Johns Hopkins University President Ronald J. Daniels shared an update today on how the university is weathering the financial challenges posed by the COVID-19 pandemic, including final results for fiscal year 2020 and updated projections for fiscal year 2021.
Daniels' message comes nearly six months after an April communication in which he described in detail the many and significant financial implications of the pandemic and outlined how the university planned to respond.
His full message is below.
Dear Johns Hopkins community:
The past eight months have been among the most challenging in our university's past century, as we have weathered together the effects of a devastating pandemic that has taken millions of lives and disrupted our global and national economies. Even as steady progress is being made toward a vaccine and improved therapeutics, and as we are developing new ways of carrying out our education, research, and clinical missions, we are far from out of the woods.
It is in this context that I write to share an update on Johns Hopkins' financial situation, which continues to reflect the strain and uncertainty of the pandemic but is nevertheless substantially stronger than we originally feared and is encouraging for the future.
In brief, as a result of the mitigation measures we have taken, including salary and hiring freezes and a one-year suspension of retirement contributions that went into effect in July, as well as other factors, the university ended fiscal year 2020 with a modest surplus. Further, we have substantially reduced, but not eliminated, our projected deficit for fiscal year 2021.
Because of the projected deficit and continued uncertainty surrounding the pandemic, our austerity measures will remain in place for the rest of this academic year. Our public health experts continue to remind us that another spike in the level of infection is not only possible but likely, particularly as flu season is upon us and winter weather moves more activity indoors. A second surge on the scale that we experienced this past spring would mean increased revenue losses and a worsened year-end result, and this scenario is one that we must consider in our planning. Having said that, we do not anticipate taking further significant mitigation or employment actions this fiscal year. And, as promised, we are working closely with the university's academic divisions to resume regular retirement contributions, salary increases, and hiring at the start of the next fiscal year (July 1, 2021).
Without doubt, this improved picture is a testament to the resilience, sacrifice, and dedication of our deans, faculty, staff, and students, and I am grateful to you all.
The following is some additional information about our finances, and you may find even more detail on our COVID website and in an upcoming town hall meeting with the university's finance team at 10 a.m. on Wednesday, Oct. 21.
FY2020 Results and FY2021 Projections
You will recall that when I shared a detailed account of our financial picture this past April—with clinical services limited to emergencies and COVID care and our in-person, on-campus activities, including our research operations, suspended—the university was anticipating projected losses of $100 million for fiscal year 2020 and $375 million for fiscal year 2021. These results were projected before any mitigation actions were undertaken.
To close those gaps and weather the broader economic downturn, we initiated a multiphase plan that sought to preserve the health and safety of our community; continue to deliver on our education, clinical, and research missions; and respond to the needs of our local and global communities in a moment of profound crisis while also ensuring responsible financial management of our $6 billion-plus enterprise. Foremost among our priorities was the need to limit, to the greatest extent possible, layoffs and furloughs of members of our workforce.
As a result of the strong performance of many of our divisions in the first three quarters of the last fiscal year, as well as critical mission support from the Johns Hopkins Health System, increased federal funding, and the hard work, creativity, and sacrifice of each of you, we are pleased to report that we have avoided the worst of the forecasts we were facing last spring.
Specifically, we ended FY20 with a modest surplus of $75 million on a budget of $6.5 billion, and we have reduced the projected deficit for the current fiscal year (FY21, which began July 1, 2020) from the $375 million forecast last April to $73 million as of now.
This $73 million deficit remains despite the $100 million savings due to the one-year suspension of retirement contributions and substantial additional savings from salary and hiring freezes for FY21. Without those sacrifices, our deficit would have been more than twice as severe. In normal times, a deficit of any kind—something that has happened only once in the past 25 years—would be an unacceptable and worrisome result. However, in a time of COVID-19, considering how much more severe our financial condition could have been, we are relieved and encouraged by this revised projection.
With this projected deficit, and the continued uncertainty we face as we enter the first full fiscal year under the shadow of COVID-19, prudence dictates that we maintain our austerity measures. In our financial planning and management, we lean toward caution, and we will not hesitate to again scale back our activities if necessary for public health and incur the unavoidable revenue losses attendant with that decision.
But we are cautiously optimistic that we will not need to undertake any significant new mitigation actions in this fiscal year beyond those detailed in our earlier guidance. And if, instead, university finances improve enough for us to reconsider reversing previous actions for this year, we will not hesitate to do so.
Further, we remain determined to confine our COVID-19 austerity measures to the current fiscal year alone. We are committed to resuming full retirement contributions, regular salary increases, and hiring beginning July 2021. Indeed, the university and its divisions have included this resumption in our five-year budget planning in order to support the core academic mission of the university.
In the same spirit with which I communicated our initial efforts in the spring, you will find more detail on the university's current financial picture and future plans on our coronavirus information website. As ever, you have my deepest gratitude for your exemplary and tireless work to help our university not merely endure this moment but emerge from it stronger and ever more prepared to advance our academic mission.
Stay safe and be well,
Ronald J. Daniels
Posted in University News