Updates on the University’s Financial Status
|Vice Presidents, Vice Provosts, Deans, Directors, Department Heads, and Managers
|Sally Kornbluth, Provost and Jo Rae Wright Professor of Biology
Tallman Trask III, Executive Vice President
|Updates on the University’s Financial Status
The University’s financial circumstances have changed significantly due to the COVID-19 crisis and related impacts on the global economy. While many implications of the crisis remain uncertain, we provide here an overview of our current financial status, our financial outlook for the coming year, and steps that you can take to help Duke succeed in light of these challenges.
Fiscal Year 2020 Results
The university’s finances were not dramatically impacted by the COVID-19 crisis in Fiscal Year 2020 because most of our revenues were solid when the pandemic began in March. While some revenues (e.g. housing, dining fees) were lower than originally expected, philanthropic support remained strong and the clinical and research missions returned to near normal sooner than anticipated. In addition, the expenditure controls we enacted were effective – non-salary spending alone was down nearly $64 million from April-June compared to the same period last year. We appreciate the careful attention to cost controls demonstrated across the entire university.
Financial Outlook for Fiscal Year 2021 and Beyond
We expect to see the most significant impacts of the pandemic in the current fiscal year. As previously communicated, our projections for this fiscal year anticipate revenue shortfalls of $250-$350 million (approximately 10% of our total revenue, excluding Duke University Health System) and a financial deficit of approximately $100 million. Beyond FY-2021, our financial projections reflect persistent operating deficits of a similar scale (around $100 million per year) caused by limited revenue growth potential and structural budget problems that preceded the pandemic.
Given the current and anticipated revenue losses, cost control remains a critical priority. We have already taken a number of steps to address the financial pressures referenced above, including:
- Elimination of merit-based salary increases for all University employees
- Hiring freeze
- Non-salary spending controls
- Suspension of employer 403(b) retirement plan contributions
- Temporary salary reductions for highly-paid staff
- Mandatory budget reductions in allocated administrative and academic support units
- Compensation reductions, work schedule adjustments and other actions in select organizational units
Faculty and staff salaries and benefits account for a majority of the University’s expenses, making up more than 60% of our total costs in the last fiscal year. We have largely preserved the jobs of our staff despite the impacts of the pandemic, and that remains a top priority. We have successfully reduced our personnel costs through retirements or voluntary departures, and together with vacancy management controls, have eliminated over 200 positions since March.
In March, when Duke and virtually every other business went into the lockdown, we committed paying all employees regardless of their work location or schedule to help mitigate the immediate economic impact of the pandemic on our workforce as long as that was feasible. As we now address the longer-term financial challenges related to COVID-19, we must shift to paying staff for actual time worked.
Effective October 1, 2020, staff members should only submit, and managers should only approve, actual hours worked. Staff members who are able to work remotely should continue to do so unless approved by their dean or vice president to work on-site. Staff members may also continue to use accrued time off (with approval from their managers) to cover any work absences.
Further reductions over time – ideally still through attrition – are necessary. To facilitate this transition, we have created a variety of options to support workforce management efforts within our schools and other units. Those options include:
- Short-Term Reduced Work Schedules with Benefits: We have received approval from the Board of Trustees to modify our benefit plans to allow any staff member whose work schedule falls below 30 hours per week to continue coverage for health insurance and other benefits.
- Voluntary Separation Incentive for Exempt (Monthly-Paid) and Non-Exempt (Bi-Weekly Paid) Staff: Under certain circumstances, the university will offer a financial incentive to employees in exchange for their voluntary permanent separation. Eligible participants would receive two weeks’ salary for each year worked at Duke, up to a maximum of 52 weeks (or one year’s salary).
- Redeployment of Staff: Since the onset of the pandemic, we have made significant operational changes to support the safe delivery of our academic and research missions. As part of this effort, there may be opportunities to redeploy staff into other areas of urgent need.
More information about these programs, including details on process, FAQs, and forms on the Duke Human Resources website. If you have questions regarding the short-term reduced work schedule option, please contact Dave Smithwick at email@example.com. For questions regarding the voluntary separation incentive program please contact Joyce Williams at firstname.lastname@example.org. For questions regarding staff redeployment please email email@example.com. Please note that these policies and actions do not apply to Duke University Health System (DUHS) employees.
Thank you for your ongoing support of our academic, research, and clinical missions during these unprecedented times.