Dear Carleton Faculty and Staff,
This spring, we shared with you two updates on the College’s financial picture: a May 1 memo outlining initial financial impacts of COVID-19 and a May 25 announcement about fiscal year 2021 salaries. In the last six weeks, we have continued to monitor FY20 results, refine our operating plan for the fall, model various financial scenarios for FY21, and work with College governance bodies on the best path forward.
Today, we will be sharing an announcement with the Carleton community about our plan for Fall Term, which includes bringing about 85% of Carleton students back to Northfield. While we are confident in our operating decisions and safety planning, the financial outlook is less clear. Unfortunately, each of our modeled scenarios shows Carleton’s budget in deficit for FY21. As we have shared in previous communications, enrollment is key to our economic stability, as student fees account for 70% of the operating budget income before scholarships. We anticipate a loss in enrollment due to the pandemic and its economic impacts. Further, our housing capacity will be somewhat limited this fall in order to maintain safe physical distancing. Both of these factors will lead to a loss of income. We are also anticipating nearly $5 million in necessary expenses for testing, safety measures, classroom technology, renting local hotel rooms for student housing, and other pandemic-related costs. Given the combination of decreased student fee revenue and increased expenses, as well as heightened need for more financial aid for more of our students, we are forecasting a budget deficit of $11 million this year, presuming a 5% overall loss in enrollment.
Earlier financial decisions such as limiting travel and hiring, and not increasing employee salaries, will not sufficiently address this deficit. We are planning to use one-third of our College reserves ($4.8 million of $13 million) to cover one-time expenses associated with the pandemic response. We are also announcing additional budget measures today, which include: a reduction in capital/maintenance projects ($1 million budget impact); department budget cuts ($1 million); savings from unfilled faculty lines ($585,000); savings from unfilled staff positions ($750,000); a 10-15% cut to senior staff salaries ($125,000); and a six-month suspension of the College contribution to employee retirement plans, effective November 1 ($3 million).
We understand and regret that these decisions will have a significant financial impact on faculty and staff as well as a substantive operational impact on the College. We arrived at this set of decisions because they were equitable across faculty and staff, and scalable so that if projections are outperformed, we could reverse course. Taken together, presuming our planning assumptions hold, we can balance the FY21 budget. However, our budget challenges are likely to continue into FY22 and beyond. As we move into the fall, there will be much work ahead for the Budget Committee.
We have received many questions about increasing the endowment draw to address current budget challenges. The endowment provides a critical, consistent source of operating income for the College, ideally growing over time as to support operating budget increases. Many of the funds in the endowment are restricted to narrow purposes such as particular student scholarship awards, academic program enhancements, and specific endowed faculty positions. The endowment spending policy is intended to help ensure that the College maintains fiscal discipline both in times of great challenge and times of great abundance. Carleton’s financial health comes in part from the discipline that the preceding generations have demonstrated with the endowment, and we want to do the same for subsequent Carls so that endowment proceeds can continue to grow and provide even more support for our academic mission.
In terms of returning to campus, most employees whose work requires an on-campus presence have already returned. Human Resources will work with supervisors over the next few weeks to bring back remaining employees who need to work on campus. Other employees will continue to work remotely.
We are grateful for the members of the Carleton community and for the dedication you have shown to educating our students. Faculty and staff at Carleton have worked extremely hard to adapt to difficult circumstances and develop new ways to deliver our shared mission. As we work together to face the historic challenge of this pandemic, you are invited and encouraged to attend an upcoming virtual town hall meeting (for faculty on Wednesday, July 15 at 10:30 a.m. and for staff on Thursday, July 16 at 9:00 a.m.) and to continue to visit the COVID-19 website for the most up-to-date information and resources related to our planning. We will continue to communicate with faculty and staff as we have more information to share.
Dean of the College
Vice President & Treasurer