Dear members of the Northwestern community,
We want to thank you for the collective resolve and teamwork you have displayed in recent weeks as we respond to the COVID-19 pandemic that has upended all of our lives. At a moment such as this, we are proud to be a part of a forward-looking, caring community. So many of our people have made remarkable personal sacrifices.
We expect to see repercussions from the pandemic for some time. Most of our work involves bringing large numbers of people together—in classrooms, dormitories, hospitals, libraries, laboratories, meeting rooms, concert halls and athletic arenas. As such, a pandemic places extreme pressure on all our major functions and on associated revenue streams.
We anticipate a total shortfall of roughly $90 million for the current 2020 fiscal year. Even if we resume on-campus activity in the fall, as we hope to do by phases, we are likely to see a significant shortfall in the 2021 fiscal year as well, perhaps as great as or greater than what we are experiencing this year.
Continuing some efforts that were announced last month—which include hiring restrictions, a pause on University travel and discretionary spending, and deferral of most facilities projects—will allow us to reduce this fiscal year’s deficit by approximately half.
We would like to share with you a number of additional financial decisions we have made to address the remainder of the shortfall:
- We will temporarily increase the rate at which we draw from our endowment;
- The three of us, as well as other University leaders, will take reductions in pay;
- We will suspend the University’s 5% automatic contribution and 5% matched contribution to retirement plans;
- And we have made the painful decision to furlough about 250 staff members whose workloads are being reduced during the move to limited and mostly remote operations.
As we have noted previously, our approach is guided by a commitment to protect the academic excellence that this community has built up over 169 years and to prioritize the well-being of our people.
Increase in Rate of Endowment Payout
The vast majority of our endowment, which is the fiscal foundation for our University, is restricted or illiquid. We are charged with keeping our annual draw from it at a sustainable level, so that it can provide as much support for future generations as for this one. However, given the endowment’s recent drop in value, holding to our usual spending rate would result in much greater pressure on our budget. Accordingly, we will temporarily increase the payout rate, even as we acknowledge the need to return as soon as possible to our normal rate.
Leadership Pay Reductions
The financial burden must be shared broadly, and we believe this begins with the three of us. We each are taking at least a 20% pay reduction, effective immediately. Our deans will take a 10% reduction as well. And other University leaders and members of the President’s Senior Staff have chosen to take similar reductions.
Suspension of University’s Retirement Contributions
We are temporarily suspending the University’s contributions to retirement plans for faculty and staff. This includes both our 5% automatic contribution and 5% matched contribution. This will be in effect on a pro-rated basis from June 11 through December 2020, at which point we will evaluate when we might be able to resume the contributions. You are able to continue contributing in the meantime toward your retirement plan without a match. We expect this action alone will save the University tens of millions of dollars and considerably reduce the possibility of further cuts.
We remain committed to protecting our workforce. However, as almost 60% of the University’s overall expenditures are for employee compensation, this was an area we needed to examine closely. We have come to the difficult decision to furlough approximately 250 staff members who are unable to substantially perform their duties remotely or who support areas with significantly reduced workloads in the wake of the pandemic. We will also reduce temporary work until further notice, and prioritize furloughed employees for temporary placement whenever possible.
Notifications to affected staff will begin today, and their furloughs will begin over the next few weeks, likely lasting through the Summer Quarter. We will do what we can to minimize the length of furloughs and will attempt an earlier recall when we are able to begin a phased reopening of campus. We will also continue their benefits and provide resources and information sessions through this transition, and they will retain access to professional development opportunities. We will take other measures to mitigate the impact of a furlough, including an increase to 100% of our coverage of health care insurance premiums and basic life insurance premiums continuation. They will be eligible to apply for state unemployment, which, when supplemented by the federal stimulus package, in some cases can replace most or all of the lost wages.
Dialogues About Longer-Range Planning
We are deeply mindful of how the sacrifices we have asked for here are painful ones for our community. We believe, however, that these moves will allow Northwestern to reach the Fall Quarter with room to maneuver in response to future events. We hope for our world to overcome this pandemic in the coming months, with tangible contributions from our own researchers, who are working tirelessly toward that end. We also hope for an economic rebound to begin soon.
We will continue examining many scenarios for strengthening the University and adjusting our operations. The Offices of the Provost and the Senior Vice President are leading planning and financial modeling, working with the Board of Trustees, our deans and other University leaders, to see how we can emerge from the pandemic as a stronger and more resilient institution.
We will also engage the broader community to discern how to take our next steps together. While stay-at-home orders necessitated the cancelling of Conversations with the President events that were scheduled for April in Evanston and Chicago, NUSAC will host for you a webcast discussion with the three of us next week.
Northwestern University has a distinct identity—with extraordinary strengths in interdisciplinarity, collaboration and innovation, and a commitment to public service on a global scale. This reminds us that Northwestern possesses an extraordinary capacity to meet the world’s most pressing needs at a moment such as this. May we continue to work together toward this end.
President and Professor
Interim Provost and Professor
Senior Vice President for Business and Finance