DePauw budget shortfall could exceed $8 million in coming year
With COVID-19 having already negatively impacted the 2019-20 budget at DePauw, the university is likely to face an even more substantial shortfall in the coming academic year.
In a Monday memo to staff and faculty, Vice President for Academic Affairs Dave Berque and Vice President for Finance and Administration Bob Leonard laid out the situation the university is facing as well as some measures to make up for the shortfall.
Berque pointed to previous information that suggested the university saw a negative financial impact of $2.9 million due to the COVID-19 pandemic cutting short the 2019-20 school year. The combination of a hybrid model in response to the virus as well as other factors are likely to make 2020-21 even harder.
“Even if the COVID-19 crisis diminishes during the fall term, under the hybrid model mentioned above for 2020-21, we may well face a reduction in net revenue from tuition, room and board, gifts and auxiliary operations of more than $8 million,” Berque and Leonard wrote. “Should we see a resurgence in the pandemic, the decline in net revenue would become even more daunting.”
The report is based on the work of the COVID-19 Financial Planning Group (CFPG), which has been meeting since early in the coronavirus crisis to discuss the effects of the pandemic and strategies for the university moving forward.
“As early as its first meeting, it was clear that the CFPG found it preferable to prioritize strategies other than layoffs, involuntary furloughs or changes to healthcare,” Berque and Leonard said.
Instead, the reported, “a set of strategies as a possible path forward in terms of savings measures to be implemented.”
The three strategies the university hopes to implement for the 2020-21 academic year include reductions in the non-salary operating budget, forgoing raises for the year and deferral of a portion of the Capital Renew & Replace Budget, which is used to make repairs and enhancements to existing buildings.
Berque and Leonard reported that after reviewing the CFPG recommendations and consulting with the DePauw Board of Trustees Executive Committee, new DePauw President Lori White determined the university will not implement salary reductions for the upcoming academic year. However, university contributions to 403(b) retirement funds will be reduced from 8 percent to 4 percent, saving the university approximately $1.3 million.
At the same time, along with forgoing raises (a savings of $780,000), the university will also:
• Reduce nonessential overhead at least $2 million.
• Consider deferring up to $1.5 million in annual Capital Renewal & Replacement.
• Strive to identify at least $500,000 in new revenue sources or additional savings.
Having already authorized a $2.6 million supplemental draw from the university endowment during the spring 2020 semester, the board also “cautiously authorized” another draw of up to $3.9 million for the coming year.
“The endowment draw,” Berque and Leonard wrote, “will allow us to avoid salary reductions and will help us close the remaining budget gap even after the measures above are implemented. We need to hold some of these funds in reserve in the event that we have difficulty fully implementing the three measures listed above and/or the budgetary impact of COVID-19 exceeds what we are currently estimating.”
The memo also noted that, while continuing the deal with the short-term impact of COVID-19, the trustees also “charged Dr. White to lead the campus through a collaborative strategic planning exercise, on an appropriate timeline, to help us grow revenue, determine the appropriate size of our student body, address any imbalances between the size of our student body and our expenses and to best position DePauw for the years ahead.”