Update on Drexel’s Fiscal Year 2020-2021 Operating Budget and Planning for the Future
October 8, 2020
We would like to share with you an update on Drexel’s Fiscal Year 2020-2021 operating budget, the steps we have taken to balance the budget, and the work we will undertake together to further strengthen Drexel’s financial position.
On September 23, as the fall quarter was just getting started, the University presented to the Board of Trustees a balanced budget for FY2021. As mentioned in the welcome back message to the University community on September 21, we would not have been able to balance the budget amid the unprecedented challenges posed by COVID-19 without your collaboration, flexibility and sacrifice. Time and time again since the pandemic hit in March, you have shown your dedication to Drexel and resilience in the face of hardship, and we are deeply grateful for your partnership.
Some of the actions we took to balance the budget included:
- Suspension of the employer contribution to the employee retirement plan for fiscal year 2021;
- Reduction in the vacation payout for employees who leave Drexel from 200 hours to 100 hours;
- Suspension of merit increases for calendar year 2021;
- Temporary reduction of senior officer compensation;
- Restrictions on hiring for vacant positions; and
- Expense reduction measures including suspension of the P-Card program, suspension of all business travel, and limited spending on non-essential supplies, dues, memberships, printing and mailing.
Although we have done so much to maintain Drexel’s strong financial position, more work remains. Some of the measures we’ve taken are temporary, short-term strategies that need to be replaced by permanent reductions from other areas in future fiscal years. In addition, we are still evaluating the option of returning to campus in the winter. If the University continues remote undergraduate instruction in January, we will have more COVID-19-related financial impacts to address. Finally, the 5-Year Budget Model we presented to the trustees shows that, based on conservative assumptions driven primarily by COVID-19 and the coming demographic shift for higher education, we will have significant work to do to balance the budget for FY2022, and additional work for the years following.
Drexel is hardly alone in facing these challenges; our peers in higher education are all dealing with the same issues. Even institutions like Harvard are facing their first significant revenue losses since the 2007 financial crisis due to the pandemic and are planning accordingly. We are proud of Drexel’s success in navigating financial challenges in the past, and we’re fully confident that we’ll be able to do so again. As we have done before, we will work together to initiate structural and financial changes in order to address these challenges facing the higher education sector. Provost Jensen and Executive Vice President Bowman will co-lead this initiative to explore potential changes that have both operational and academic implications, engaging with the deans and their schools and colleges, Faculty Senate, and leaders of administrative units.
In addition, to assist in this work, we have engaged the management consulting firm McKinsey & Company to provide external expertise, analysis and recommendations so we can undertake this work in a thorough and timely manner. Collaboratively, our objectives will be to evaluate the following:
- Academic structure and program strategy to both grow revenue and reduce expenses;
- Pricing and financial aid strategy to increase revenue;
- Additional operating costs opportunities to reduce expenses; and
- Internal/external marketing and communications to drive enrollment.
Of course, this work will not happen in a vacuum — it will be informed by the strategic planning work of the Executive Planning Committee (EPC), and, at the same time, it will help guide the implementation plan that the EPC is developing. McKinsey is already supporting the development of the University’s new strategic plan (at no cost), so their partnership in both of these endeavors will allow for continuity as well as expediency. While we recognize this work will be difficult, we are confident that our restructuring efforts and emerging strategic plan will strengthen the University and position us for success in the next decade and beyond.
Thank you again for your patience and understanding over the past seven months, and for your cooperation and partnership as we embark on these initiatives. We know it has been a difficult time, and we are inspired by how the Drexel community has come together to support one another and advance the University’s mission under unprecedented circumstances. Together, we will ensure Drexel remains strong and resilient for years to come.
Paul E. Jensen
Executive Vice President, Nina Henderson Provost
Helen Y. Bowman
Executive Vice President, Treasurer and Chief Operating Officer