Dear faculty and staff,
As you have heard me say often over the last few weeks, what is certain is Oberlin. I feel this sense of certainty despite the additional financial challenges that we face because of the COVID-19 pandemic. We have been responding to the changing landscape of higher education for quite some time here at Oberlin. These prior challenges have financially impacted each of you, and I know that it has not been easy. Ours is a community, however, that has demonstrated that we know how to face a challenge head-on, we know how to collaborate, and we know how to find innovative solutions. Our work on AAPR and the creation of the One Oberlin initiatives have laid the foundation for our collaborations and our solution-oriented approach.
The three-semester plan I announced on Wednesday is the beginning of a roadmap we are building together, through hard work and shared commitment to this institution. These efforts will help us face some of the most challenging times for higher education in our professional careers. For some colleges and universities, COVID-19 will prove to be an extinction event. Many institutions are projecting enrollment declines of up to 30 percent, budget deficits that threaten to overwhelm their financial positions and layoffs that cripple academic delivery.
Our projections are less dire, but we do expect significant financial impacts. However, thanks to our collaboration and hard work in service to our students and the institution, Oberlin will not only survive, I am convinced we will thrive. Today, I am writing to share with you the financial realities of our 2020-21 fiscal year and aspects of the budget the board approved last week. We have some difficult reductions to absorb, to be sure, but these reductions are coupled with a significant use of the endowment to respond to the financial impact of COVID-19.
I am proud of how our community came together to face the challenge of recruiting in the midst of a pandemic.
When it became clear overnight that our tried and true enrollment strategies, which safeguard our primary revenue streams of tuition, room and board, would become irrelevant, we pivoted seamlessly. Staff, faculty, students, and some high-profile alumni collaborated on a virtual strategy as effective as any I have seen in higher education. From our COVID-19 course to the Conservatory’s Stage Left to our virtual All Roads effort, we reached out to prospective students and their parents. I want to thank Manuel Carballo, Beth Weiss, and their respective teams for their leadership.
While we achieved our enrollment headcount targets, because of our discount rate and a reduced number of international students, our initial numbers are about $1.9 million below our net tuition revenue target. We also are below the enrollment cushion we were seeking to compensate for the typical enrollment loss during the summer. We are responding to this challenge by providing a series of summer courses and private lessons that we believe will continue to connect our students. I am hopeful that our academic plan and work this summer will stem the typical melt and potential losses associated with COVID-19, but we will need to watch these numbers closely over the next few weeks and into the fall.
Oberlin is fortunate to have an endowment, and it is appropriate that we should turn to it at this time to help us more than is customary. These are extraordinary times. We typically utilize 4.5% of the endowment each year, which is about $40 million. Our current projections indicate that we will need to increase our withdrawal to 8%, for a total draw of more than $70 million. Like most investments, our endowment was impacted by the recent market volatility. Fortunately, it has recovered some of its losses. Our intention to balance our operating losses with such a large reliance on our endowment reflects the Board’s recognition of our short-term needs.
Before the pandemic, Oberlin planned $6.8 million in reductions associated with the One Oberlin roadmap and these reductions were projected to produce a balanced budget. Next year’s budget assumes that we will still achieve those necessary budget reductions, including those associated with our negotiations with the UAW.
However, now that the pandemic and economic slowdown have hit, we are projecting a budget deficit of $44.7 million. To address the deficit, the board has approved an extraordinary withdrawal from the endowment of $31.2 million and a series of one-time cuts that will save $13.5 million. Included in these one-time cuts is a 10% reduction in my salary and 5% reductions in the senior staff salaries. These one-time measures do not include reductions to the salaries of faculty and staff, but they do eliminate raises for faculty and staff for the 2020-2021 academic year.
Before I explain the one-time reductions, let me share two assumptions in our projections. The first is an 11% drop in enrollment. While many national surveys suggest further enrollment losses are more likely, we are hopeful, that with the recruitment work we have done and the plans we have announced, our efforts will produce better results than the national surveys suggest. Our second assumption is that we will need to increase our expenditures associated with COVID-19 by $8 million in 2020-2021 to create as safe a campus environment as is possible during this pandemic. This includes paying for testing for COVID-19 for all faculty and staff, improvements in technology, facilities changes, investments in key personnel and protective equipment, and other measures.
In addition to the $6.8 million in One Oberlin reductions, the next fiscal year’s one-time reductions include: (1) a wage freeze; (2) a hiring freeze with limited exceptions (3) the suspension of the retirement contribution for 2020-2021; (4) the reduction of travel and conference attendance; (5) the cancellation of summer 2020 programs and conferences; (6) the suspension of study away for at least the fall term; (7) and other reductions in temporary staff and overtime. We will be negotiating with the college’s four unions to achieve equity across all employee groups regarding the wage and retirement contribution adjustments.
It is my hope that further cuts will not be necessary. But as I have said, the pandemic has created an unpredictable environment for all of us. The current reductions are based on the facts as we know them now. If in the fall, enrollment is stronger than projected and other factors are improved, we will return to the Board with new recommendations regarding these one-time reductions. The opposite is also true. If in the fall our enrollment is not as strong as we hope or if full remote instruction was required, we would need to institute further reductions. Besides unpredictability, what is most true about this year’s financial framework is that it will need to be continuously monitored throughout the year.
We will keep you informed as we learn more about our financial picture. What we do know is that when we were challenged this year, we responded with an urgency and a commitment emblematic of Oberlin’s academic and musical excellence. We identified solutions. We motivated our students, and helped bolster our community when it was under great stress. I wish I could promise that our stress levels will be eliminated, but I can tell you that this community continues to demonstrate why I say that in this world of uncertainty, what is certain is Oberlin.
Carmen Twillie Ambar