Northwestern Announces $90 Million Shortfall, Furloughs 250 Staff

EVANSTON, IL — Northwestern University officials project a $90 million budget shortfall for the current fiscal year as a result of the coronavirus pandemic. University leaders announced Monday they would personally take pay cuts, furlough 250 workers and start withdrawing more money from the university’s endowment.

“Even if we resume on-campus activity in the fall, as we hope to do by phases, we are likely to see a significant shortfall in the 2021 fiscal year as well, perhaps as great as or greater than what we are experiencing this year,” President Morton Schapiro, Interim Provost Kathleen Hagerty and Senior Vice President for Business and Finance Craig Johnson said in a joint letter.

In response to the fiscal pressures of the COVID-19 pandemic, Shapiro last month announced a freeze on salary increases, hiring restrictions and pauses on discretionary spending, travel and capital projects. Those efforts will account for about $45 million in savings, according to Monday’s joint letter addressing plans to cover the rest of the shortfall.

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Starting this week, about 250 staff members “who are unable to substantially perform their duties remotely or who support areas with significantly reduced workloads in the wake of the pandemic” will be notified of furloughs, which are likely to last until the fall, according to the letter.

According to spokesperson Jon Yates, the furloughs would impact most schools and departments and would not be based on job type or location. University leaders said the employees would continue to receive coverage of health insurance premiums and would be able to apply for state unemployment insurance benefits that, “when supplemented by the federal stimulus package, in some cases can replace most or all of the lost wages.”

The university has not cut any faculty positions, although some subcontracted on-campus positions have been given short-term layoffs during the pandemic and are expected to be recalled when possible, Yates said.

Schapiro, Hagerty and Johnson announced they will each take immediate pay cuts of at least 20 percent, and deans will take 10 percent pay cuts, according to their joint letter. Other university leaders and members of Schapiro’s senior staff elected to take “similar” cuts, it said. Yates declined to specify the precise amount.

The university will also save tens of millions of dollars by suspending contributions to faculty and staff retirement programs through the end of the year, according to its leaders.

The university’s endowment has suffered from a recent drop in value amid the pandemic, the letter said. Schapiro previously said the endowment was not intended to fix budget shortfalls or manage crises. Most of the fund, last estimated at more than $10 billion, is not liquid, according to the May 11 joint letter, and normally university leaders are charged with drawing from it sustainably.

“However, given the endowment’s recent drop in value,” the leaders said, “holding to our usual spending rate would result in much greater pressure on our budget.”

Last month, university officials announced they would not apply for $8.5 million in economic relief provided through the federal Coronavirus Aid, Relief, and Economic Stimulus Act, also known as the CARES Act. About half the money would have been required to be earmarked for emergency loans to students in need. A spokesperson said university officials determined they were “unable to accept the requirements and evolving guidance” about how to spend the money.

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This article originally appeared on the Evanston Patch

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