Chancellor Christ’s update on the campus budget

Chancellor Carol Christ sent the following message to the campus community Tuesday:

I am writing to provide you with an update on university finances and the new steps we must take in order to successfully confront the pandemic’s significant and persistent impacts on our finances. I am profoundly aware and appreciative of, the extent to which you have all risen to this unprecedented occasion over the course of the last nine months. While I believe we are beginning to glimpse that proverbial light at the end of the tunnel, challenges certainly remain. And so, I ask and hope for your continued dedication, resilience, and perseverance in the months to come.

Principles and Past Actions

The principles guiding our decisions remain the same: We are prioritizing the health and well-being of the campus community. Every alternative is being assessed through an equity lens. Every effort is being made to save jobs and maximize employment. We are, and will remain, determined to protect our academic core and excellence. We are striving to avoid actions and decisions that could permanently and irreversibly damage the essential parts of what makes Berkeley Berkeley, especially given our belief that the pandemic’s operational and budgetary impacts will begin to subside by the end of this fiscal year, in the summer of 2021.

While a significant degree of short-term uncertainty persists, it is now clear that we must go beyond the budgetary steps taken so far.  We have, to date, managed to mitigate approximately $140 million of the pandemic’s $340 million budgetary impact with the help of federal relief funding, a temporary halt on merit increases for staff and range increases for faculty, voluntary separations and retirements, short-term borrowing, cash management strategies, and moderate budget cuts for the campus’s operating units.

New Measures

In order to close the remaining gap, maximize employment, and avoid further budget reductions to operating units, the campus will adopt new measures, including the implementation of a year-long program of tiered, income-based furloughs for all non-represented staff, academics, and faculty, and reductions in time for represented staff. This was not an easy decision. I know and regret that it will entail personal sacrifice, yet I believe the burden can and will be fairly shared across a community that has come together in support of our mission and the greater good.

We plan to launch the program on February 1st. Consistent with our commitment to equity, employees earning less than $59,000 will be exempted, with progressive, graduated reductions up to a top rate of 3.84% for those earning more than $234,000. Information on the time and salary reduction tiers can be found here.

I want to acknowledge that there remain a number of issues to be discussed with deans and managers before we finalize the details. We are sharing this preliminary information now because of our commitment to transparency, as well as your need for timely information that supports effective, personal financial planning. Among the issues we must still resolve is how or if the program will include employees who are compensated via external grants and contracts. We are also exploring whether individuals with the ability to offset a reduction in salary with an external source of funding, such as a grant, will be permitted to do so in exchange for a contribution to the campus, as a way of ensuring we all share in an equitable effort to protect jobs and our educational programs. The Regents have taken action to protect employees’ service credit toward retirement in any furlough, curtailment, or time reduction program the campus may implement.

I want to assure you that we will, via campus messages, keep the community updated as key, remaining details of the furlough program are determined.

I know there will be many questions and comments about this step, as well as the others I describe below. So, before proceeding, I invite everyone to a special Campus Conversation focused on the budget that is scheduled for 12 p.m. on Wednesday, Dec. 9. I will be joined by EVCP Paul Alivisatos, Vice Chancellor for Administration Marc Fisher, and CFO Rosemarie Rae. You are welcome to submit questions about the budget and other campus issues in advance through this online form, or during the event by posting your query on our Facebook Live streaming site.

A Comprehensive Response

Because we do not want our employees to bear the primary brunt of balancing the budget, the tiered salary and time reduction program is but one piece of our plans to address a projected budget deficit of $200 million. While the roughly $27 million in savings that we will realize from this program is needed, it is clearly not, on its own, sufficient and more must be done. While the extent of additional measures will, to some degree, depend on whether a new federal relief package is forthcoming, we are currently planning to take additional steps, including:

• Realization of investment gains;
• Stricter enforcement of the staff hiring freeze;
• Incentivizing and encouraging units, schools, and colleges to use more of their reserves and funds functioning as endowments;
• A prudent expansion of university borrowing to help meet operational costs;
• A second round of the voluntary retirement and separation programs to be launched in spring 2021; and
• A slow-down for all pending capital projects.

Consistent with President Drake’s recent message regarding pandemic relief, we have already achieved the goal of $10 million in savings in order to minimize layoffs and preserve lower-paid jobs that otherwise may not have sufficient funding. The savings in question were the result of the suspension of the non-represented staff merit increases and range adjustments for faculty.

Given the aforementioned lack of clarity, we cannot be sure these steps will suffice. Further actions may be needed. However, there is no doubt that the passage of a new, substantial federal relief package would be of enormous benefit. According to recent news out of Washington, legislators are renewing efforts on that front, and while our planning does not assume they will succeed, we are working hard to advocate for and support these efforts.

A Strategy for the Long Term

Beyond these relatively short-term measures, we are also engaged in longer term, strategic planning and actions designed to strengthen and protect our financial foundation, particularly insofar as future revenue growth is concerned. We are active and engaged in Sacramento, making the case for reliable, consistent levels of state funding that are commensurate with the University’s contributions to the state’s economic, scientific, and cultural vitality. The campus will continue to expand and enhance Berkeley’s ability to monetize the intellectual property created by our world-class research enterprise. With tuition playing an increasingly important role in our financial model, we will continue our advocacy for a cohort tuition model that would provide for small, regular, and reliable tuition increases that would enable us to keep pace with cost increases beyond our control, while providing students and their families with a level of assurance and predictability they currently do not have.

We are also committed to an exploration of ways to best utilize and take advantage of our expanding and improving abilities to provide high-quality remote learning. I believe there is great potential to expand remote offerings and enrollment for every sector and season: undergraduate, graduate, summer sessions and University Extension. A final piece of our long-term strategy is continued investment in philanthropy. We continue to break fundraising records. I am particularly grateful to the thousands of donors who, together, have donated $32 million to support COVID-19 related efforts in research and testing, and provide emergency financial support to students experiencing unforeseen difficulties in these trying times. While the vast majority of other donations are restricted to specific uses, based on donors’ intentions, and thus not available to alleviate our short-term budgetary woes, these funds most certainly help support core programs, needs, and initiatives.

With Gratitude

Please allow me to end this message in a manner akin to how it began, with a sincere expression of gratitude and appreciation. I, along with every member of my leadership team, am well aware that we have been operating in an environment of financial constraint and hardship for a long time, since well before the pandemic took hold some nine months ago. And, thus it is nothing short of miraculous that we are maintaining Berkeley’s excellence in teaching, research, and public service; advancing our initiatives to increase the diversity of the campus community; and reinvigorating our sense of community and belonging. I also know that, despite our best efforts, we have friends and colleagues who are struggling mightily to get by. I urge everyone to take full advantage of the support services on offer, and to share your caring and compassion with those who are in need.