University Fiscal Update
We write to share an update on the University’s financial picture and report on our early planning for the year ahead.
As each of you is already aware, Columbia has felt the financial impact of COVID-19 across every aspect of what we do. The very features that make Columbia exceptional have been sources of vulnerability: revenues from delivering complex patient care, tuition from our international student population, and income from housing for students and faculty all have been affected significantly.
From the beginning of this public health crisis in late winter, we have made the care and physical safety of our health care providers, patients, students, faculty, and staff the top priority. Concurrently, we have endeavored to find the means—fiscal and human—to keep Columbia vibrant. We are incredibly proud of the individual and collective efforts to achieve our University’s purposes, not least the widespread adherence to the Columbia Compact.
Alongside these efforts, we believe the University’s investments in testing, tracing, campus safety, classroom technology, benefits for childcare and transportation, and the rent freeze for tenants in our faculty and graduate university housing are among the many measures that have been both important and necessary to undertake. So, too, are we proud of the responsiveness, discipline, and clarity of the approaches utilized by our deans as well as institute and administrative unit heads in developing financial plans to navigate the fiscal difficulties we have confronted on many fronts.
The constraints that we placed on the institution last spring—a significant reduction in non-personnel spending, coupled with a hiring freeze and salary freeze—along with creative redeployment efforts have helped mitigate our revenue losses. Although the abrupt financial impact of the pandemic due to the return of certain student fees and operating constraints across the institution last spring caused significant financial losses, savings in other areas enabled us to limit the aggregate losses due to COVID to under $50 million on a net basis in fiscal year 2020. That achievement required effort on both a grand and small scale, and we thank you.
For the current fiscal year, we are estimating deeper financial challenges as we continue to make more significant investments to keep the campus safe and face ongoing hurdles such as students unable to enter our country, housing portfolios with reduced occupancy by design, and clinical care that reflects exceptional delivery of service though with volumes that are still affected by the broader health landscape. Even after the expense saving measures we have put in place, the net losses due to the pandemic could exceed $300 million across the two years of fiscal 2020 and 2021, a significant impact for our institution. Although we typically generate operating surpluses to invest in needed ongoing capital work, we presently expect that fiscal year 2021 will conclude with a deficit, the first in recent history. In all, we have attempted since the early weeks of March to calibrate our responses carefully, in a measured manner, as information and the fiscal picture has clarified.
Now in mid-fiscal year, the expense control measures we have in place are ever more critical, and thus must continue. Specifically, the hiring freeze and the salary freeze will continue to remain in place. We know this situation places great pressure on many aspects of campus life.
We also need to announce the moderation of a benefit that will affect all officers at the University. We will institute a temporary (one year) moderation of our retirement benefits, limiting the University’s total contribution to each officer’s retirement plan to the level of 5% of eligible compensation for calendar year 2021, with an intent to return to the prior contribution and match rates for calendar year 2022. The CUIMC clinical retirement benefit, which is paid directly from clinical revenue, will remain unchanged. Given the structure of our plans, this temporary change to our retirement plans will understandably have greater impact on higher paid officers. We hope you will agree that this approach, painful but necessary, is in keeping with our broader institutional values. We also believe this decision will help preserve jobs and forestall widespread furloughs. Importantly, for those officers with a plan to retire in 2021, we will remedy the impact of this change in contribution level upon retirement, if that falls within the calendar year. Understanding that you may have questions about certain aspects of this temporary change to the University’s retirement contributions, additional detail is forthcoming shortly from the University’s Human Resources team.
You may wonder if this policy will be sufficient to mitigate the losses we have described. In fact, it will not. In addition to the reduction of expenses in each of our units, the University has taken other steps, through the utilization of debt issued this summer and cash reserves, to craft a package of grants and relief loans to every unit on campus experiencing deep losses. We are hopeful that proceeding down this path together will allow the University to face forward quickly. To that end, we have begun planning efforts into fiscal year 2022, and are hopeful that we can create capacity for a pool for modest salary increases.
Uncertainty remains. One characteristic not often applied to higher education, though, can certainly be attributed to Columbia: a degree of operational flexibility and financial nimbleness we frankly did not know we had. In so many areas of our decision-making, we have benefitted from the exceptional leadership of our deans, institute and administrative unit heads, together with thoughtful mechanisms to garner feedback that have informed our paths forward. Moving ahead, we thank you, not only for the shared sacrifice, but also for your resilience and willingness to act for the common good, and for the voices that have continued to propel us to act with care for each other and our institution.
With warm appreciation,
Ruggles Professor of Political Science and History
Executive Vice President for Finance and Information Technology