Johns Hopkins University will cut top officials’ pay, halt projects and undertake furloughs and layoffs amid projections it could lose as much as $100 million by the end of June and $375 million during the next fiscal year due to the fallout from COVID-19, university President Ronald J. Daniels wrote in a letter to campus Tuesday night.
Declines in student tuition and fees, research slowdowns and the expenses of responding to the pandemic, including a transition to online learning, have significantly affected the budget, Daniels wrote. And the university is reluctant to tap its endowment because that has also been affected by the stock market’s fall due to the coronavirus.
“These tremendous financial pressures are not unique to Johns Hopkins,” Daniels wrote. “Many of our peers are grappling with similar challenges. But they are ours to resolve.”
Daniels’ letter and an accompanying financial breakdown reveal how Hopkins has been affected by the pandemic. They also provide a glimpse into the calculations most colleges and universities are making as they face budget shortfalls and higher expenses.
Maryland’s public universities are also expected to have to make cuts because state tax revenues have taken a substantial hit from the economic slowdown.
Universities have received some funding from the federal government’s stimulus packages, but that amount pales in comparison to their losses. Hopkins will receive nearly $6.3 million, at least half of which must be designated for emergency financial aid grants to students.
Daniels also unveiled measures designed to help mitigate the projected budget shortfalls.
Daniels and Provost Sunil Kumar will each take 20% salary reductions during the 2021 fiscal year, which begins this July. Deans and university officers will have their salaries reduced 10%.
The university has also instituted freezes on hiring and pay increases and is halting its retirement contributions for the next fiscal year. The suspension of retirement contributions is expected to save $100 million, while the salary holds and hiring reductions will save a combined $60 million.
Furloughs and layoffs affecting all departments and the administration are also likely, Daniels wrote.
The university will prioritize funding for COVID-19, both its own internal response and its outward response, moving forward. Hiring for COVID-19 clinical roles could continue, and the university is setting up two disease-related funds to help provide relief for employees and contractors.
The budget shortfalls have come at a time of extreme change for universities. The shift to online learning has been sudden, but universities have also had to stop most on-campus research except for research in critical phases or related to combating the pandemic.
Hopkins projects tuition and student revenue-related losses of $25 million through the rest of this fiscal year and $150 million in losses next year if current restrictions remain in place.
“We, of course, hope and expect that the extreme restrictions now placed on our institution (and, indeed, across the state and nation) will be lifted by the end of the summer,” Daniels wrote. “But we also know that reopening will require widespread COVID-19 testing, and that we will have to be vigilant in preventing a resurgence of new infections while we await the development of clinical therapies and the availability of an effective vaccine.”
The university also projects losses from the research slowdown of $25 million this year and $30 million next year before any cost-cutting measures go into place.
Most significant could be a loss in clinical revenue as most health care settings have canceled elective procedures. Those losses could total $100 million through the rest of this fiscal year and $200 million next year.
University fundraising will also take a hit as donors tighten their belts during a recession. The university projects a loss of $25 million this year and $60 million next year.
The university’s endowment has also been reduced by the stock markets’ volatility over the past two months. Hopkins had been planning to increase the payout from the endowment by 2%; instead, it will cut that payout by 2%, about $10 million.