Update on COVID-19 Financial Mitigation Plan
Dear St. Thomas Faculty and Staff,
The university is grateful for the sacrifices and hard work that St. Thomas employees have demonstrated during this difficult and unprecedented time. Thank you for your many contributions to enable St. Thomas to continue our mission amidst uncertainty. Today we, the members of the Scenario Planning Steering Committee, will provide you with an update on the ongoing financial impacts of COVID-19 and projections that are guiding additional decisions about finances.
Where We Started
In April, President Julie Sullivan tasked our Scenario Planning Steering Committee with two important goals: first, to provide guidance on decisions necessary to ensure the financial health of St. Thomas given the COVID-19 pandemic, and second, to prepare St. Thomas to adapt and thrive in a post-COVID-19 world.
Based on St. Thomas’s leadership principles, we developed recommendations to mitigate revenue losses that occurred last spring, and to anticipate financial losses expected in FY21. Details of the approved mitigation plan were communicated on May 1. At that time, the university projected an $8.1 million revenue shortfall for FY20 and anticipated another potential loss between $20 million and $60 million, depending on the severity and duration of the pandemic, for FY21.
At the Conclusion of the 2020 Fiscal Year
While last year’s books are not quite closed, the final impact of COVID-19 on our FY20 budget is anticipated to be a revenue loss of $8.7 million. The main drivers were room and board refunds due to our campus closure and lost revenue from event cancellations in the spring and summer.
The university mitigation plan that began on May 15 required shared sacrifice among administrators, faculty and staff, and reinforced the fact that we are all in this together. The plan included six months of salary reductions from staff implemented immediately, faculty salary reductions to begin in fall, retirement contribution reductions for all employees, and layoffs and furloughs. Because over 70% of our budget is compensation, this shared sacrifice is a key driver in mitigating the financial impact of COVID-19.
FY20 savings from our shared reductions combined with funding from the federal CARES Act, lower than expected medical costs, and a decrease in spending on travel and other discretionary spending collectively combined to offset the $8.7 million in revenue loss.
Looking Ahead to the 2021 Fiscal Year
As we began the new 2021 fiscal year on July 1, urgent and important work was underway across the university to prepare for the reopening of our campus. A top priority is to protect the health and safety of our students, faculty and staff. At the same time, we continue to create opportunities to provide students a high-quality, personalized education that focuses on the whole person and develops moral leaders ready to encounter the world.
Increased costs associated with reopening include enhancements in our classroom technology services, adaptations of instructional spaces and preparing spaces for quarantine and isolation. We are also increasing resources for sanitization, testing and contact tracing, and adding more institutionally funded financial aid to meet the additional needs of our students and their families.
Limited exceptions to the hiring freeze will be granted for resources in support of critical university functions and priorities (such as additional cleaning support, staffing the new dining facility, etc.). An exception process with clear criteria is currently being developed to ensure consistency in decision making and will be presented to the President’s Cabinet for feedback soon.
Key metrics for the improvement of our financial situation (including enrollment, retention, housing and financial aid) are slightly under target, but since COVID-19 cases are still rising across the country the pandemic may force us to pivot our operations. We have reviewed various scenarios and maintain our estimate that we will face a potential revenue loss between $20 million and $60 million into FY21.
Our current mitigation plan for FY21 includes:
- Employee salary/retirement decreases already announced (the FY21 portion of these savings account for $10.8 million)
- A continued hiring freeze
- Reductions in the university’s non-compensation budget
- Deferment of capital projects
- Use of our operating reserves
These strategies will offset the low end of our anticipated range of revenue loss but will not be enough if our revenue losses are at the high end. We will need to remain vigilant about expenses and may need to implement additional strategies into FY21.
Working Toward a Reenvisioned Future State
Our committee has also been charged with preparing St. Thomas for a post-COVID-19 world. St. Thomas was already underway with identifying opportunities to innovate and reimagine our work and expense structures. These efforts are continuing and include planning for our future workforce needs and completing the annual fringe benefit review. We anticipate more communication about these topics coming in the fall.
Opportunities for our community to be involved in defining the future of St. Thomas also continue. Some of you participated in community conversations as part of the initial phases of the development of our St. Thomas 2025 strategic plan. Key issues started to emerge that are now more urgent than ever. We will continue this conversation in a way that helps us transcend this moment of crisis to discover and implement how our strengths differentiate St. Thomas in our post-COVID-19 context. Look for a continuation of these conversations to begin again in the fall.
Progressing Institutional Priorities
With the recent announcement of our impending move to Division I sports in July 2021, it is worth noting that, because of the impact of COVID-19, the university has reduced its total athletic investment and implemented a longer period of transition for this move. Transition costs will be primarily funded by incremental athletics revenues, philanthropy and an investment from a board-controlled endowment fund. The board’s quasi-endowment fund supports strategic initiatives that advance the university’s long-term goals and their use will allow us to avoid impacts on academic resources. More details on the university’s plan to fund athletics can be found here.
Expanded health and wellness programming within the Morrison Family College of Health, consistent with the vision of the planning task force that came together to recommend a college of health, continues to move forward. Start-up funds through quasi-endowment were set aside at the beginning of this effort and are supporting the growth of the college as it forms, alongside improvements that will attract new students to St. Thomas.
Communication and Transparency
We will continue to keep the community informed about mitigating the financial impact of COVID-19 during these unprecedented times. Look for another written update in September after we know our actual fall enrollment numbers.
Thank you for your dedication to St. Thomas and for all of the work preparing for our unprecedented semester. We are a resilient and resourceful community. Please continue to care for one another as we work together to face the challenges ahead with compassion. Let us keep each other in our thoughts and prayers.
If you have any questions in the meantime, please don’t hesitate to reach out to any one of us.
Richard Plumb, EVP and Provost, committee co-chair
Mark Vangsgard, CFO, committee co-chair
Ed Clark, Chief Innovation Technology Officer
Al Cotrone, VP Enrollment
Abigail Crouse, Associate General Counsel
MayKao Y. Hang, VP and Founding Dean of the Morrison Family College of Health
Kevin Henderson, Professor, Opus College of Business
Nora Fitzpatrick, AVP, Financial Planning and Budgeting
Marty Johnston, Professor, College of Arts and Sciences
Karen Julian, Chief Data Officer
Karen Lange, VP Student Affairs
Kymm Martinez, VP Marketing, Insights and Communications
Amy McDonough, Chief of Staff to the President
Sandra Menssen, Associate Dean, School of Education
Michelle Thom, Chief Human Resources Officer
Wendy Wyatt, Vice Provost, Academic Affairs