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COVID-19 Updates, News, University News

Paxson: Brown must make ‘tough’ financial choices due to economic impacts of COVID-19

Decisions in coming months will take into account guiding principles, epidemiological predictions for fall semester

By and
University News Editor and Senior Staff Writer
Monday, April 6, 2020

The costs for this fiscal year, which ends June 30, have now likely exceeded $21 million as a result of expenses related to the COVID-19 pandemic.

Updated 11:00 a.m. April 7, 2020

The University calculated that costs associated with the effects of the COVID-19 coronavirus pandemic will exceed $20 million in the current fiscal year, according to a community-wide email from President Christina Paxson P’19 sent this morning. In anticipation of further economic challenges produced by the global health crisis, Paxson wrote that the University’s ongoing financial decisions will be based on commitments that are “grounded in Brown’s values.”

“What I’m hoping to do with this letter is give people a heads up that this is the territory we’re entering into,” Paxson told The Herald. “My hope is that the community will pull together and understand the need to be really prudent and that we can all make these choices together.”

The costs for this fiscal year, which ends June 30, have now likely exceeded $21 million as a result of expenses relating to partial room and board refunds for the semester, assisting students in leaving campus and E-Gap Funds that were provided to students to cover Internet service and laptops, Paxson said.

Furthermore, total losses in revenue and increases in costs “over the next several months (could amount to) at least $50 million, and possibly significantly more, depending on the duration of the pandemic,” she wrote in the email. Paxson added that the University’s revenue may also take an estimated $15 million hit if international students are unable to return in the fall as a result of visa-processing issues. 

“We’re not looking at this (financial hit) as a crisis,” Paxson told The Herald. “But we are looking at it as something that’s going to require really careful management in the months and maybe in the year ahead, depending on the depth of the recession that follows this crisis.”

Still, she added that she is “optimistic” that Brown will have a “close to normal start in the fall.”

The email outlined five guiding principles that will inform the financial choices the administration will make in the coming months “as we address very difficult economic realities,” Paxson wrote.

Student and employee health

The University will not resume “full campus operations until it is safe to do so,” Paxson wrote. Guided by some public health experts who say that the outbreak could “dissipate in the summer but with the potential for sporadic outbreaks in the fall,” Paxson added that the University is developing a potentially costly health plan to mitigate the possibility of students and employees contracting the virus while on campus in the fall. 

“We’re working on this in real time,” Paxson said, adding that the planning is still in its earliest stages. She noted projections of greater ability for rapid testing of the virus, which she said will hopefully be accessible at Health Services in the fall. 

Paxson emphasized the need to be able to determine quickly if someone on campus acquires the virus in the fall. She said that a major element of the plan would also involve setting aside a space for infected community members to self-quarantine, “so if we have to manage COVID on campus, we can do that without sending all of our students home.”

Maintaining the financial well-being of students and employees

Undergraduates will continue to receive financial aid that fully covers their demonstrated need, and the University will maintain graduate fellowships, according to the email.

“We are protecting financial aid,” Paxson said. “We are committed to need-blind admissions and committed to meeting the full need of every student.”

For employees, Paxson hopes to “avoid future layoffs to the best extent practicable,” she wrote.

But as of the end of last week, Paxson said that temporary, seasonal or intermittent workers throughout campus whose work could not continue remotely were identified and laid off. These include workers who were hired to staff Commencement and some dining services workers, for example. 

She noted that no permanent workers, which form the majority of Brown’s workforce, have been laid off. The University also has not announced any wage freezes or changes relating to compensation for permanent workers, she said.

In addition, the majority of student workers are able to continue their work remotely, Paxson said. The University has committed to pay student workers on financial aid whose jobs could not continue remotely through the end of the semester, but unaided student workers whose jobs ended will not be paid.

“We’re looking at this through a lens of equity in a world with constrained resources,” Paxson said. “Reserving money for the aided students seemed to just take priority over everyone else.”

Summer earnings expectations have been waived for incoming students, and the University is “in the middle of thinking through” what work requirements will look like for current aided students, Paxson said.

She also noted additional work opportunities for graduate students in helping the University potentially transition summer programs to a virtual environment. Should some international students be unable to return to campus in the fall due to visa processing issues, graduate students may also play a large role in facilitating remote instruction for those students, she said.

Focusing resources on the University’s highest priorities

Academic activities, including education and research, will “take precedence over activities that are less central to the University’s core mission,” Paxson wrote. “We will work as a community to set priorities so that our students continue to have excellent educational and co-curricular experiences, our faculty’s scholarship and research is appropriately supported and our work is conducted as efficiently as possible.”

Nathaniel Pettit ’20, University relations director for Housing Opportunities for People Everywhere and chair of the student learning and development committee on the Swearer Center Student Advisory Committee, said he was concerned about the need to decide “what aspects of our work to preserve and grow,” as described in the email.

“That sort of language makes me concerned about the possibility of what the University will deem as not worthy of preserving and growing,” Pettit said, adding that it was unclear to him what these principles would look like actually enacted. “I think that President Paxson is … setting up some pretty tough choices and I would be really concerned about how the larger community might fare in that.”

Pettit emphasized the need to continue supporting student community engagement even through the difficult financial decisions posed by the pandemic. “While the University no doubt is making some really tough choices, I would argue until I don’t have any breath that some of the most important things that we have to … continue to fund is student community engagement,” he said. “Not only because it’s tremendously valuable to students who partake in it, but because in a lot of instances, HOPE being just one example, students are fulfilling really important community needs.”

Halting co-curricular work is “absolutely not going to happen,” Paxson said. “But you really have to prioritize and make very careful choices about how you spend your money and what you invest in.”

Decisions about which specific areas will be impacted by the focusing of resources will be made in the next month as the budget for next fiscal year is set. “We’re well-positioned to do this work,” Paxson said.

Protecting the University’s long-term financial health

Brown’s $4.2 billion endowment supports 14 percent of the University’s annual operating budget and provides funding for employee salaries, academic programs and financial aid. 4.5 percent to 5.5 percent of the average market value of that endowment is “distributed to the University to support operations,” according to the Investment Office’s website. That working money constitutes the “payout” rate. 

“We are fortunate to have had three years of excellent endowment returns, which will help to sustain the University now,” Paxson wrote, adding that the endowment “must be protected during this time of volatile financial markets.” 

Investment management will “require constant attention to make sure we’re maintaining the endowment and getting the best returns we possibly can,” Paxson said. She acknowledged that fundraising, an important measure to build the endowment, will be difficult in the midst of a likely recession.

“It’s tough because there’s a lot of uncertainty. People don’t know what’s going to happen to their wealth, what’s going to happen to their income,” she said. “On the other hand, we have some really compelling needs right now, and mainly around our students.” 

“We know we can still rely on our Brown community to continue to support us, and we’re going to continue to work with them to make that possible,” Paxson said.

Commitment to transparency

Despite the uncertainty of how long the pandemic will last and its consequent impacts on University life, Paxson wrote that she is “committed to ensuring that Brown faculty and staff will be kept fully informed about challenges as they arise, and given opportunities to ask questions and provide input as decisions are made.”

Many questions from students and employees may not have answers right now as a result of the lasting uncertainty around the future, Paxson said. “I know people love certainty, but I ask the community to bear with us as we work through and as we get new information about the duration and impact of the pandemic.”

Community members will be able to ask questions and provide input throughout the semester, including at the Brown University Community Council meeting, accessible online Wednesday at 1 p.m., Paxson wrote.

 

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3 Comments

  1. This pandemic is going to slaughter most universities. Many will close.

  2. jeff koutsantanou says:

    Brown has a 4 billion dollar endowment fund. The university is far from poor.
    Why wouldn’t a university pull from those funds during this time rather than cut employee salaries?

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