April 28, 2020
Dear Carnegie Mellon Faculty and Staff,
I am writing to you at a singular moment for Carnegie Mellon University and during an unprecedented time in modern history. This pandemic continues to transform our world, disrupt our daily lives and challenge each one of us on every level, both personally and professionally. Throughout these recent trials, our community has responded with ingenuity, compassion and a shared commitment to our mission. I am so grateful for this spirit of solidarity and profoundly appreciative of your many efforts.
Whether transitioning 2,400 classes to online instruction, coming to campus to work on the frontlines, balancing remote work with personal demands, or contributing innovative research to respond to the crisis, you have demonstrated the values and ideals that make this university truly exceptional. It will be these values that will ensure Carnegie Mellon gets through this next phase despite the tough decisions that lie ahead.
The goal of my communication today is to begin to address the questions that I know are on your minds regarding how this crisis is impacting the university’s finances, and how we are planning for the fall 2020 semester. In addressing these topics, I wish to be as transparent as possible about the complex issues we now face, and to share the actions we are planning in order to uphold our mission while maintaining the university’s future financial health.
Economic Realities of the Pandemic
Let me start by saying that, as a result of careful stewardship of our resources and assets, the university is in strong financial health and is able to meet forecasted as well as unexpected cash flow needs during the current academic year. At the same time, the COVID-19 pandemic has had an undeniable financial impact on the university over the past few months. Some of these impacts include lost revenue resulting from refunds on housing and dining services, increased costs of operating online and all of the various measures taken to respond to this situation and provide support to those affected, including offering the opportunity for all CMU employees to earn their full compensation through at least May 31, 2020. We estimate the revenue impacts associated with COVID-19 to date will exceed $28 million in this fiscal year, not including any anticipated losses of future revenue.
Beyond these short-term impacts, we are possibly headed toward a significant, worldwide economic downturn as a result of the pandemic and the shutdown. Looking back at the Great Recession of 2007-08 may offer some indication of what could be on the horizon in the years ahead, including declining economic activity, rising unemployment, and increased financial pressure on students and their families. This ongoing economic shock will undoubtedly be exacerbated by uncertainty in the spread of the virus and its public health implications. Like all organizations, Carnegie Mellon must prepare to assure its financial health in preparation for these challenging economic conditions.
There are a number of areas where we foresee revenue impacts resulting from both the effects of the pandemic and the potential consequences of an economic downturn. First, the university’s primary source of revenue is tuition, which accounts for a significant fraction of our operating budget. Furthermore, we anticipate the need for significant increases in financial aid, especially for returning students whose families may be under new financial stress because of the pandemic and the slowing economy. As an institution that is committed to the accessibility of a CMU education, we are committed to meeting these needs as best as we can and ensure that all deserving students can continue to pursue their dreams at CMU.
There are a number of other sizeable sources of revenue that also may be affected due to the uncertainties ahead. For example, as a residential university, we have a close-knit community of students living, working and collaborating on campus, but we may face continued impacts to our housing and dining services. We also may see a potential flattening in our sponsored research programs. Unfortunately, we cannot rely on endowment, investment income, and philanthropic support to fully cover these budget shortfalls. I should note that our fiduciary responsibility for CMU’s long-term health, as well as restrictions in existing agreements with donors, and in state law, preclude us from using the endowment as an emergency fund, although we will use our unrestricted or discretionary funds from these sources as much as we can. And, in recent weeks, due to market fluctuations, the value of our endowment has already seen a decline, which may reduce the annual draw amounts that can be distributed in future years. Fundraising is likely to get more difficult in the near term as well, although at this point, we are on track with milestones for the Make Possible campaign and I remain highly confident in its long-term success.
I share this information not to heighten your anxiety, but rather to be candid about a reality we must confront with the same ingenuity and resourcefulness we have always exemplified as Tartans. I also want to give you the proper context for the short- and immediate-term decisions we need to make to secure our long-term success and ensure the continuity of our societal mission.
Scenario Planning for Fall
As we approach the fall semester, we face the reality of several unresolved variables that are impacting our future planning. I am optimistic that social distancing efforts seem to be working in the metro areas of many of our campuses; however, given that CMU includes a global cohort of scholars, we must consider the pandemic’s overall spread as well as the availability of testing and tracing tools that will be critical for returning to in-person operations. (As I shared last Friday, I am proud that CMU-led research is playing a significant role in both forecasting the spread and in tracking exposure.)
This scenario essentially continues our current state of operations, although there may be flexibility to resume significant research activities on campus.
Under a hybrid model, we will offer both in-person and online instruction. Under a hybrid model, even if some students, faculty and staff can return to campus, this scenario anticipates we also will be delivering education to other students who are not able to be on campus, and that some portion of the faculty and staff will continue to work remotely.
In this scenario, we would push the semester back by two to six weeks, based on a reasonable expectation that some more time will allow us to resume in-person operations or the hybrid model.
Each of these scenarios includes making plans for a phased approach for returning our research enterprise in Pittsburgh to onsite operations over the summer.
As we develop our plans, we do so with a commitment to our foundational values of diversity, equity and inclusion. This includes proudly embracing students from around the world, who enrich our intellectual landscape and enliven our community. We also recognize the unique challenges our current and newly accepted international students might face in traveling to Pittsburgh or to our other campus locations. We are committed to doing everything we can to allow them to pursue their education with Carnegie Mellon without delay or interruption, which could include allowing them to complete some portion or all of their fall semester online and then finish their degrees in residence once the situation permits. We understand the issues our international students face are significant and complex, and we will be sending more information regarding these concerns in the near future.
Continued engagement with health experts and government officials will be key to determining which of the scenarios CMU will be operating under as we head into the fall. In the words of Benjamin Disraeli, we are “prepared for the worst, but hope for the best.” Provost Jim Garrett and Vice President for Research Michael McQuade will communicate with the campus community by May 15 to share more information about our framework for making these important decisions about fall. I am committed to keeping the lines of communication open and to sharing information as soon as we are able.
Immediate Steps to Safeguard and Shepherd University Resources
Each of the scenarios I have just outlined — or any combination thereof — will require us to take steps to prudently shepherd the university’s resources. In developing these actions, we need to balance the need to weather the current crisis with the desire to prepare for better days ahead when we will have opportunities to make meaningful investments in our core mission. With the advisement of the Board of Trustees and working with university leadership, we are enacting the following cost avoidance, reduction and deferral measures:
Restrictions on Hiring
As announced previously to deans and vice presidents, a staff hiring freeze is in effect, with any exceptions requiring explicit approval by senior leadership. Given we are in the midst of the faculty recruitment cycle, faculty hiring in the current academic year will continue, but will fall under additional scrutiny and must be approved by the respective dean.
Suspension of Merit Increases
Annual base salary merit increases for the upcoming fiscal year 2021 will be suspended until further notice. Exceptions can be granted for faculty and staff promotions with the approval of the respective dean or vice president, and also by me or the Provost. There also may be exceptions for contractual adjustments prescribed by collective bargaining agreements.
Salary Reductions for Senior University Leadership
In addition to the provision for no merit increases and in recognition of the sacrifices that will be made by the university community at this extraordinary moment, the provost and I have committed to take a 10% reduction in our salaries for the next academic year. Our vice presidents, academic deans and chief investment officer also have volunteered to reduce their salaries by 5%.
Reduction of Discretionary and Non-personnel Expenses
We will work together to examine and identify opportunities for savings in discretionary and non-personnel areas, such as professional services, contracts and lease commitments, travel, equipment and other significant expenditures. Sponsored research, the funding for which is provided externally, is expected to continue as provided under the terms of existing sponsoring agreements.
Pursuit of Organizational Efficiencies
All academic and administrative unit leaders have been asked to examine and streamline their organizational structure and operations to gain new efficiencies and reduce expenses. Although there are no plans for across-the-board layoffs or furloughs at this time, units may need to make decisions regarding staffing to reduce expenses in anticipation of revenue losses.
Re-evaluation of Capital Projects
We are currently reviewing all planned capital renewal, renovation and new construction projects to determine when to restart projects that already are underway and which ones can and should be delayed. With approval of the Board of Trustees, this may include reprioritizing certain projects in order to maintain a healthy cash flow and liquidity position. We also will consider how the design of new projects can anticipate and address how we might be living, working and learning in the future.
I know these steps will require shared sacrifice across our community, but enacting these measures will put CMU in the best possible position heading into the future and will allow us to advance the Strategic Plan 2025 priorities that are critical to our long-term success. As we move forward in our planning, I will continue to seek input from faculty, staff and students and from leaders and governance bodies across the university, and we will continually evaluate our actions as conditions change.
There will be some tough times ahead, but as with every decision we have made since the start of this pandemic, we will continue to lead with a dual commitment to our people and our mission. In doing so, we are guided by a set of principles that reflect the university’s core values, and which strive to:
- Safeguard the health and well-being of the CMU community and its people;
- Maintain our commitment to delivering an outstanding education and experience for our students, and to advancing our research mission;
- Make decisions rooted in science, driven by data, and informed by the guidance of public health experts and government officials;
- Advance strategic priorities that will secure CMU’s long-term vitality and promote our impact on a changing world;
- Leverage opportunities to embrace new paradigms in teaching, learning and research;
- Recognize the unique needs and challenges of individual units across campus by avoiding a one-size-fits-all approach;
- Engage and consult broadly with faculty, staff and students; and
- Deliver timely, transparent and effective communications to our community.
By following these principles, we will stay true to the core of who we are as a university and remain a united, global community. We have a long history of meeting challenges head on, and I am confident — and thankful — that we have the fortitude and resiliency to call upon this trademark fearlessness now. Furthermore, as we move forward, we will use this time to embrace opportunities to lead in the transformation of higher education, which will only be accelerated by this crisis and by increased reliance on technology-enhanced learning.
Despite the uncertainty that remains, one thing is unequivocally clear: humanity needs Carnegie Mellon now more than ever and the work we do is vital to the world’s continued response, recovery and revival. Right now, CMU is offering critical expertise to help curtail the pandemic and its effects, seeking answers to the questions that are defining this era for society, and providing the creative outlets we all need at this time of isolation. Each and every member of this staff and faculty community has contributed to this important work, and we should all feel pride and optimism in the strengths we are bringing to bear at this moment. I continue to be humbled by our community’s indefatigable spirit and grateful to count you among my colleagues and fellow Tartans. We will get through this, together.
Henry L. Hillman Chair
Carnegie Mellon University