Financial Planning in the Wake of COVID-19
Members of the Michigan Tech Community:
The gravity of the situation in which higher education institutions find themselves, including Michigan Tech, is difficult at best. Yet, in spite of these trying times, our campus community has banded together to help each other and even those afar through innovation, creativity and kindness. Thank you.
I would like to outline the framework and planning horizon the leadership team is working from to address the fiscal deficit caused by COVID-19. Currently, we are assuming an enrollment decline for both the summer and fall terms, a correlating decline in auxiliary services revenue, and a modest reduction in state funding. Based on these assumptions, we have estimated a budget shortfall of approximately $18 million—but it could be as high as $38 million depending on additional fluctuations in enrollment, how the state’s higher education funding formula unfolds during the legislative session, and whether Michigan Tech returns to face-to-face instruction to start the fall semester.
In early April, we enacted cost controls to address the current fiscal year deficit. These included a hiring, spending, and wage freeze, among additional measures. Thanks to your efforts, we have minimized the fiscal year 2020 shortfall. However, we must now turn our attention to the projected deficit for fiscal year 2021.
Effective immediately, I will take a 15 percent pay reduction and the vice presidents will take a 7 percent pay reduction, at least through December 31, 2020. This is in addition to a number of other cost-saving options under consideration, which will be reviewed and prioritized by the President’s Budget Advisory Committee. All of our decisions will be guided by the following principles:
- Protecting the health, safety, and well-being of our campus community to the best of our ability
- Supporting and continuing high-quality educational and research activities at Michigan Tech
- Respecting all health and safety requirements issued by the state of Michigan and modifying our operations in compliance with these guidelines.
Over the next few weeks, we will solidify our decisions in preparation for the May Board of Trustees meeting, where we must present a balanced fiscal year 2021 budget to the Board for approval. Actions necessary to achieve a balanced budget with a projected shortfall of $18 million may include reductions to operating budgets and workforce needs, and/or temporary pay cuts. In full disclosure, we must acknowledge that additional cuts to services and programs may be necessary over the course of the year due to additional, unforeseen factors or if we experience greater declines in enrollment or state funding over and above what we are currently projecting.
I will continue to provide regular updates regarding the status of campus operations and the fiscal implications related to COVID-19 in the coming days and weeks. I remain optimistic about Michigan Tech’s long-term future. We are positioned well financially, our reputation is strong, and I am confident in our ability to discover creative solutions, even in the face of adversity.
Take care and stay safe.