response to likely expanded economic stress over the coming months, we are committed to continuing to provide our students with financial support for the fall semester to the extent that we can.
Together, these three areas will likely reflect at least $24M in additional necessary funds.
Necessary Increases in Campus Operations Costs. As we scale up on-campus operations, it will be necessary to purchase PPE and cleaning supplies needed to keep members of our community safe. Additionally, as we look to a wider-scale return to campus in the fall, access to diagnostic testing, the retrofitting of campus buildings to better support public health, and the installation of additional classroom technology will all be necessary to protect the health and well-being of community members. We anticipate these measures will cost as much as $10M in total.
Decreased Fundraising Projections. Brandeis, like most of our peers in higher education, relies upon the generosity of alumni and friends to support financial aid, teaching, research, and the general operations of the campus. While we hope that philanthropy will remain strong throughout the upcoming fiscal year, it is still necessary for us to prepare for a potential shortfall of approximately $2M in anticipated Annual Fund gifts — funds that directly support necessary operating costs, including financial aid, and faculty and staff salaries.
Necessary Measures to Mitigate Financial Losses
In the face of this projected shortfall of at least $35M, it is necessary to implement several cost-saving measures in addition to those identified in my March 30 message. Again, this projection reflects the best-case scenario; depending on the trajectory of COVID-19 spread and a variety of other factors, this figure could be significantly higher.
Although Brandeis is a complex organization, especially for its relatively small size, our financial model makes it so that the success of one area of the university depends to a large extent on the success of others. These financial challenges will affect all of us, regardless of where we sit within the institution. Mitigating these challenges will require sacrifice from all of us, too.
I can assure you that we do not take the necessary steps lightly. But taking them will allow us to safeguard the financial well-being of our institution and of one another.
These mitigations fall into three broad areas.
First, the university has already taken the actions described in my March 30 message, which have resulted in an excess of $11M in savings.
Second, beyond these savings, on June 11 the Board of Trustees authorized a one-year increase in the endowment draw rate to 6.5%. This extraordinary draw on our endowment will provide the university with an additional $10M in funds. Brandeis has historically spent at a rate higher than our peers, and we have been engaged in an effort to reduce this rate to 5%, which is more in line with best practices employed to preserve the endowment and ensure intergenerational equity. In these unprecedented times, however, it is necessary for us to pause this effort and utilize a greater percentage of our resources in support of our students, faculty, staff, and overall mission.
Finally, we will expand upon the measures outlined in my March 30 message to prepare for the financial challenges ahead:
Temporary suspension of employer match to retirement funds. As of July 1, and through the fiscal year, the university will suspend employer contributions to employee retirement accounts. We take this step only after examining all other options, and with full recognition of the similar sacrifice that many community members made during the 2008 financial crisis. This action, which is projected to save $9M, will enable us to avoid or forestall further measures such as across-the-board salary reductions, furloughs, and layoffs.
Deferring salary increases for an additional six months. As I previously announced in my March 30 message, we have already implemented a six-month deferral of the regular salary increase program for all non-unionized faculty and staff. In the face of the challenges ahead, it is necessary to extend this deferral for an additional six months, until at least July 1, 2021. This will provide the university with approximately $2.5M in savings.
Reduction in leadership salary for an additional six months. I have also previously announced a six-month reduction in my salary (20%) and the salaries of those who report directly to me (10%). We are extending these measures for an additional six months, until at least July 1, 2021. During this time period, some senior leaders beyond my direct reports have agreed to take voluntary salary reductions as well. Together, these measures will provide over $500,000 in savings for the university.
Overtime freeze. Due to an overall reduction in on-campus activity in the coming months, we expect a significant reduction in overtime hours. Consequently, we will be instituting a freeze on overtime hours, effective immediately, for a period of six months. Any exceptions to this new policy must be approved by either Provost Lisa Lynch or Stew Uretsky, executive vice president for finance and administration. This measure will accrue approximately $1M in savings for the university.
Beyond the measures described above, we have taken steps to receive the $3.2M allocated to Brandeis through the Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act. Consistent with the legislation, the university will be able to utilize $1.6M of these funds for costs incurred as a result of the pandemic. We will then distribute the remaining $1.6M to all eligible students. The Division of Finance and Administration has recently shared more information on the distribution of CARES Act funds.
Together, these difficult financial measures will result in more than $35M of necessary savings for the university. As I underscore above, all these steps reflect projections about the challenges that lie ahead for Brandeis. If our projections change due to evolving conditions, we will revisit these decisions and adjust our plans accordingly.
Opportunities for Further Discussion
Especially in a time when we are already faced with so much uncertainty and stress, I understand that these financial measures will likely cause a great deal of anxiety and concern. Please know that we are taking these steps only after exhausting the possibility of any alternative measures, and with the ultimate goal of protecting jobs and the health and safety of all members of our community.
I know there are many questions about the fall semester and the steps we have taken to prepare the university to face anticipated challenges. I invite you to join me and my senior administrative colleagues for an online Faculty and Staff Community Check-In on Monday, June 15, from 11:30 a.m.–12:30 p.m. This event will be live-streamed at brandeis.edu/streaming. Although you will be able to share your ideas and ask questions during the event, you can also submit any questions in advance of the community check-in using this form. This event will be recorded and made available for review in case you are unable to attend.
I look forward to seeing all of you on June 15, and to engaging in the conversations we will continue to have over the coming months.
Sincerely,
Ron