Immediate Measures to Address Financial Challenges
Dear members of the Northwestern community,
Earlier this year, our annual financial update enumerated some of the potential challenges that lie ahead, including:
- Constraints on tuition and endowment payout revenues
- Increased expenses related to labor contracts and employee benefits
- Federal legislation, potential changes in federal policy, compliance, research administration, security and litigation
Since then, we have seen these challenges emerge in a variety of ways, including a recent National Institutes of Health (NIH) announcement we communicated about on Monday that could have a profound and damaging effect on federally funded research across the country. In addition, Congress continues to discuss proposals to dramatically increase the tax on university endowments.
While the federal directives coming out of Washington, D.C., are rapidly evolving, in some cases unclear and subject to legal challenges, it is clear that Northwestern and our peer schools could suffer significant financial repercussions.
Any one of these measures could have a substantial impact on our budget. For example, one proposal to increase the endowment tax from 1.4% to 14%, if enacted, could result in a more than $70 million budget impact for Northwestern. And although NIH’s recent guidance is now suspended due to legal challenges, the proposed cap on cost recovery would result in a reduction of more than $100 million in funding annually to support research at the University.
After consultation with University leaders and Board of Trustees leadership, we have decided to take the following measures, effective immediately, to protect Northwestern and to best position the institution amid these myriad challenges.
First, all personnel actions, including hiring, compensation increases, additional payments and other related actions will be reviewed centrally to ensure they are necessary to the operation of the University and the pursuit of our mission of teaching and research. Previously approved faculty hiring will not be affected for this year, but all other open positions at the University, including ones that have already been posted, will be reviewed centrally to determine their necessity.
Second, we will limit current spending by reducing non-personnel expense budgets in the current fiscal year by 10%. This will be managed in close partnership with school and unit leadership.
Third, expenditures or financial commitments greater than $25,000 will require pre-approval by the Vice President and Chief Financial Officer. We encourage all faculty and staff to exercise prudence in your requests given the current financial uncertainty.
In the next few days, we will disseminate guidance and procedures that will help units understand these new protocols.
These measures will impact almost every part of our University in some way. We regret that some of the plans and aspirations of members of our community may be constrained, at least for now. While we are doing all we can to advocate for and protect our community, we feel it is necessary to take these steps until further notice to help ensure Northwestern is best positioned to navigate this period of uncertainty without permanent damage to our operations or mission.
The work we do is vital. On our campuses, we educate the next generation of leaders, we produce groundbreaking research that changes the world, and we push the boundaries of discovery in ways few institutions can. As many of you have heard us say, if you care about the future, you need to care about higher education.
We will continue to advocate on behalf of Northwestern and, with our peers, on behalf of higher education in our country. We are confident that we will succeed because we must.
We truly appreciate your partnership and your dedication to our University.