The University’s financial losses for Fiscal Year 2021 may range from $100 to $165 million due to the economic impacts of COVID-19 and adjustments made to the academic year, President Christina Paxson P ’19, Provost Richard Locke P ’18 and Vice President for Finance and Administration Barbara Chernow announced in a letter to staff and faculty Tuesday morning.
The University has created a five-pronged approach to maintain Brown’s fiscal health in response to the increased costs and decreased revenue it will see for FY21.
Beginning Nov. 1, the University will institute a temporary 12-month reduction in retirement fund contributions to 2 percent for non-unionized employees to avoid layoffs. This reduction will save $20 million over the next year.
The University instituted a hiring freeze and an early retirement program at the beginning of the pandemic, and it has continued to approve only essential hiring since then. A Staff Temporary Project Assignments Program was created to reassign staff in departments with unused capacity. Some senior administrators have chosen to take voluntary salary reductions as well. Together, these changes are expected to save $15 to $20 million.
The University will withdraw an additional $15 to $20 million from its endowment funds. $15 million from the President’s Response Fund will also be available to support the budget.
Additionally, since May, the University has taken on more debt with historically low borrowing rates. $30 to $40 million of these funds will be used to finance this year’s operations, allowing the University to “smooth the impact of this year’s financial losses over time” instead of all at once, the letter explained.
The University has set a goal of saving an additional $15 to $20 million from non-personnel expenses, and departments have already reduced their accumulation of event and travel fees. The Finance office will work directly with academic and administrative departments to identify ways to further decrease this spending.
The growing deficit comes partially from the University’s newly instituted protective measures, including offering free COVID-19 tests for community members, distributing personal protective equipment to on-campus students and staff, upgrading air filtration and HVAC systems and de-densifying dorms and other campus buildings.
The University has also increased financial aid funding, eliminated the student summer earnings requirement for the 2020-2021 school year, extended fellowships for graduate students and extended the tenure timeline for junior professors. Many of these costs are expected to continue into FY22.
The University has continued to pay all employees, regardless of whether or not they have been able to work, and they hope to avoid layoffs in the coming months.
“Our hope is that if members of our community embrace a shared commitment to work together to weather our current challenges, we will be able to come through the pandemic with our community intact,” the letter stated.
There is still strong support from donors to fund research programs, but tuition and housing revenue have decreased as many students are choosing to take leaves of absence, defer enrollment or study remotely, the letter stated.
The University does not yet know what the final deficit will be, but “it is critical that we take steps now to ensure the financial health of the University so that Brown can effectively support students and scholars into the future,” Paxson, Locke and Chernow wrote.
ADVERTISEMENT
