President Martha E. Pollack and Provost Michael Kotlikoff sent the following message on July 2:
As you know, earlier this week we announced our plans for the fall semester. We are writing today to share our financial plans. While the expected in-person semester with hybrid instruction adds clarity to our financial position, we still face significant uncertainty as we navigate the coming months. That said, based on our current plans, we project that the total financial impact of the pandemic for the coming fiscal year – July 1, 2020 through June 30, 2021 – will be $210 million for the Ithaca and Cornell Tech campuses; this is on top of the $45 million impact for the fiscal year that just ended. While this message pertains only to Ithaca and Cornell Tech, Weill Cornell Medicine – which has a different financial model that is based heavily on patient care, and a budget that is managed separately – is also addressing a total financial impact of over $200 million.
Among the factors contributing to this fiscal impact, the largest is a significant anticipated increase in financial aid demand, resulting from the economic dislocation of many families as a result of the current crisis. We remain fully committed to meeting the financial aid need of our students, even in this challenging time. An additional, important component is the extra costs that are associated with our taking steps to try to provide the safest possible experience for our staff, faculty, and students this coming year while a vaccine for COVID-19 is still not available.
Back in March, we announced a set of actions that were quickly taken to address the fiscal challenges that we knew we would be facing. These included putting in place a salary freeze and a hiring freeze, suspending capital projects, restricting travel and discretionary spending, shifting fundraising focus from endowment to current use, and adopting voluntary salary reductions by senior leadership, faculty, and staff. These actions enabled us to balance the FY20 budget, and are projected also to produce approximately $110 million toward the budget deficit for FY21, leaving a gap of approximately $100 million. Meeting this remaining budget challenge will not be easy, and we have greatly appreciated the input that we have received from our meetings with faculty and staff, in town halls, and at Assembly and Faculty Senate meetings – input that has shaped our decisions.
Last week, we announced a first step: a Voluntary Retirement Incentive programfor eligible staff and faculty, though the amount of savings obtained from the program is uncertain, and much of it will come after the current fiscal year.
Today, we are announcing the following, additional measures to address the remaining, currently predicted budget deficit:
Increase endowment payout rate. The endowment is a collection of many funds, the vast majority of which were given by donors for particular purposes, such as faculty support, financial aid, or academic program support. Those donations were given with the expectation that they would be invested in ways that allow permanent support for those purposes. Each year, the university spends a little more than 5% of the endowment; this rate of spending is at the upper limit of what is fiscally appropriate to enable that support to remain permanent. Going beyond that rate of spending is thus highly controversial. Given that our ongoing budget depends on the ongoing support from the endowment, overspending now will cause stress on the budget later. However, recognizing the extraordinary nature of our current circumstances, we will increase the draw, for FY21 only, to generate an additional $15 million.
Increase the shift in our philanthropy efforts from endowment to current use. We had already committed to raising $10 million for financial aid current-use needs; we are increasing the commitment to $15 million and aiming for $20 million in FY21, with the intent to raise additional support over the following two years. We thank our generous donors, including many current and former trustees, for their leadership contributions in launching this effort.
Temporarily reduce retirement contributions (for endowed units) and reduce salaries (for contract college units). This is the most difficult and painful of the measures that we need to implement, but it is necessary if we are to do everything we can to protect jobs, while also meeting our students’ financial aid needs and protecting the long-term excellence of the university. We will need to reduce employer retirement contributions for endowed units to 3% for eleven months, beginning Aug. 1, 2020 and continuing through June 30, 2021. Because the retirement plans in the contract colleges are managed by New York state, we will need instead to institute an eleven-month reduction in salary of between 0.5% and 5% for contract college units. The temporary pay reductions for contract college employees will be made on a tiered basis, with employees earning less than $40,000 per year experiencing no reduction. We will revisit our financial situation in six months and, if possible, restore the retirement contributions and salary cuts.
Voluntary reduced appointments/hours for faculty and staff. Some staff and faculty have expressed interest in reducing their hours in order to attend to personal responsibilities associated with the pandemic. Faculty members, of any age, wishing to develop a reduced-time arrangement should discuss plans with their department chair and/or dean to develop a mutually agreeable set of duties, appointment dates, and duration. Staff wishing to reduce their hours should discuss plans with their supervisors and local HR representatives, in accordance with Cornell’s COVID-19 HR practices.
Voluntary salary reductions by faculty and staff. We are grateful to the faculty and staff who have joined us and other university leaders in voluntarily reducing their salaries to support student financial aid. Those interested in participating in this effort should contact Kim Babuka in the Division of Human Resources at email@example.com. Like all salary-related matters, these conversations will be kept strictly confidential.
As noted above, we are committed to closely monitoring the budget, and we will provide an update in six months to the Employee Assembly and Faculty Senate. If our financial situation is better than we projected, we will at that time restore as much of the retirement contributions and salary reductions as possible.
More details on the university budget can be found here.
We do not take any of these actions lightly. Indeed, the impacts of the decisions – financial and otherwise – that we are making over these critical weeks and months have the potential to be felt by Cornellians now and in the future. This is a responsibility that we feel keenly, and, to all of you, we say frankly: There is no easy way to cover financial deficits of this magnitude, but we have worked hard to achieve the right balance in terms of actions and impacts. We have continually returned to our guiding principles: of caring for students, safeguarding our future as a world-class academic institution, maintaining our staffing, and seeking new knowledge.
We recognize that the actions we are announcing today are difficult for our faculty and staff, and we understand that some of you are disappointed. It is our sincere hope that these actions, together with our plans for the fall, will position Cornell to emerge stronger from this unprecedented time.