July 16, 2020
Dear Carnegie Mellon Faculty and Staff:
As we enter a new fiscal year and prepare for the start of the fall semester, I wish to thank each one of you for your role in Carnegie Mellon’s coordinated and comprehensive response to COVID-19. I am profoundly grateful for your flexibility and perseverance as we navigate the fluid nature of this pandemic, and its continued impact on every aspect of our enterprise. Through your collective efforts, our students completed their spring semester studies, and we successfully graduated 5,436 new alumni in May. The Class of 2020 epitomizes how your collaboration and community spirit have sustained CMU’s momentum and our students’ continued success serves as a powerful reminder of the importance of our core mission.
The university is continuing to work with academic and administrative units on our plans for a gradual return to campus. Our efforts are focused on a hybrid model of education, and a phased return of research activities and operations, and will include procedures for de-densifying campus, reconfiguring spaces, and instituting testing and contact tracing protocols. We are actively working with internal and external experts to ensure these preparations adhere to current public health guidelines. We will continue to communicate with the CMU community as this work progresses.
In the meantime, today I am writing to follow up on my April 28 communication and share an update on the FY20 actual results, to advise on the continuing financial impacts of the pandemic and, as we head into FY21, to remain transparent about the FY21 budget and some of the measures we have put in place to manage and shepherd university resources.
Impact on the FY20 Budget
First, the impacts on our FY20 budget are expected to play out as anticipated, with lost revenue estimated to amount to $28 million for the FY20 fiscal year that ended June 30. As a reminder, this financial impact is largely the result of refunds on housing and dining as well as revenue loss in other auxiliary services; however, we also saw increased costs from operating online and new expenses related to measures taken to provide support to those affected by the pandemic. As we finalize the results for FY20, thanks to steps taken by the academic and administrative units, including a pause in hiring and a reduction in operating expense categories such as travel and events, we project that we will absorb those impacts, and we do not expect a deficit for FY20.
Impact on the FY21 Budget
Now we turn our attention to the current fiscal year, which will be heavily impacted by the ongoing constraints and variables imposed by the pandemic. In May, the university administration presented the Board of Trustees with multiple scenarios for the fall, including an FY21 budget based on a hybrid model, which assumes a combination of in-person and remote instruction and operations. After discussions with university leadership, the Board of Trustees approved this interim budget for FY21, recognizing that the university must remain agile in dealing with the dynamic situation created by this pandemic.
Key assumptions for the interim budget include lower net tuition and fees due to increases in financial aid, and possible reductions in enrollment of graduate students due to ongoing travel restrictions and difficulties in obtaining visas; a decline in housing and dining revenues due to de-densification measures to ensure community safety; reductions in investment income; and modest decreases to sponsored revenues, which will be offset by lower sponsored program expenses. We also expect significant additional expenses related to preparing the campus and the community to return in the fall, including monitoring, testing and contact tracing, reconfiguring classrooms and other facilities, HVAC improvements and enhanced sanitation procedures, securing personal protective equipment, and improving our capabilities and infrastructure to deliver remote instruction.
The approved interim FY21 budget includes revenues of $1.31 billion and expenses of $1.29 billion. Compared to our original (pre-pandemic) FY21 baseline budget, this represents a $116 million reduction to operating revenues, necessitating a $91 million reduction in operating expenses.
Measures to Support CMU’s Mission and Long-Term Vitality
As I mentioned in my April 28th message, throughout this time, our decision-making has been guided by our commitments to safeguard the health and well-being of the CMU community, maintain our high-quality and high-impact research and education missions, and support our students and their success.
With these principles in mind, the university has pursued the measures outlined in the April memorandum to manage our resources and account for anticipated decreased revenues and other financial impacts. These measures include a suspension of merit increases for FY21, a reduction of leadership salaries, a review and re-prioritization of all capital projects, and a pause in hiring for both new positions and vacant ones unless approved by university leadership. In addition to the specific measures, I charged all academic and administrative unit leaders with examining their organizations and operations to gain new efficiencies and to reduce expenses.
Although the memo did not mandate across-the-board layoffs or furloughs at the time, it contemplated that units might decide to reduce staffing in anticipation of reduced revenues. As of June 30, there have been 220 such reductions across CMU, including job eliminations, non-renewals of fixed-term contracts, and partial and full furloughs. When combined with an additional 118 staff positions that will remain vacant, this represents a 6.7% reduction in the university’s staff positions.
The commitment and hard work of our staff enables so much of our success as an institution, and these decisions were not made lightly. We deeply regret the hardship they have had on those impacted. However, we made these decisions in order to support our core mission while protecting thousands of other jobs. By sharing this information, it is not my intent to add to the stress you and your families may be experiencing during these difficult times, but to be transparent about the state of the university’s financial situation as we know it today. I also want to let you know that we do hope to be able to recall many of the furloughed staff members as the cloud of uncertainty clears.
Especially as we see COVID-19 cases spike in Allegheny County, and in many other localities around the nation, we should all be reminded that this pandemic remains a very fluid situation. While we remain optimistic about our approach for a hybrid model in the fall, we must remain nimble during this rapidly evolving situation and ready for any additional and unanticipated requirements that may arise. I wish to take this opportunity to thank the deans and members of the academic and administrative leadership for their continued efforts to support our students and for their dedication to our mission, especially as we manage the many variables of this dynamic environment. Their leadership will continue to be critical as we head toward the fall term.
CMU Leadership Transitions
Finally, I also want to share details of a reorganization of the responsibilities of the executive management team. Dr. Rodney McClendon, former Vice President for Operations, is no longer with CMU following my decision to reorganize that division. Furthermore, Key Nuttall, Vice President for Marketing and Communications, resigned to pursue other opportunities. I am grateful for the leadership and guidance provided by Rodney and Key, especially during these past several months, and I wish both the best in the next chapters of their lives.
As the pandemic and its economic impacts continue to unfold, we are doing all that we can to protect the vitality of our mission and prioritize the health and well-being of our community so that Carnegie Mellon University can emerge more resilient on the other side of this challenging situation. While they are not easy, the steps outlined in this memo are designed to put CMU in a strong position moving forward. I remain grateful for your continued collaboration as we develop and implement our plans for the coming academic year.
Henry L. Hillman President’s Chair