Loh: Financial Impact of Pandemic on UMD Estimated at $87M
Disruption from the COVID-19 pandemic has driven a number of changes, including a hiring freeze, adjustment of student and employee fees and a plan to reduce and delay spending, said UMD President Wallace D. Loh.
University of Maryland President Wallace D. Loh sent the following email to faculty and staff today:
Under the governor's directive, all Maryland residents must now shelter at home, except to leave for "an essential job or for an essential reason, such as obtaining food or medicine ... or other necessary purpose." Over half of the states are under a similar order.
It is a reminder of our civic responsibility to keep ourselves and each other safe. Only then will we slow the spread of this pathogen that has upended our lives, shuttered wide swaths of the economy, and caused the number of unemployed workers to soar.
Our core missions: education and research
This week, the university offered all instruction remotely. I want to recognize the extraordinary effort by our faculty and staff that made this transition possible, despite the short lead time. Thank you for enabling our students to continue their studies while they remain safe and well.
My appreciation to all the researchers who are carrying out their work in ways that minimize the possibility of spreading the disease in our campus community. Normally, thousands of experiments are performed daily in our laboratories and other research facilities, but now that number has been reduced to just over 40. The Vice President for Research Laurie Locascio had to announce severe restrictions and urge that some research activities be done remotely, such as data analysis and publications.
Impact of the pandemic on institutional finances
This invisible and ubiquitous virus has caused massive disruption to the lives of students, faculty and staff, as well as to institutional operations and to institutional finances. I'm proud and appreciative of the resiliency, solidarity and dedication to the common good that members of our university community have shown. Today, my focus is on the financial impacts of this virus on our university.
Adjustment of students' and employees' fees
The University System of Maryland (USM) Chancellor has announced that each USM institution will set "policies for the fair adjustment of a number of student fees, including the costs associated with room, board, parking and athletics," and that these would be "calculated by each institution on a prorated basis."
In a separate letter to students, Vice President for Student Affairs Patty Perillo stated the policies that many university administrators and staff, with input from student leaders, have developed. I thank them for their work. Briefly, the university will issue credits on a prorated basis for the following student fees: parking and shuttle, athletics, recreation services, Stamp Student Union, performing arts and cultural centers, student facilities and sustainability. Students in residence halls will also receive prorated credits and/or refunds for room and board. The university will inform students and families directly about the prorated amounts and how the credits will be issued.
There will not be any adjustments to library, technology and health center fees, since these resources are essential to ongoing operations. Other academic fees will not be affected. Education is now delivered online and students will earn the credits for their degrees.
For employees, parking fees will no longer be deducted from their paychecks.
These fee adjustments by the university, totaling about $39 million, help our students and employees with the financial impact of the pandemic.
Support for staff
The university refunds prorated room and board fees to students because, due to the need for social distancing, they can no longer live and eat on campus. However, closing residential and dining facilities does not save the university money. This is because the university continues to pay the salaries of the staff who work in these facilities. We care about their financial well-being, and that of their families, at a time of widespread unemployment.
Faced with the greatest crisis of our time, higher education needs financial relief on a scale that only the federal government can provide. It soothes the pain for a while and keeps money flowing through parts of the inactive economy.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act, signed into law last week, provides a $2 trillion lifeline to businesses, non-profit organizations, state governments and the unemployed. The university expects to receive its share of CARES funds in a few weeks, which includes funds for emergency grants to students and funds for the institution to pay for pandemic-related costs.
Impact of the pandemic on the finances of UMD
The total estimated financial impact of the pandemic on the university, through this spring semester, is $87 million. This figure includes all lost revenues (including the refund of fees), plus new increased costs (such as moving to online education and labor productivity loss—paying employees who are not working on campus and cannot telework), minus savings (no food purchases for dining halls; no travel costs). We appreciate the CARES funding, though we estimate that the amount the university will receive will be substantially less than the financial impact.
States have ordered many businesses to shut down as a social distancing action. It slows the spread of the virus, but it also causes unemployment. Therefore, states could be faced with revenue shortfalls from reduced taxes, and also with increased expenses from additional public health measures. The result could be state budget shortfalls, and state agencies could then be directed to cut their budgets. Therefore, it is only prudent that the university plan for possible budget reductions.
Suspension of all faculty and staff hiring
For the foregoing reason, I am announcing this suspension and it is effective immediately. Provost Rankin and the Office of Human Resources will follow up shortly with information on how the suspension will be implemented and how requests for exceptions can be submitted and how they will be reviewed. Vice presidents and their designees can respond to specific questions from their respective divisions.
Reduction in the rate of expenditures
I have also asked all vice presidents for plans to reduce the rate of expenditures within their divisions and to delay any expenditures that are not deemed absolutely critical. Details on the implementation of spending restrictions for the campus will be forthcoming from Provost Rankin and Vice President for Administration and Finance Carlo Colella.
I regret the need to proceed with these fiscal measures. However, in times of adversity, we must plan for the worst, while we pray for the best. Thank you to all members of our community for doing your part for our collective safety and well-being, and for our fiscal health, while carrying on the important missions of the university.
Wallace D. Loh
President, University of Maryland
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