The university will implement a series of cost-saving measures in response to budget shortages brought about by the COVID-19 pandemic, according to a May 12 announcement from President John DeGioia. According to DeGioia, the university expects to encounter a $50 million budget shortfall by the end of August and has implemented measures including voluntary furlough and salary reduction programs to cut back on spending.
The expected budget shortfall is not the first time since the pandemic that the university has expressed concern about its financial status—on April 7, DeGioia stated that the university had already spent $25 million in unplanned expenses related to the pandemic, such as prorating room and board fees and assisting students moving out of campus. Georgetown has also lost annual sources of income it relies on each summer, including summer housing, parking fees, the campus bookstore, the university-owned hotel and conference center, and canceled summer programs, according to a university spokesperson.
In addition to a continued freeze on hiring, DeGioia stated that the hold on salary increases would be expanded to include merit-based increases and that the university would suspend contributions to staff retirement plans starting in June and through the 2021 fiscal year until further notice.
The university is also offering a voluntary salary reduction program, giving staff members the option to reduce their salary by a selected amount for a specified amount of time. “More than 50 senior leaders, including the President, Executive Vice Presidents, and Vice Presidents, have taken voluntary salary reductions, totaling $2.4 million in savings,” a university spokesperson wrote in an email to the Voice.
University staff also had the option to apply for the voluntary temporary furlough program by May 18. The furlough period would last nine weeks. Those on temporary leave would not be paid but could choose to apply their accrued paid time off to part of the furlough period. The university encouraged those who did not wish to use their accrued paid time off to apply for unemployment benefits. According to the announcement, the university is hoping to recoup $10 million in losses from this initiative.
While the university projects that cuts to staff benefits and pay will save over $75 million, it also intends to save $40 million by curbing non-essential capital expenditures. This will primarily impact spending on projects related to the university’s infrastructure, though many details on which projects will be delayed or canceled remain unclear. The Law Center has already stated that some planned construction in the Hotung Building will be canceled as a result of these cuts. “Capital projects that address critical safety or systems issues, meet an urgent strategic need, or are largely supported by donor and/or sponsored funds will continue,” the university spokesperson wrote.
In addition to implementing cost-saving measures, the university has been granted some economic relief from the federal government. Earlier this month, it accepted over $6 million in funding as part of the CARES Act, a bill intended to help alleviate economic hardship brought on to businesses and families by the pandemic. While the bill requires that universities use half of the allotment for grants to low-income students, Georgetown has stated that the other half of their grant will be used for unspecified institutional needs.
However, facing an impending shortfall of at least $50 million, the university is far from any guarantee of financial stability, especially given that other unexpected expenditures may arise and there is no guarantee all projected savings will be met. “Additional steps may become necessary, including actions affecting employment and compensation and other cost reduction measures,” DeGioia stated. In a follow-up to DeGioia’s announcement, Chief Operating Officer Geoff Chatas more specifically stated that he hoped the proposed budget-saving measures would serve to “minimize or avoid future employment actions, such as mandatory furloughs, salary reductions and/or layoffs.”
Any future significant budget shortfalls will likely result from changes in the university’s operating status in the upcoming fall semester. Depending on the university’s decisions, the next semester may see reduced housing capacity, and with it a decrease in revenue from room and board fees. Additionally, universities may face up to a 30 percent drop in enrollment, if they opt to have online-only classes next semester. Georgetown administrative officials hope to reach a decision about the school’s operating status at the end of June.
This post has been updated to accurately reflect the furlough program details.
[…] to year, and certainly will look different for the foreseeable future due to substantial financial losses and cost-saving measures taken in response to COVID-19, the 2019 fiscal year (from July 2018 […]