While much uncertainty remains, each day we learn more about how the economic crisis caused by the pandemic is affecting our state and our University. I write today to provide some context regarding these initial impacts and describe the recent directives from the state of Washington that will guide our budget planning.
UW Medicine
As doctors, nurses, health professionals and researchers save lives threatened by the coronavirus, academic medical centers and their affiliated public hospitals and clinics on the front lines of this fight have been among the hardest hit financially. Unfortunately, UW Medicine is not immune. As you may have read, even as it has led our state and country in responding to the coronavirus – tracking its spread, treating those who fall ill and researching new treatments – UW Medicine is projecting a loss of more than $500 million by the end of this summer. While we continue to pursue federal and state emergency funding to support this critical work, without urgent mitigation efforts this shortfall jeopardizes our ongoing mission to improve the health of the public.
On Monday, UW Medicine CEO Dr. Paul Ramsey outlined the steps being taken to protect UW Medicine’s hospitals’ and clinics’ ability to care for patients. These will include temporary furloughs and reduced hours and compensation for staff, with the goal of minimizing the number of permanent layoffs that are needed. As a reminder, furloughs are temporary and allow employees to keep their benefits, including health insurance. Leaders at UW Medicine are voluntarily contributing part of their own salaries back to the University in light of these extraordinary circumstances, as are Provost Richards and I and many other UW leaders across our three campuses.
The effects on auxiliary units
As we discussed in the May 1 town hall, other units at the UW, such as Housing & Food Services, UW Athletics and UW Facilities are also experiencing significant revenue losses due to fewer students and employees living and working on campus. In addition to UW Medicine’s losses, we are now projecting the UW’s auxiliary units will collectively lose at least $100 million between now and the end of September.
It’s important to remember that the majority of these units’ budgets go to employee salaries and benefits. That’s also true for the University’s budget as a whole. Just as tuition and fees help pay for our outstanding faculty and dedicated student support staff, budgets in auxiliary units pay for employees who serve our campus every day – in food service, custodial work and transportation, to name a few. Like UW Medicine, a safe return to a “new normal” on our campuses for faculty, staff and students is necessary to fully recover from these losses over time.
New guidance from the state
The state’s Office of Financial Management (OFM) is gathering information to plan for FY 2021, which begins July 1. State appropriations make up roughly a third of the UW’s General Operating Fund, which is what supports our academic operations on all three campuses. Today we were asked by OFM to model options for a 15% reduction to state funding, as were other state agencies. To be clear, these options have not been imposed – this is part of the state’s assessment of the impact that reductions of this magnitude could have.
Like us, the state is trying to identify ways to manage revenue reductions with the best available information. This new guidance allows the University to provide this information about the impact of a reduction before further action. We still expect more detailed information will be available after the state revenue forecast in mid-June.
Governor Inslee has also restricted hiring at state agencies and asked universities to take similar measures, which the UW had already implemented when we limited hiring to only essential faculty or staff positions and directed leaders to minimize non-essential expenses.
I remember guiding the College of Arts and Sciences through the 2008 economic recession when I served as dean. In some ways, this all feels eerily and uncomfortably familiar. After all, it’s only this year that our state appropriation closed in on pre-recession levels. It is important, though, to understand that this current crisis is different. The Great Recession impacted some parts of our University much more than others. Just as this current crisis is impacting every corner of our society, it’s also impacting every part of the UW – in some areas, with immediate actions required, in others with adjustments we will need to manage over time. As a result, our strategies to address the budgetary impacts will have to adapt and evolve as well. We are committed to frequent communications, full transparency and strong partnerships and consultation with our faculty, staff and student leadership.
Our shared path forward
As we take actions at the UW, we’ll also need more partnership and support from our public partners. There are further actions the state and federal governments can take to mitigate the effects of this crisis beyond the critical funding already received, including quickly processing our requests for emergency operations reimbursements, increasing funding for testing and passing another federal stimulus package. Providing additional federal support for universities and academic medical centers – which are at the forefront of the fight against COVID-19 – and for state and local governments will help avoid serious cuts to critical public services, thereby shortening the recession and speeding up the recovery. We have and will continue to advocate strongly at the state and federal level.
As I said last month, all of our decisions will be guided by our values and our core mission of providing access and excellence to our students. We will seek to mitigate as much as possible the effects of this crisis on our teaching, research and service, and on the faculty and staff who make all of that possible. As we learn more, we will share information with you and with the many leaders across the University who will, with me, be making difficult, but thoughtful, decisions.
This is a difficult time. I am proud to lead this University – and I am proud of your work to lead our state’s COVID-19 response and recovery. As the economic impacts become clearer, the positive impact of your work has never been more visible. And while the growing losses, both personal and financial, impact each of us in different ways, I find comfort in the knowledge that our University community has risen to this latest challenge with compassion for each other and a determination to see this through together. Both of those – compassion and determination – will be necessary in the days and weeks ahead as we respond to the pandemic and chart a recovery that improves the health and well-being of all people.