The following message was sent to faculty and professional staff on Friday, May 8.
As the University has taken unprecedented measures over the past several weeks to continue its mission of teaching, research and service while ensuring the health and safety of everyone in the Drexel community, I know that you have been anxious about the financial impact on Drexel of the COVID-19 pandemic. Today, I want to share my assessment of where we stand, the hurdles and uncertainties that remain, and the plans we are formulating to keep the University on strong financial footing.
First, I want to reiterate how proud and grateful I am for Drexel’s faculty and professional staff, who have met the challenges of the past two months with remarkable skill, dedication and resilience. Each week, we see the impressive results: more than 3,200 courses and lab sessions being held remotely, core University functions fully operational while most employees work from home, and our faculty’s powerful research directed toward protecting vulnerable populations from COVID-19 and helping alleviate suffering for those impacted by this disease. Of course, we are also grateful to the health care workers on our faculty and professional staff, who have been serving at the front lines of care for COVID-19 patients and other patients at this critical time.
Even so, this pandemic has taught us the hard lesson that no individual, no sector of the economy, and no organization will emerge unscathed. For higher education, quite broadly, and for Drexel, in particular, the financial impact of COVID-19 has been immediate and sweeping, and we expect it to be compounded by what could be a longer-term downturn in the global economy. We must work together to strengthen Drexel’s financial capacity in the face of these daunting economic conditions.
Although the near-term financial outlook is very serious, and we will need to enact painful cost-reduction measures, I want to assure you that these steps are necessary to secure Drexel’s future. We entered this pandemic in good financial health, and I am confident that we will come out of this period even stronger and more resilient, just as we have done upon navigating other crises, such as the abrupt closure of Hahnemann University Hospital last summer.
Now that the May 1 deposit deadline for newly admitted students has passed and we have an initial understanding of fall undergraduate enrollment, the University’s financial outlook is coming into focus, although much uncertainty remains. Taking into account the impact of COVID-19 on this fiscal year (’19-’20) and next (’20-’21), the University needs to reduce its expenses by $90 million, which includes a 25 percent contingency factor. The budget gap is due to a range of causes, most of them traceable to the pandemic.
Much of the shortfall stems directly and indirectly from COVID-related costs, particularly the unexpected expenditures needed to close down the campus in March and ramp up remote learning. This includes the loss of expected revenues from room and board for the spring term, which is approximately $11 million; loss of income from cancelled summer camps, programs and conferences; and disruption to other campus operations. In addition, revenue from room and board for fiscal year ’20-’21 could be reduced by half from current levels, as more students may choose to live at home.
Of greatest concern going forward are both the significant drop in enrollment expected for the first-year incoming class, and also lagging enrollment in graduate programs. We anticipate having approximately 600 fewer students in the incoming first-year class in September. That decrease mirrors national trends, where one out of every six high school graduates say they may postpone college. For a tuition-driven institution like Drexel, the impact of a smaller first-year class is particularly acute.
Graduate education revenue lags by over $8 million for this fiscal year. Now, new enrollment is trailing projections and undoubtedly will be limited by the fact that international students may face continued travel restrictions.
Faced with an uncertain higher education landscape, we have built a significant contingency factor into the budget, understanding that the situation remains volatile and these projections may change.
We have weathered challenging times before, and we will weather this one, however unprecedented it might be. But it will require some decisive and difficult actions. Before I outline the specific steps we are taking, I want to set out the principles by which we move ahead to bring expenses in line with revenues and build for Drexel’s future.
- Preserve core values: We will sustain our deep commitment to excellence in teaching, research and service, and support for the well-being of students, faculty, professional staff and other employees.
- Health and safety as our top priority: Any steps taken, such as reopening the campuses, must be done with the health and safety of the Drexel community being the top priority.
- Students at the center: We will ensure that student teaching, learning, success, belonging, and well-being remain at the center of everything we do and are considered in every choice we make, as they always have.
- Value employees: We will seek to achieve a balanced budget through reductions in operating expenses that I will outline in this letter, and will only consider layoffs, furloughs and other measures that will impact individual employees as a last resort. If layoffs and furloughs of personnel are necessary, we will exercise caution and consider the impact of such decisions on individuals as well as University operations.
- External support: We will vigorously pursue aid from federal, state and local sources, acknowledging the anchor role that Drexel plays in the community. In addition, we will continue University fundraising efforts, thanks to the generosity of Drexel’s alumni and many other loyal supporters.
- Tailored response: We will be mindful of unique circumstances and challenges for the various colleges, schools and departments of the University, and shape strategies accordingly.
- Strategic and long-term: Our response to COVID-19 will be guided by Drexel’s long-term strategic objectives, which themselves are being refined and updated during this period by the Executive Planning Committee (EPC).
- Consultative and transparent: We will inform our responses to COVID-19 by tapping into the knowledge and expertise of faculty, professional staff and our board of trustees.
Budget Reduction Measures
Our plan for Drexel University, which includes both personnel and program measures, is as follows. These plans are being developed and will be implemented in close collaboration with all academic and administrative unit leaders, as well as the Academy of Natural Sciences. Details on many aspects of these measures are being developed and will be subsequently communicated to the Drexel community.
Non-personnel Savings Through Operating Budget Reductions
As always, we will prioritize non-personnel savings whenever possible to limit the effects on our people. However, the majority of our costs are tied to personnel. We have already suspended the P-Card program, which has resulted in the reduction of nonessential spending by $5 million during the pandemic, as well as reduced our requisition activity by approximately $6 million. We will continue to look for savings of this kind. Other expense reductions in this category will include renegotiating contracts, reviewing leases, eliminating travel, and reducing spending on supplies, dues, memberships, printing and mailing. All units will be asked to examine their operations and identify opportunities for savings and efficiencies.
Personnel-Related Savings to Balance the Budget
The following steps are being taken:
- Merit increases suspended for calendar year 2021;
- University match for retirement plans suspended for fiscal year ’20-’21;
- Salary reductions for senior-level employees, including a 20 percent salary reduction for me; and
- Restrictions on hiring, including a hiring freeze for all non-essential positions (those not required for safety, compliance, financial stability and/or accreditation) and the elimination of vacant positions. We will be working with the deans and administrative leaders to assess the impact of these restrictions.
Additional Budget Reduction Options Under Review
- Enacting nine-month appointments for certain employees, reducing staffing coverage during the summer;
- Lowering accrued vacation payouts for employees who leave Drexel;
- Targeted reorganizations between and among administrative units; and
- Furloughs and layoffs, which will only be utilized as necessary.
CARES Act Relief
In addition, we will utilize more than $6.5 million in federal CARES Act funding allocated for necessary University expenses (the remainder of University CARES Act funds are allocated toward student relief).
Delaying Capital Projects to Increase Liquidity
Non-essential, University-funded capital projects that have not already begun have been put on hold and will continue to be evaluated on a case-by-case basis. Delaying capital projects does not help balance the operating budget, but it does help with cash flow. Projects being funded through our external partnerships (Drexel Academic Tower, Powel Elementary/Science Leadership Academy, Schuylkill Yards, College of Medicine at West Reading) are proceeding now that government restrictions have been eased.
These steps will represent the first part of a phased approach to addressing this challenge. In the second phase, beginning this month, we will develop revised budget plans for the University and every college, school and administrative unit. In the third phase, beginning this fall, we will assess and adjust as needed. The COVID-19 crisis has introduced many uncertainties over the coming months and years to an already uncertain higher education landscape. We will need to be prepared for further action, depending on how scenarios play out, in public health, in our sector, and in our University.
At the same time as we implement immediate measures to secure Drexel’s financial position, we will focus on a long-term strategy to strengthen the University’s competitive position. A number of the steps being taken now are temporary solutions, while we continue to explore ways to reduce structural costs and operate more efficiently in the years to come. And although our current focus is addressing and resolving this situation, we are also thinking about the long-term by moving ahead in developing a new strategic plan to guide Drexel over the next decade.
Most importantly, we will stabilize and eventually grow enrollment with a range of initiatives, including:
- Doubling down on messages to admitted, deposited and prospective students regarding our distinctive leadership in experiential, career-ready education and the higher-than-ever relevance of our approach to a fast-changing, uncertain world and economy;
- Extending the enrollment confirmation deadline by continuing to accept applications for the fall 2020 term;
- Establishing a Winter Entry Program and begin immediate recruitment, including reaching out to the current pool of admitted students;
- Implementing robust anti-melt efforts to retain incoming and continuing students;
- Deploying extra efforts to recruit transfer students, including free applications and “Transfer Instant Decision Days” along with other re-targeting initiatives; and
- Inaugurating a one-time scholarship opportunity for graduating 2020 seniors to enroll in select Drexel graduate programs.
These are extraordinary times, and the challenges we face as a University are just as unprecedented. But Drexel has faced adversity many times in the past and overcome every obstacle to achieve success. We have been battle-tested again and again, in recent years successfully working through budget disruptions related to transforming our enrollment strategy and the closure of Hahnemann University Hospital. We have worked together to find ways to adapt with incredible flexibility then and will do so again.
When this pandemic hit, we pivoted in countless ways. Public Safety and Student Life saw to it that our students reached home safely. Faculty and professional staff quickly moved us toward becoming a hybrid university. The Office of Research and Innovation kept scientific inquiry thriving. The Steinbright Career Development Center helped to ensure that 78 percent of students on co-ops this spring and summer are working remotely or will have a delayed start. Around the University, students, faculty and professional staff are working collaboratively, changing the way Drexel works for the better. Our community members have already shown each other and me that we are prepared to step up and that we will emerge from this historic moment stronger.
Our 129-year history of scholarship, innovation and service to community should give us great confidence in what we can achieve when we work together.
Thank you again for your patience and understanding at this difficult time. And thank you for all that you are doing to sustain and advance our University. Please take care of yourselves and your loved ones, and each other.