Chancellor’s Update: COVID-19 Financial Implications and Moving Forward

Dear Faculty and Staff,

The past two months have upset our lives in numerous ways. COVID-19 has taken the lives of 61,000 people in the U.S. and more than 1 million people have been infected. Since mid-March, more than 30 million Americans have filed for unemployment insurance benefits, including more than 440,000 in Wisconsin. And, we’ve all seen the headlines about the U.S. GDP shrinking 4.8% in the first quarter of 2020 – the largest decline in 12 years.

Closer to home and at UWM, we are not immune to these drastic trends. As individuals and as a university, we have responded with compassion, innovation, courage and determination. Your commitment to our students is remarkable. Thank you for the enormous energy you have exerted to create some academic and emotional normalcy for our students even as most of us are simultaneously trying to adapt in our own lives.

In the following materials, I share details of COVID-19 impacts on UWM.

Assessment of our current situation

As we near the end of the spring semester, we know that our campus operations will be minimal through July 31 and that our summer courses will be delivered online. We moved the May 17 commencement ceremonies to Oct. 10 and are working closely with public health authorities on the safest and best ways to resume operations. It is our goal to have campus courses, research and residential operations back in person as soon as realistically feasible, and we will do so in a safe, socially distant manner when the time is right.

Financial outlook

Even before the pandemic, we were confronting a budget shortfall of approximately $8-9 million spurred by larger than expected enrollment declines this year as well as additional pay plan expenses. We experienced $9-10 million in losses due to the pandemic-related refunds for lost revenues in our auxiliary units, such as housing, dining, and parking/ transportation. UWM will receive federal CARES funding of $8.5 million for the institution, which we will use to mitigate these losses. This week the Wisconsin Department of Administration announced a 5%, one-time funding lapse for 2019-20 for all state agencies, including UW System (UWS) institutions. We are awaiting confirmation of UWM’s portion but estimate it will be $6-8 million, which effectively negates the institutional portion of the federal CARES funding in terms of total impact to UWM. It is quite possible that the state will take additional budgetary action, in the form of an additional lapse or cut, in the next fiscal year. We simply don’t know at this time.

Between that and our projected revenue declines this fall, we have been examining every tool available to address these unprecedented and tremendous financial pressures. Our end goal is to take action that will allow us to emerge from this crisis as strong and best prepared for the new normal as we can be. Over the years, I’ve talked a great deal about how our workforce, salaries and benefits represent the largest expense to our institution. Regrettably, we will not make it through this situation unless we significantly reduce those expenses.

Furlough summary

Before instituting a furlough plan, we took swift actions early in this pandemic to control costs to protect our employees, including:

  • Canceled university-sponsored travel
  • Limited non-essential expenses
  • Deferred or changed some infrastructure projects
  • Increased efforts to retain our current students and enroll a strong freshman class
  • Enacted hiring and salary freezes, with limited exceptions

These actions, however, were not sufficient to cover our financial deficit. Thus, we needed to take the additional step to furlough employees, both on a position-specific basis and intermittent furlough days for most employees. A furlough is mandated unpaid leave and is not a layoff or non-renewal. Since we are facing this challenge as a community, we are asking for a shared sacrifice among faculty, academic and university staff, with the largest contributions from our leadership and highest earners, as described below. We estimate that total savings from the furloughs described below will be about $9-11 million, and we appreciate everyone’s contributions to this effort.

As announced last week, UWM will implement the first phase of position-specific furloughs for employees who currently cannot work due to the disruption of campus operations, beginning May 4. These are employees who do not have the ability to work remotely and who have not been designated as essential to current, limited onsite operations, as well as employees in operations that were most immediately impacted by refunds to students and revenue losses. Most of the employees in this first group are furloughed through Aug. 31 but could be called back earlier as work is available. We expect that these furloughs will save about $2 million over four months.

Additional position-specific furloughs are set to begin May 16, with employees being notified by May 9. The employees included in this group will be those performing duties and responsibilities that are not mission critical at the present time, where budgetary savings can be achieved through furlough to help UWM mitigate overall anticipated losses. UWM successfully lobbied UW System to include partial furloughs in UWS policy, which allows some employees to work part-time and retain a portion of their appointment. Partial furloughs are considered where they are feasible operationally and can be accommodated safely, for employees working onsite. Once the population of this second group is known, Human Resources will share more information about impacts for employees, as well as anticipated savings from this group.

We are also now poised to begin implementation of intermittent furloughs broadly across most academic staff, faculty and university staff. Graduate assistants, student employees, post-doctoral fellows, non-FTE appointments, externally funded (i.e., grants) positions and those on H1-B and E-3 visas are excluded. Employees earning $15 an hour or less also will not participate in intermittent furloughs.

The intermittent furloughs will be implemented as follows:

Fiscal Year 2020:

All 12-month employees will take one furlough day on June 19, 2020.

Fiscal Year 2021

12-month employees will take the following number of furlough days, founded on base earnings

  • $15/hour or less, and Graduate Assistants (TAs, PAs and RAs): zero furlough days
  • Over $15/hour, up to $99,999 per year: eight furlough days
  • $100,000 to $174,999: 12 furlough days
  • $175,000 and up: 16 furlough days

9-month employees will take the following number of furlough days, based on base earnings

  • $15/hour or less, and Graduate Assistants (TAs, PAs, and RAs): zero furlough days
  • Up to $99,999 per year: six furlough days
  • $100,000 to $174,999: nine furlough days
  • $175,000 and up: 12 furlough days

The base eight furlough days (six for nine-month employees) in fiscal year 2021 will be scheduled dates. Additional furlough days beyond the base set are floating and may be taken in full or half-day increments.

Both Provost Britz and I will take 10% pay reductions and all vice chancellors will take a 6.16% pay reduction in fiscal year 2021. Employees making over $100,000 per year will have an option to voluntarily forgo furlough days above eight and opt for a temporary pay reduction instead. We estimate savings from intermittent furloughs to be about $7 million. Details on the dates of furloughs and other information is available in UWM’s Guidelines on Intermittent Furloughs with FAQs here and we will plan informational sessions in the coming weeks.

Other UW institutions have already issued or will be issuing furlough plans. Each institution is making these decisions based on individual campus needs, and thus, plans will not be comparable. UWM’s goals included: 1) To provide employment continuity and access to health insurance coverage for those going on position-specific furloughs; and 2) To outline a 13-month plan on intermittent furloughs that provides advance notice to affected employees for the coming year.

Planning for future

We are in the process of scenario planning for the year ahead – financially, academically and with a top priority on safety and health for our faculty, staff and students. Our goal, again, is to be operational, in person, in 2020-21 but we need to do so responsibly given unknowns and the possibility of future waves of the COVID-19 virus. Financially, the principal risks include having few or reduced students and activities on campus and the resulting enrollment and revenue declines. What makes this especially challenging is that we may be dealing with a hybrid situation in the process and costs of transitioning back from full online status, possibly with setbacks along the way.

Support for students: Chancellor’s Student Success Fund

As we all know, much we took for granted has changed over the past several weeks in ways we could never have predicted a few short months ago. Despite all the change and unknowns, however, we are bolstered and comforted by one certainty – UWM faculty, staff, alumni and friends are always ready to step forward and help.

Thousands of our students lost their jobs and much needed income as campus, restaurants, retail stores, and service organizations shut down. Their families, too, are experiencing lost jobs and wages. In the immediate aftermath of COVID-19, we turned to our faculty, staff, alumni and friends for the basic human needs of our students – assistance to pay rent, to purchase food and to acquire other necessities of life. We thank the hundreds who responded generously, allowing us to provide emergency financial assistance and food to nearly 1,000 students to date, with a waiting list for support.

Our students will continue to need emergency assistance and more – scholarships and other financial assistance – to allow them to complete their degrees successfully. With this in mind, today I am announcing my gift of $50,000 to launch a $1 million fundraising campaign for a new fund – the Chancellor’s Student Success Fund. I invite those who are in a position to help to join me and others in making a gift to what matters most – our students’ success. Details about the fund and how to give will be available soon.

Being strong – and realistic

I want to end with reflection of the hardships that you have faced and how heroically you have responded. Yesterday, several of us briefed some of the regents on our circumstances and how we are responding and planning. They shared very supportive comments about all we are doing and know the difficulties you have addressed. Please know that our campus leaders and I realize the burdens you may feel – stress, anxiety, hard work and burnout take their toll. We know that college students here and nationally face significant mental health issues, but we also know that faculty and staff are not immune to these pressures. Because the pandemic represents a long-term reality, I encourage you to pace yourself, reach out to colleagues, family and friends and stay connected. Please know that we have resources available through our Employee Assistance Program and, please see this piece about the need for self-care from UWM Psychology Department Chair Hobart Davies.

The magnitude of challenges we face from the COVID-19 pandemic are unlike any we have ever experienced, but we can and will overcome them. To do so requires difficult sacrifices from us all. We will need our combined strength and will need to dig deep for endurance for an unknown length of time. This is true of UWM, all of higher education, and the national and global levels. Rest assured, at UWM we will be steered by our strong sense of purpose for students, research and engagement and our guiding values. We are in this together and will meet what lies ahead head on.

Best regards,

Mark A. Mone
University of Wisconsin-Milwaukee