Dear AU Community,
Usually, I would start a note at this time of year wishing you a good start to the summer. While that is still my hope, I also recognize the challenges that so many in our community are facing in so many ways. The transition from the spring semester to summer is anything but typical, but it is heartening that our community of changemakers is forging ahead with spirit and purpose. We are answering the challenges of COVID-19 and sharing knowledge from our expert faculty. Our students are being honored for outstanding scholarship and winning national awards for research in natural sciences, mathematics, and engineering. We see great enthusiasm from our incoming class, with a record number of registrations for new student orientation. It is exciting to see our momentum in so many places.
Importantly, we are also planning for the fall semester and beyond. Today, I want to update you on our progress. Our teams are working around the clock to finalize our approach, and we are on track to share the comprehensive plan for our fall operations with you by mid-June.
Our preparations are focused on safeguarding the health and well-being of our community; fulfilling our core mission of teaching, research, and learning; and delivering a high-quality student experience. In addition to the broader COVID-19 Working Group that has operated since the onset of the pandemic, we have three task forces – Health and Safety, Enrollment and Retention, and Workforce Planning – as well as numerous dedicated workstreams within the schools, colleges, and administrative units, and faculty efforts to prepare fall classes with innovative designs. All the task forces are interconnected and collaborating closely together, as every decision has multiple implications across the institution. This will ensure that our operations and procedures are aligned and have the flexibility to adapt to the changing conditions of COVID-19.
The Health and Safety Task Force is preparing testing protocols; social and physical distancing guidelines; occupancy requirements for campus housing, classrooms, and research and office spaces; procedures for contact tracing and isolation for confirmed and suspected cases of COVID-19; protective equipment supply and distribution plans; cleaning measures; and safety training that will be necessary for any return to campus. The Enrollment and Retention team is crafting recommendations for classes and instruction, the student experience, community building, and skills development opportunities. The Workforce Planning group is developing procedures for how faculty and staff will work in the fall (including parameters for a phased return of the workforce to campus, provisions for telework, and other options that may be needed), provisions for supporting faculty and staff in high-risk categories, and arrangements that address the impact of regional decisions regarding local schools and public transportation.
As the recommendations from each task force come together, we are collecting a broad range of input from students and parents, faculty, and staff. This includes almost 14,000 student evaluations about the 2,000 spring classes that transitioned online. The work will culminate in key decisions made over the next several weeks and then communicated to the community in our overall plan. While COVID-19 presents many uncertainties, this approach will provide the clarity and the flexibility needed for a safe and successful fall semester.
Concurrent with the extensive planning, we are also dealing with challenging economic realities. I wrote to you in April about the $27 million financial shortfall the university is facing for the spring and summer as a result of the actions required to keep our community safe, support our students, and continue our educational mission as the COVID-19 pandemic spread. We have taken important steps to address the initial shortfalls, including pausing all new construction, reducing compensation for the Cabinet and myself, halting merit increases for faculty and staff making more than $40,000 per year, and instituting a hiring freeze. Combined with expense savings, federal funding from the CARES Act, increased enrollment in summer classes, and other measures, we have made important progress against this deficit, but our work is not finished.
We are projecting at least a two-year impact on the university’s finances and operations from COVID-19. We have modeled different budget scenarios to estimate potential losses in tuition and housing revenue, additional costs for the ongoing COVID-19 response, and impacts on other university operations. While the scenarios present a range of possible impacts, we cannot assume the more optimistic potential outcomes will materialize. Based on current information and using a more conservative approach that will better prepare us for the more challenging scenarios, the financial impacts could total $100 million in lost revenue and increased costs for fiscal year 2021.
To put those impacts into context, American University’s FY2021 annual budget is approximately $775 million. A potential shortfall of $100 million is 13 percent of our total budget. Given that 92 percent of our revenue comes from tuition and fees, if enrollment is down 10 or 20 percent with a corresponding effect on housing occupancy, we will be facing intense budget pressures in every part of our operations.
We are acting decisively and prudently to mitigate these shortfalls, including extensive efforts to meet enrollment goals for current and incoming students. All schools, colleges, and administrative units will be asked to find additional cost savings and ways to reduce non-personnel spending. We will draw on unrestricted income from the endowment and use reserve and contingency funds that were established in previous years.
While we begin to take these actions, the continuing uncertainty and toll of COVID-19 means we also have to prepare for the reality that more extensive measures may be necessary for the financial stability of the university, both now and into the future. This includes potential impacts on our workforce, as more than half of our annual operating budget is dedicated to personnel. Options that are being considered include stopping the employer match for retirement contributions, salary reductions, furloughs, and possibly layoffs.
We previously announced that the current compensation approach for full-time and regular part-time employees will continue through the end of this fiscal year (June 30). We will provide additional details as soon as possible regarding any employment-related measures that may be implemented for the fiscal year that begins on July 1, 2020.
These are difficult matters. I hoped that we would not have to consider steps that create additional hardships. The AU community is special because of our people. I wanted you to know about these challenges because one of our core principles is to be transparent and forthright with one another. We will do everything possible to minimize the impacts, but this unprecedented situation requires us to consider all options as we maintain our commitment to our students, our educational mission, and the AU experience.
I am grateful for your dedication and your perseverance. You have proven time and again how AU Eagles take on all challenges and work together to find solutions for our community, and for communities everywhere. I know you will bring this same purpose as we chart our path for AU’s future.
Be safe and be well.