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Updates

Responding to the Financial Challenges of the COVID-19 Pandemic

Dear Colleagues,

A few months ago, we could not have imagined how our lives would be disrupted by the COVID-19 pandemic. Faculty, students, and staff alike have had to change the way they work, teach, learn, care for patients, and connect with family and friends. We have been inspired by the resiliency demonstrated by every member of our University community, and we thank you for your commitment and continued optimism. We will get through this.

As a University with an academic medical center, the global economic challenges caused by this pandemic have been particularly acute. We have experienced significant lost revenue from suspending non-essential medical procedures in order to build capacity in our hospitals for an anticipated surge in COVID-19 patients. Similarly, we have incurred expenses to prepare to care for our patients through telemedicine and to prepare our faculty and students for online learning. We have refunded room and board fees for undergraduates who left campus in March, but continue to provide housing, food, and support for students who had to remain on campus. We do not know yet when we will be able to conduct in-person education again, which makes projecting tuition income difficult; and we cannot predict when clinical revenue from our healthcare system will return to the levels we experienced prior to the pandemic. The financial implications of this situation have been significant, and we don’t yet know how long these will last.

As a preliminary measure to help sustain University operations, we have made some tough decisions that will directly affect faculty and staff. There may be other steps that we will have to take in the future, depending on the duration of the pandemic and the impacts of the economic downturn. Although we are modeling a variety of possible outcomes, we cannot yet predict what additional measures we may need to implement, if any. We are committed to keeping you informed about our plans as they evolve, however.

Some of you have asked why we cannot simply use funds from our endowment to tide us over. The majority of University’s endowment is directed to specific purposes such as professorships and scholarships. We simply can’t use those funds to support operations. We must also take a long-range view of our endowment; it is as much ours now as it will be for future generations of University of Rochester faculty, students, and staff. There is also an economic reason to not withdraw from the endowment in a crisis. The downturn in the financial markets and the economy has reduced our endowment value, along with endowments of other colleges and universities. We are in a more fortunate endowment position than many universities because our endowment investments outperformed many of our close peers over the past two decades. The inclusion of new endowments raised in the Meliora Challenge also helped bolster endowment support of the University. We are confident that we will be able to keep our endowment strong if we do not withdraw funds when the value recedes.

We must take action based on our current financial situation; what follows are the steps we are taking now:

Hiring and Overtime

We have implemented a freeze on hiring for all open positions and replacement staff positions until further notice, unless an offer was extended to a candidate as of March 20, 2020. Any exceptions must be approved by senior leadership who report directly to the President. During this time, no new faculty recruitment should begin unless essential to operations and approved by senior leadership. Additionally, all overtime in non-clinical areas should be kept to a minimum and will require approval by senior leadership.

Merit Program

We will not provide merit increases to faculty or staff for fiscal year 2021. This was not an easy decision, but we feel that taking this step now will help to ensure financial stability for the entire institution.

Senior Leadership Compensation

Beginning May 1, the President’s Senior Leadership Group and Cabinet, plus a group of the senior leaders at the Medical Center and some other senior staff will take salary reductions of up to 18 percent, with the highest wage earners taking the greatest reductions. This tangible contribution will generate a significant amount of payroll savings. It represents University leadership’s personal commitment to all employees, as well as to the future health of this institution. We will continue to evaluate this move as circumstances at the University change.

Furloughs for Some Staff

Some employees will be asked to take short-term furloughs in the coming months, including furloughs that occur regularly during the normal course of business as operations are ramped down for the summer, as well as incremental furloughs in other areas. We believe that most, if not all, furloughed employees will be able to recoup their lost wages in full through the current State and Federal unemployment benefits programs. The University will continue to provide healthcare benefits to furloughed employees who are on University benefit plans. Human Resources Business Partners and individual managers will work with affected employees to try to ease the impacts of this effort, and we hope to minimize the period of time these furloughs will be in effect.

Maximizing Funding Sources

The Government Relations team continues to work aggressively to take advantage of all funding opportunities available to healthcare organizations and universities through the CARES Act and other programs developed to mitigate the financial challenges created by this pandemic. Our Government Relations colleagues are in daily contact with local, state, and federal representatives to ensure that the University of Rochester’s priorities are taken into account in terms of both policy and legislation. In addition, we are tracking all expenses incurred during this time using special expense and pay codes to ensure that we are able to take maximum advantage of any governmental assistance programs that may be made available in the future.

Capital Projects

We are holding on any new capital spending for the next 90 days. Projects that are already underway are being reviewed and only those that are critical to maintaining patient care operations, address critical life safety issues or infrastructure, or are necessary to meeting contractual requirements will move forward.  We are complying with all guidelines set by the national and local government on essential workers for any project that continues to develop.

Wage Compression Program

Because of the many challenges presented by the COVID-19 pandemic, we will delay the planned wage compression program for employees affected by the increase in the minimum wage. Although we are not in a financial position to address wage compression at this time, we understand the effect it has on our staff, and will address this as soon as we can.

We expect the next few weeks will allow us to continue to develop a clearer financial picture for the University, but we are confident that adoption of these measures now will help to keep our institution healthy, both in this time of financial crisis and into the future.

Most importantly, we thank you for your continued partnership as we navigate these unprecedented times together. Our people are our most important assets, and we are focused on continuing to support our staff, faculty, students, and other members of the broader University community. As we noted at the beginning of this message, we will get through this. The steps we are taking now will ensure that the University will emerge from this challenging situation in a strong position to move forward with renewed vigor and resolve.

Sincerely,

Sarah C. Mangelsdorf, President

Robert L. Clark, Provost

Holly G. Crawford, Senior Vice President for Administration and Finance, CFO

 

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