Facing significant financial impacts from the COVID-19 pandemic, Emory has implemented a series of cost-saving strategies designed to ensure the continuation of the university’s core activities of teaching, research and health care.

“These decisions are not made lightly,” Emory leaders wrote in an email distributed April 14 to university faculty and staff. “We recognize these cost-saving measures may introduce great change within Emory, but they are imperative for the university to sustain our academic community, deliver the highest quality student experience, and support our global research missions, all while prioritizing our people.” 

Key measures include:

• A hiring freeze, with limited exceptions focused on maintaining the university’s teaching and research missions;
• Suspension of non-essential staff travel, even after pandemic travel restrictions are lifted;
• Suspension of merit pay increases for the next year for faculty and staff, with exceptions related to faculty promotion and some staff job reclassifications;
• Delay of certain capital projects, renovations and upgrades, although donor-funded building projects will continue, including the new Randall Rollins Building for the Rollins School of Public Health, the Health Sciences Research Building II and the Winship at Midtown building;
• Delay or elimination of discretionary spending on non-essential activities (food, gifts, events, etc.), as well as an average 5 percent budget reduction for administrative units in fiscal year 2021;
• Implementation of a zero-based budget process for all administrative units “to align our support activities with the needs of our students, faculty and researchers, those at the core of our operations.”

The university’s fiscal year begins in September and runs through August. The cost-saving measures are expected to remain in place through Aug. 31, 2021.

“Depending on the duration of the COVID-19 disruption and the depth of the economic recession, we must acknowledge that Emory may not be exempt from very difficult choices,” the email noted. “However, we ask our entire community to find ways to reduce costs to protect the heart of our community and the hallmarks of what makes Emory so strong.”

Economic recession will require ‘significant adjustments’

The message to faculty and staff was sent by Christopher L. Augostini, executive vice president for business and administration, and chief financial officer; Jan Love, interim provost and executive vice president for academic affairs; and Jonathan S. Lewin, executive vice president for health affairs.

“Emory has lost revenue related to the suspension of mission-related activities, incurred costs related to supporting students’ financial needs, and faculty and staff salary continuation,” they explained in the email. “The economic recession resulting from the pandemic will be felt for many months and will require significant adjustments for all of us.”

While Emory has a strong endowment, the university can’t draw from those funds to cover all of the expected financial shortfalls, the email noted, because “these resources do not serve as a reserve fund and, therefore, cannot be used to replace lost revenue. The endowment provides sustainable financial support, but also serves to support specific initiatives, as directed by donors, now and into the future.” 

The recession caused by the pandemic is impacting financial markets, which is expected to reduce the value of Emory’s endowment and therefore reduce the annual payout from the endowment that supports Emory operations. “The cost reduction measures are designed to help offset this impact so scholarships, professorships and other activities funded by the endowment can be maintained, even if the endowment provides less financial support,” the email stated. 

In an interview, Augostini and Love provided more details about the financial impact of the pandemic and Emory’s priorities for moving forward. 

As the potential scope of the pandemic evolved in January and February, Augostini said university leaders realized Emory’s biggest financial concern would be having enough liquidity or cash to continue normal operations. At the beginning of March, the Board of Trustees approved borrowing $900 million on a short-term basis through the expansion of lines of credit.

“Our top values and commitments in decision-making are always trying to focus on the most vulnerable and those who have the greatest need, as well as coupled with keeping the mission of this university front and center,” Love said. “Teaching, research, preserving knowledge, creating knowledge – all of those things go to the heart of what Emory is and does every day, and so our efforts have been to try to bolster the capacity of everyone to respond to this challenge.”

Anticipated financial impact for Emory University and Emory Healthcare

Emory University anticipates operating revenue losses ranging from $145 million to $195 million in fiscal 2020, depending upon the timing of the return to normal research activities. 

According to Augostini, the direct impact of the spring term disruption was approximately $30 million, including about $8 million in additional student support, student refunds and expenses related to the transition to a remote learning environment. As the COVID-19 disruption continues to negatively impact summer tuition and programs, research activities, salary continuation, residential housing support, donor contributions and other operating costs, the estimated cost range from $115 million to $165 million is contingent upon the timing of Emory’s return to normal operations.

The planned cost-saving measures in fiscal 2020 are expected to make up for approximately $95-$110 million, with another $40-$45 million available due to the federal stimulus acts. While $8 million of the federal funding could support the most vulnerable members of the student population, the remainder is a deferral of payroll taxes that effectively serve as 0% interest loans and will have to be repaid. 

After all of the steps Emory is taking, there will be an expected negative cash impact on the university’s operations of approximately $45 million through the end of August. The university is also planning for financial impacts beyond that timeframe, although estimates are not yet available. 

“We are assuming there will be quite a deep and long 12-18 month recession following the events of COVID-19, so as we go into the Sept. 1, 2021, cycle, we intend to be very cautious to ensure that when we come out of this, we have the resources needed to continue our aspirations of eminence,” Augostini said.

Emory Healthcare, in coordination with the university, will be implementing its own set of cost savings measures in the coming weeks as it works to continue to provide care for the community, keep frontline health care workers safe, and conduct research into treatment and vaccines.

At this time, Emory Healthcare’s financial focus is on short-term liquidity, which will enable the hospital system to leverage current income and assets to ensure short term liabilities are paid. EHC is working closely with the university in addressing this priority by utilizing a combination of existing lines of credit, Medicare pre-payments, funds from the CARES Act grant, and other financial strategies.

In the email, Augostini, Love and Lewin asked faculty and staff to “support deans, vice presidents and other leaders by providing input and work to achieve these necessary actions by identifying cost-saving measures in your area,” and thanked employees “for your continued resilience during these uncertain times and your continued commitment to Emory.” 

The full email to Emory faculty and staff is below:

Dear Faculty and Staff Colleagues, 

We are grateful to our entire Emory community for coming together with urgency, strength and support during this rapidly changing global pandemic. Our frontline healthcare workers sprang into action immediately as did many staff and faculty members working in support of healthcare, establishing remote learning and multiple business operations. Many continue to work on campus conducting essential work and to support the 300 students that remain. It affirms our pride in each of you. 

The COVID-19 pandemic has disrupted so much of our lives, including three of the university’s core activities – teaching, research and health care – and with that has come a significant impact on our financial foundation as a university and academic medical center. We continue to anticipate significant financial losses related to this pandemic within our own community and beyond. Emory has lost revenue related to the suspension of mission-related activities, incurred costs related to supporting students’ financial needs, and faculty and staff salary continuation. The economic recession resulting from the pandemic will be felt for many months and will require significant adjustments for all of us. 

Despite the challenges, Emory University has held true to our values and commitment to our students, our faculty and staff, our healthcare community and the Atlanta community through our wide distribution of resources. Many of us have family and friends encountering job loss or reduction of income, and we are fortunate that we have avoided those actions thus far. Depending on the duration of the COVID-19 disruption and the depth of the economic recession, we must acknowledge that Emory may not be exempt from very difficult choices. However, we ask our entire community to find ways to reduce costs to protect the heart of our community and the hallmarks of what makes Emory so strong.

Together, we can innovate and create cost-savings to solve some of the university’s financial challenges created by COVID-19 and the recession. Working with the deans and other senior leaders, we have already identified areas of savings. We also recognize that some schools have been more negatively impacted than others, but our cost-savings steps require a unified approach. It is important for our entire community to share in our collective response and alignment as we are always stronger together.  

While Emory does have a large endowment, these resources do not serve as a reserve fund and, therefore, cannot be used to replace lost revenue. The endowment provides sustainable financial support, but also serves to support specific initiatives, as directed by donors, now and into the future. The economic recession, triggered by COVID-19, has negatively impacted the global financial markets. As a result, we expect our endowment’s overall market value to decline, reducing the annual payout that supports Emory operations. The cost reduction measures are designed to help offset this impact so scholarships, professorships and other activities funded by the endowment can be maintained, even if the endowment provides less financial support. 

In order to navigate an unknown future, Emory is implementing the following cost-saving measures:  

Hiring Freeze 

Emory has implemented a hiring freeze with limited exceptions to allow resources to continue supporting existing faculty and staff. We have a process to prioritize hiring exceptions to ensure we maintain our strong teaching and research missions.  

The hiring freeze is expected to remain in place through August 31, 2021. Schools and units may continue to hire students for jobs currently held by students. 

The Human Resources division has created an Internal Resource Planning Program that can locate and re-assign those who can fill staffing gaps during the hiring freeze period. 

Travel 

Faculty travel may resume once safe to do so and if funds are available within the academic unit. Staff travel associated with student immersion learning trips and fundraising activities is considered essential travel and may be resumed once safe to do so. Additional communications will let you know when that travel may resume. Non-essential staff travel (such as conferences, peer school meetings, association meetings, etc.) will be suspended through August 31, 2021. 

Merit Increases 

Emory will not provide merit increases for faculty and staff through an anticipated date of August 31, 2021. Salary increases associated with faculty promotions will continue to be part of the promotion process. Salary increases for staff associated with job reclassifications will be limited. However, performance reviews remain an important part of staff development and feedback, and all performance reviews are expected to be completed as normal.

Delay of Capital Projects

Certain capital projects, renovations and furniture upgrades will be delayed as we re-evaluate our overall master and capital planning initiatives. Capital projects that are supported by philanthropy will continue, thanks to the generosity of our donors, and will be performed within the terms of those gift agreements.

Discretionary Spending and Budget Reductions

Discretionary spending and non-essential activities (such as food, gifts, events, etc.) that are not critical to the operation of the enterprise will be delayed or eliminated through an anticipated date of August 31, 2021. In addition to these measures, we are working with the administrative unit leaders to implement a 5 percent budget reduction to each administrative unit in fiscal year 2021. 

Zero-Based Budget Process 

All administrative units will undergo a zero-based budget process over the next two years to align our support activities with the needs of our students, faculty and researchers, those at the core of our operations. Academic units are encouraged to undergo zero-based budget reviews as well. Emory has utilized an incremental budget process for over two decades; the zero-based budget process allows units to refocus and recalibrate our critical administrative infrastructure. These measures are part of the baseline budget for Fiscal 2022 and are expected to include reductions due to process efficiencies and/or the elimination of activities and expenses not fundamental to fulfilling our mission. 

These decisions are not made lightly. We recognize these cost-saving measures may introduce great change within Emory, but they are imperative for the university to sustain our academic community, deliver the highest quality student experience, and support our global research missions, all while prioritizing our people. 

We ask that you support deans, vice presidents and other leaders by providing input and work to achieve these necessary actions by identifying cost-saving measures in your area. Thank you for your continued resilience during these uncertain times and your continued commitment to Emory. 

Sincerely, 

Christopher L. Augostini, Executive Vice President for Business and Administration, Chief FinancialOfficer

Jan Love, Interim Provost and Executive Vice President for Academic Affairs

Jonathan S. Lewin, Executive Vice President for Health Affairs, Executive Director, Woodruff Health Sciences Center, President, CEO, and Chairman of the Board, Emory Healthcare