Update on our Financial Response to COVID-19 – May 2020
May 12, 2020
Dear Members of the Georgetown University Community:
I wish to begin in gratitude to all of the members of our community who enabled us to complete the Spring term. Nine weeks ago, in response to the COVID-19 pandemic, we transitioned to a virtual learning environment across all our campuses and to a telework environment for many among our faculty, staff, and AAP community. In March, I shared with you that we would be postponing Commencement until a time when we could all safely gather together. This week, to ensure we mark this important milestone in the lives of our students, we will gather virtually, for a series of special events, including the conferral of degrees. This will be a bittersweet weekend, and we look forward to the chance when we can all celebrate the Class of 2020, together.
Over the past weeks, while seeking to ensure the completion of the semester, we have begun our preparations for the Fall semester. In this letter, I will present specific steps we will be taking to strengthen the financial framework for meeting our mission during this challenging time. In the coming days, I will share a second letter with you that will outline our approach to opening for the Fall.
In recent weeks, we have established four tracks of work, each focused on an aspect of preparation: Public Health, Academic Planning, Operations, and Finance. Each track of work is identifying the most important questions that we will need to address in the coming weeks.
We have exceptional colleagues guiding our track focused on Public Health. They include Jesse Goodman, Lawrence Gostin, Rebecca Katz, Princy Kumar, and Vince WinklerPrins. The group, under the leadership of Edward Healton, our executive vice president for health sciences and executive dean of the School of Medicine, is identifying the conditions and recommendations from a health perspective that would guide our next steps, in the operations of our University. Once I receive their recommendations, I will share them with you in my next letter.
We will ensure that our colleagues responsible for the Operations track will integrate the recommendations on Public Health into our planning for the Fall. Among the issues the Operations track will consider are changes to the physical layout of our campuses to ensure our ability to meet our Public Health obligations. Geoff Chatas (C’85), our Senior Vice President and Chief Operating Officer, and Chris Culley, our Vice President for Enterprise Initiatives, are overseeing this track.
The Academic Planning track is led by our campus leaders: Robert Groves, Provost of the Main Campus; William Treanor, Executive Vice President and Dean, Georgetown University Law Center; and Edward Healton. These colleagues are working together and with faculty and deans on each of our campuses to plan for a range of possible options for the Fall.
The fourth track—focused on Finance—is led by Geoff Chatas and Dave Green, our Chief Financial Officer. They have been meeting regularly with colleagues from across the University, including the Senate University Budget Committee and the Benefits Advisory Committee, and members of our Board of Directors, exploring options to enable Georgetown to respond to the continuing financial impact of the COVID-19 crisis.
I wish to share with you a set of recommendations that have emerged from the financial analysis over the past several weeks.
On April 7, 2020, I shared with you the first steps that we would take to respond to the financial implications of the crisis, identifying actions that we would put into place through June 30, 2020, the close of our fiscal year. At that time, I announced that we would pause new hiring, salary increases, and discretionary spending through June 2020.
Over the past five weeks, the implications of the crisis have become clearer. In April, I shared with you that the immediate impact of the first weeks of the crisis required approximately $25 million in immediate unbudgeted spending. As we look at the impact of three additional months—April, May, and June—and include additional costs and lost summer auxiliary revenue, we expect an operating loss of at least $50 million as we look to begin the Fall term.
Even more challenging than responding to the impact for this fiscal year is trying to imagine the financial requirements for the coming academic year. We do not know at this time the impact of COVID-19 on the four key elements that determine our financial capacity: student enrollment, especially for international students; research funding; the performance of our endowment; and philanthropy. We also expect to face new expenses associated with the combination of the pandemic and the global financial crisis that has followed.
Recognizing this uncertainty and the need to prepare our University for the coming year, I wish to outline a set of steps that will strengthen our position to respond to the uncertainty of the coming year.
First, we will significantly reduce new capital expenditures—buildings and grounds—and continue to maintain a high level of scrutiny for non-essential spending. We expect this will generate $40 million in cost savings over the coming year.
Second, we will take a series of steps related to compensation and retirement:
- We will withhold merit salary increases for all members of our community—faculty, staff and AAP—for the coming fiscal year. We expect that this decision will provide $18 million in cost savings.
- We will continue to pause hiring and salary increases as outlined in my letter on April 7th, until further notice.
- Beginning in June 2020, we will suspend all Georgetown contributions to our retirement plan for the coming fiscal year for all faculty, staff, and AAPs. These contributions would have required $47 million in the coming year. If we find ourselves in a stronger financial position during the coming year, we will revisit this decision.
- Fifty-four members of the leadership of the University’s administration have taken voluntary salary reductions for the coming fiscal year. This commitment of our colleagues will provide more than $2 million in savings. I am grateful to each member of the team for their contribution in this challenging time.
These steps will provide more than $100 million in cost savings that will enable us to address our current shortfall of $50 million and prepare for the uncertain financial picture for the Fall term.
Many in our community have asked us how you can help to strengthen the institution during this time, and to support our ability to protect as many jobs as we can for as long as possible.
In order to help provide the strongest possible framework for the Fall, and to continue to protect as many jobs as possible, we are implementing a voluntary temporary furlough program that will deepen our ability to protect our workforce in the coming months.
We will offer a nine-week voluntary temporary furlough program for all eligible staff and AAP employees. A furlough is a temporary unpaid leave, during which participating individuals remain Georgetown employees. The University will cover the cost of employee healthcare premiums through the period of furlough, and employees will receive credit for a continuation of service—there will be no impact on Paid Time Off accrual, time in service, or tuition remission status due to the furlough. Anyone who is approved to participate in this option will return to work when the program ends on July 26.
Furloughed employees will be eligible to apply for unemployment benefits, including the supplemental $600 per week Federal Pandemic Unemployment Compensation (FPUC) benefit available under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Our Human Resources Department will work with employees to help them obtain the full benefits for which they are eligible.
In addition to this furlough program, we will offer a voluntary temporary salary reduction program for all faculty, staff and AAP who wish to participate. More information about this program is available on our website along with other ways you can provide support to our community at this time.
Through these voluntary efforts, we have a goal of saving an additional $10 million.
These are actions that we can take at this time in anticipation of a very uncertain period and with the goal of putting us in the strongest possible position to protect our mission and the livelihoods of the Georgetown community, as we face additional expenses and revenue shortfalls in our response to the impact of COVID-19. We will be continuing to review and assess our financial position, as the external situation evolves. Additional steps may become necessary, including actions affecting employment and compensation and other cost reduction measures, as we confront the challenge of responding to COVID-19 over these next few months.
I began this letter in gratitude and I wish to close in gratitude. I recognize the sacrifice these steps ask of every member of our community. We are immersed in an unprecedented moment in our lifetimes, one that requires the very best of each of us and all of us. As we move forward, three priorities guide our community: protecting the health of our community; ensuring the continuity of our academic mission; and sustaining the livelihoods of our workforce. With the full engagement of every member of our community, I am confident we will be equal to the demands that now confront us. I am grateful to you for your commitment to our community.
John J. DeGioia