Financial Implications of COVID-19
Dear members of the Northwestern community,
Nearly every organization, small or large, has been compelled by the global coronavirus emergency to adjust its plans for the short-term and the long-term. I want to offer you some perspective on how we are making these adjustments at Northwestern.
Since the early days of the pandemic, we have asked you to make many sacrifices to help slow the spread of COVID-19, and we take great pride in the way the Northwestern community has responded to this call.
While the public health crisis continues, the global, national and local economic impacts of the pandemic are profound, and are likely to become increasingly challenging in the weeks and months ahead. In the first four weeks of the pandemic, more than 22 million Americans filed for unemployment and tens of thousands of U.S. businesses have temporarily closed their doors. Many of these businesses are at risk of never reopening. Through Monday, the stock market was down more than 24% amid a rapidly deepening global recession.
The sobering reality for us is that COVID-19 is having a significant impact on many elements of universities’ funding. Our challenges are similar to those faced by other universities and colleges across the country, including:
- Financial hardship for many families, requiring increased financial support for a number of our students, which we are committed to providing;
- Dramatic declines in many financial markets, causing a decrease in the value of our endowment and a reduction in endowment payouts supporting the University’s operating budget;
- A reduction of more than $25 million in revenues from room and board and student fees related to the decision to refund these charges for Spring Quarter; and
- The loss in revenue due to the cancellation of many on-campus courses and programs.
In addition to the current financial challenges, we also need to prepare our institution for potentially more financial disruptions. Philanthropy may decrease, as our alumni and supporters face financial challenges of their own. Research funding from private or government sources may decline. Enrollment in certain programs may not reach pre-pandemic levels. And certain community-defining activities, such as Athletics, may be severely impacted. Finally, our return to on-campus instruction in the summer or fall is not guaranteed.
Despite the fiscal pressures, we believe we have an obligation to help vulnerable members of our academic community and our larger community. Along with providing refunds for certain student fees and room and board, we assisted more than 1,500 students through our COVID-19 emergency assistance fund, providing more than $1.5 million for students’ travel and technology needs as we transitioned to remote learning. We partnered with Compass Group to leverage the federal relief package so that all hourly food service workers will continue to receive benefits and compensation equal to their current full-time status for the entire Spring Quarter. We also partnered with the City of Evanston to establish a food bank for Evanston community members impacted by the pandemic.
Together with the Board of Trustees and University leadership, and with input from our University community, we continue to assess the short- and long-term impacts of the pandemic on our resources. As we did following a budgetary shortfall a few short years ago, we will keep you informed and regularly updated on our plans and our progress.
Certain underlying principles will guide our actions:
- We will fully honor all student financial aid commitments, and we will provide increased financial support to undergraduate students with demonstrated need.
- We will work to minimize the disruption to our academic mission. We will continue to support intellectual eminence and impactful research.
- We will prioritize the preservation of jobs whenever possible.
- We also will work to protect our endowment, which represents a strong fiscal foundation that must serve Northwestern in perpetuity.
Given the recent budgetary shortfall, we have worked diligently to put the University on more stable financial ground, and many of the measures we have already taken will benefit us now and in the future. We have introduced greater rigor and discipline in our budgeting practices.
However, the magnitude of the financial risk we now face requires us to take additional measures, which include:
- Pausing all facilities projects, except those related to the safety and reliability of our campuses and projects that are in the final stages of permitting and close-out;
- Pausing new staff hiring until further notice, except for hiring supported by external grant funding or critical to the core mission of the University, with the understanding that we are trying to protect our current workforce for as long as possible;
- Significantly slowing academic hiring and retentions, with each hire subject to careful evaluation;
- Keeping all individual faculty and staff salaries for fiscal year 2021 at current levels (except when contractually required or salary adjustments associated with promotion and tenure decisions);
- Asking all schools and units to defer discretionary spending. Large expenditures are reviewed by the senior vice president for business and finance to ensure our resources are directed towards our most essential functions.
Depending upon how the pandemic evolves, we may continue these adjustments over the summer and perhaps into the next fiscal year. We also may ask our units to make further adjustments in expenditures.
Questions may arise as to whether Northwestern’s endowment might help us bridge any financial gap caused by the pandemic. These endowed funds tend to be restricted for specific purposes and a portion of them are allocated to illiquid investments that are not easy to unwind to support current spending needs. Funds within the endowment, in most cases, were provided by donors as a promise of support to future generations of students, faculty and staff. The endowment was not established to fix budget shortfalls or manage crises, but rather to provide key resources needed to preserve our mission of academic excellence and research eminence far into the future.
I want to reiterate how proud I am of the resilience and determination of the Northwestern community. We have swiftly adjusted the ways in which we learn, teach, research and work to meet the urgent public health challenges at hand.
I have a profound sense of optimism in the skill of our scientists, the resolve of our medical professionals and the wisdom and ingenuity of scholars in every discipline, who all are contributing to defeating this pandemic and bringing forth a better world. I know a solution will be found, but I also know we must plan in the meantime with prudence.
I want to thank you now for the hard work that implementing these steps will entail. I am inspired by your steadfast commitment to this University’s mission to serve our world — a mission never so urgent as now. May we continue to work together to overcome the challenges ahead.
President and Professor