Dear Members of the Fordham Family,
Last week the chair of the Board of Trustees and I wrote to you to share with you the news of the University’s decision to temporarily suspend its contribution to the faculty and staff retirement plan from now till 30 June 2021. As some of you may know, negotiations with the Faculty Senate, Local 810 and Local 153 regarding that action and the state of the budget began in mid-September. Every pay period that passed without an agreement from all three groups reduced the amount of money saved by $800,000. Therefore, the University had to act sooner rather than later to close the substantial budget gap with which it is wrestling during the current difficult fiscal year. I write to you today to give you more background on our budget challenges, our priorities and our planning.
As I shared with you in the State of the University Address that I delivered in early September, Fordham initially faced a $105 million budget shortfall this year as a result of a number of factors, including additional costs related to its efforts to respond to the health and safety challenges caused by COVID-19, a significant decline in enrollment (especially on the undergraduate level), a corresponding decline in the number of students in University housing, and an increase in the number of requests for enhanced financial aid that we received from students whose families suffered substantial declines in income as a result of the pandemic. To close that significant gap, the University took steps that we believed would preserve the jobs of all of our faculty and staff. We froze salaries and hiring, and offered a voluntary separation program to members of the clerical and administrative staffs. In spite of these efforts, however, a multi-million-dollar gap remained.
The University had two hard alternatives from which to choose to close that gap: suspending the University’s retirement contribution for the last three quarters of the current fiscal year; or furloughing or laying off members of our faculty and staff. We believed, and continue to believe, that the second option would fall disproportionately on the most vulnerable members of the University’s workforce. Aside from being counter to Fordham’s ethos, doing so would weaken our ability to carry out our core mission, and further reduce our ability to attract students in a highly competitive higher education climate.
Faced with this difficult decision, and the need to balance the budget through judicious cuts to expenses, the University leadership decided that it would be more compassionate to temporarily suspend the retirement match than to introduce University-wide layoffs or furloughs at this time. In our conversations with the Faculty Senate, we stressed over and over again that the Board and I hope and intend to restore the withheld funds if and when the University’s finances are back on firm footing. To keep you abreast of the efforts that we will be making toward that goal, we will hold budget forums on both campuses each semester to update the Fordham community on our operating results and financial outlook.
I have heard four broad questions in response to the facts outlined above, why can’t the University:
- use the contingency fund?
- commit to repaying the retirement fund, with interest, over a set term?
- run a deficit during this emergency?
- spend money from the endowment?
The answer to these questions, and others like them, is stark: because we do not know yet how bad the pandemic-related crisis will be. We can, however, be reasonably certain there will be no V-shaped recovery for the University, not least because we enrolled a smaller-than-average first-year class this year, and our sense (based on the application flow that we are seeing during the current admissions cycle) that we will be lucky to match even that smaller entering cohort in the Fall of 2021. Since more than 90 percent of the University’s income is from tuition and other student sources, that means we are most likely looking at several years before our revenue returns to 2019 levels.
That, of course, assumes the pandemic will be fully under control by fall 2021. The truth is, we have entered a tunnel the length of which we do not know. We cannot predict when we will see full daylight again, because the course of the pandemic and people’s response to it are unknown, and at the moment, unknowable. With regard to the four questions I have heard raised in the course of the past few weeks, let me offer the following answers:
- The contingency fund is, for all practical purposes, the COVID-19 fund. We anticipate expenses for 40,000 more tests; the continued costs of ongoing COVID-19 risk mitigation efforts at our campuses; another semester (at least) of tent rentals at Rose Hill and testing centers at both campuses; and extra per diem salaries for testing and student health care.
- The University can’t commit to a set term for repayment of the retirement match, because we don’t know when there will be sufficient funds in the budget to do so.
- Likewise, it would be irresponsible to carry a deficit from this year into the future, when our financial challenges may not subside quickly.
- The vast majority of the endowment (not a single pool, but more than 1,000 separate accounts) is restricted by contract with our donors to the purposes for which they donated, largely financial aid and endowed chairs.
There are no additional funds nor other pools of money from which to draw. The University has already released more than 40 administrators and staff through a voluntary separation plan, and pared non-personnel items in the budget to essential levels necessary to preserve the quality of the student academic experience. I assure you that we carefully considered all available options before we made the difficult decision to suspend the University’s retirement contributions for the remaining two-thirds of the current fiscal year.
Few of us at Fordham can recall a more challenging time for the University, for higher education, and for the nation. I know how difficult this moment in our history is for many of you. As I enter my twenty-fourth year in your midst, however, I also know the depth of your love for and commitment to our beloved Fordham. And how could I not? I have seen and experienced your generosity of spirit over and over again at every turn.
Therefore, I firmly believe that just as we have faced and overcome the challenges of the past, and especially those that have come our way in the course of the past eight months, we can and will rise to the challenge of this moment. We can and will rise to the present challenges in the way that we at Fordham have always faced adversity and challenge: through our sense of shared purpose, our resilience, and the knowledge we are all shouldering the burden together to help Fordham deliver on its promise of a transformative education for our students.
Sincerely,
Joseph M. McShane, S.J.
