May 7, 2020
Dear Staff and Faculty,
We are writing today about the financial challenges that COVID-19 has brought and to provide you with an initial list of the measures we believe it is necessary to take. Before we launch into this update, we thank you for your resilience and dedication in the face of this pandemic and its impact. We hope you are taking good care of yourselves.
As you know, there are more uncertainties than certainties about the course of the virus. We are in close contact with some of the best medical and public policy experts in the country. Even they are unable to say how the pandemic will evolve or when a reliable and widespread testing program or an effective treatment will become available. As a result, planning for a return to campus for our students, faculty and staff is extremely difficult.
One thing is certain: we will fulfill our academic mission—to provide an education to a talented student body and support faculty research. We hope to provide our students with a safe on-campus educational experience next academic year, if not in full, then to the greatest degree possible. To that end, Provost and Dean of the Faculty Catherine Epstein is leading efforts to imagine and assess possible pathways to a return of our students to on-campus learning while also finding ways of enhancing remote learning capabilities in the event that on-campus education is not possible. We may end up with a hybrid approach that combines on-campus and remote learning.
Even though we don’t yet know what the future will bring, we do know that the financial consequences of the pandemic are already substantial and will continue to grow, even in the more optimistic scenarios for the future. As we have previously reported, the negative financial result of the pandemic for the current fiscal year, ending June 30, 2020, will be approximately $10 million. We will use our flexible reserves to cover this shortfall.
Beyond this fiscal year, the challenges become much more daunting. As you know, the College has only three primary revenue sources: endowment spending, comprehensive fees net of financial aid, and philanthropy. All three of these sources are already under tremendous strain because of the pandemic. Even if the crisis diminishes over a shorter, rather than longer, time, we anticipate facing a budgetary challenge that totals in the tens of millions of dollars annually for next year and possibly beyond. For context, our total annual budget is about $200 million.
To prepare for the full extent of these challenges, we are modeling a range of possible scenarios and evaluating all aspects of our finances—our revenues, our expenditures, and our use of the endowment and reserves. Meanwhile, there are a number of steps that need to be taken now to reflect these new realities, and we have outlined them below. Unfortunately, these are only initial measures. It is important that we take them now, but we do not expect that they will be sufficient to alleviate the financial pressures we will face over the next year or years.
Operational cost reductions: As a result of the decrease in on-campus activity, we are experiencing some natural cost reductions already, including lower spending on utilities, travel, food, supplies, and professional services. While these reductions help to offset some of our revenue losses, they do not suffice. We are asking everyone—senior leaders, managers, supervisors/chairs, faculty, and staff—to observe a freeze on discretionary spending now and throughout the next fiscal year. The procurement team led by Ralph Johnson can assist with efforts to source needed goods and services more cost-effectively. Please note that there will be exceptions that are mission critical. We will need to invest in a range of supplies, for example, that would make it possible to have students back on campus while mitigating risk for everyone on campus. And we will invest in enhancements to the remote education we offer.
Deferral of capital projects: We have already begun to defer spending on facilities and information technology projects and equipment, having identified more than $5 million in such spending that can be put off for a year or more. Exceptions to these deferrals will be limited to projects that address critical life safety or accessibility needs, essential technology needs (for example, the College’s network), functionality to support the work of the College (for example, the Workday project), and early-stage planning and design work for major projects that could be put on hold if necessary before proceeding to the construction phase. Bear in mind that most expenditures for capital projects involve one-time costs.
Salary freezes for faculty and staff: We will not be able to provide increases to salaries and wages for the upcoming fiscal year (July 2020 through June 2021), aside from a small number of regular and recurring faculty promotions approved by the Provost and Dean of the Faculty and the President, and a very limited number of staff promotions approved by the Chief Financial and Administrative Officer and the President. This is a particularly difficult decision at a time when many faculty and staff are working so hard and taking extraordinary measures to support the College’s mission in the most challenging of circumstances.
Senior staff pay reductions: During FY21, President Martin will take a 20% reduction in salary. In addition, every member of the senior staff will also take a reduction in their salaries of amounts up to 15%. These cuts will continue at least through December 2020 and will be extended until June 30, 2021 if conditions warrant.
Hiring freeze: From now through FY21, we will not fill open faculty and staff positions aside from any current searches in the late stages of the hiring process and a very limited number of positions that meet urgent or strategic needs. These exceptions will require the approval of the Provost and Dean of the Faculty and the President for faculty positions, and the Chief Financial and Administrative Officer and the President for staff positions. In addition, some summer work opportunities for regular and casual staff may not be available this year, for example, dependent summer jobs and temporary assistance in administrative offices.
Early retirement program: We know that a number of staff have an interest in participating in a voluntary retirement program. We are exploring the feasibility of offering this opportunity in a manner that allows us to preserve adequate service levels and support for the mission. We will provide more information soon.
Compensation and benefits: Because salaries and benefits make up 60% of the College’s budget, any deep and prolonged financial challenges will require us to make adjustments to these costs. These decisions also have the greatest impact on members of our community and we would like to avoid them for as long as we can. We will take time to gather more information about the situation we will face in the next fiscal year and subsequent years before we make decisions that affect people’s positions, compensation, or benefits, beyond those announced above.
For now, we will extend the period of continuous income and the exemption from use of leave balances for any COVID-related reason from May 24, as previously promised, until at least June 30. This will apply to regular and casual staff who are currently on active work status and who ordinarily would be employed during this time of the year. Staff whose work typically ends after the conclusion of the academic year or who do not normally work during the summer will be paid through the time they would normally have worked in a typical year.
There are a variety of ways that the College’s compensation costs can be reduced during a period of deep or prolonged financial challenges, including voluntary retirement programs as highlighted above, temporary reductions to faculty and staff salaries, temporary reductions in the College’s retirement contributions, and partial or full furloughs. Should we need to use furloughs, please note that furloughs are not layoffs: furloughed individuals would remain active employees with ongoing benefits from the College and be eligible to receive income from state and federal unemployment compensation programs. Finally, in scenarios that present more extreme financial challenges, layoffs might regrettably be necessary, although it is our hope that we can avoid this by aggressively reducing expenditures by other means.
We will provide opportunities for questions and discussion in the upcoming weeks. The first of these will be a virtual town hall for staff next Thursday, May 14, at 10:30 a.m.; Zoom details will be sent next week.
In closing, we want to thank you sincerely for your hard work, your patience, your understanding, and your commitment to Amherst during an extremely trying time. We wish we knew more now about the magnitude, extent, and duration of this unprecedented global crisis, and that we could be more definitive now about the steps that we will take in the coming months. We are doing everything we can and taking the time to assess thoughtfully and thoroughly the situation we will be facing, and to design a set of actions that are best suited to that situation and that minimize the impact to our community as much as possible.
What we offer in this moment is a deep and growing gratitude for how the Amherst community—students, faculty, staff, alumni, families—has united to keep the College operating and providing the best educational experience we can to our students, along with the support they need. With smart decision-making and the will to emerge from this crisis as strong, if not stronger, than ever, Amherst will remain the beacon of intellectual enrichment and transformational learning that it has always been. Thank you for all that you have done, and all that you will do, to help us achieve that reality.
President, Amherst College
Provost and Dean of the Faculty
Chief Financial and Administrative Officer