Update on the Economic Impact of COVID-19

DEPARTMENT(S): 
April 8, 2020

Dear WPI Colleagues,

As we enter the third week of D-term, I want to sincerely thank each and every one of you for the work you are doing to uphold WPI’s mission, to support one another, and to help those communities beyond our own. Most importantly, I want to thank you for your commitment to ensuring that our students continue to advance their educational goals in this, the most challenging of moments. For those of you who were able to join our Virtual Town Hall this afternoon, this message will recap much of what we talked about. 

As the COVID-19 pandemic has unfolded over these past weeks, we have been intently focused on protecting the health and safety of our community. We have all been dedicated to the significant effort it has taken to move WPI’s education and operations to a nearly entirely remote status. The success of what is now almost 600 remote courses, and the fact that we all were paid on time using a new, remote process, are both evidence of the tireless work of staff and faculty across WPI in this temporary new normal.

I know that many of you are wondering about what the economic impact of COVID-19 might be for WPI. I write today to provide some early insights, and to share some actions we are taking to manage the realities of the current situation.

This moment brings not only a public health emergency, but an economic crisis as well. It will be some time before we know the full magnitude of the financial challenges the pandemic has wrought and their effect on WPI. Given this uncertainty, it is important that we are as prepared as we can possibly be for whatever may lie ahead.

Before I explain some of the details about our financial status, I want to start with a commitment we are making today. You are no doubt seeing the skyrocketing unemployment numbers nationwide, and many of you probably know someone personally who has been affected by a job loss in this financial crisis. We had already committed to pay all employees through the end of the academic year—and today I am sharing that we will extend the commitment to pay all employees through June 30, the end of the fiscal year.  We will share more details answering various questions about this commitment in a separate note in the coming days.

Now on to some more information about how the current crisis has impacted our finances:

  • With the move to remote instruction, we have refunded about $7 million in room and board for D-term, as well as project center and student life fees.
  • While some expenses (such as travel, events) will undoubtedly be lower than planned in this year’s budget, such expense reductions will not come close to covering the lost revenue.
  • We know that the economic downturn will reduce our fundraising, impacting this year’s budget as well as longer-term fundraising goals. This will result in a delay to the public launch of our campaign that had been scheduled for this Fall.
  • We rely on our endowment for approximately 10% of our operating budget. With the significant drop in the financial markets, we have experienced a loss of around 15% in our endowment since the beginning of 2020.  While we certainly expect the endowment’s value to recover over the long term, in the near term a hit of this size will impact our annual budget in the coming fiscal years.
  • We will likely qualify for some relief under the Federal CARES Act (the “stimulus package” recently passed by Congress). We are working hard to understand our eligibility and to be prepared to apply for aid as it becomes possible to do so. At the current time we do not believe that the relief will fully cover the revenue losses described above.
  • Recruitment of the Class of 2024 and new graduate students is going well. Yet, we must expect some near-term enrollment declines and greater need for financial aid in these challenging times.

Over the coming months, we will continue to assess how both the COVID-19 pandemic and the economic downturn impact WPI’s financial situation. In the meantime, the magnitude of the situation means that we can’t wait to take action. There are several steps that we need to take now to best position WPI to weather these dual crises.  Specifically:

  • We are evaluating all significant capital projects and reducing capital expenditures to only the most necessary. Accordingly, we will delay the start of the new residence hall project at the WPI Townhouses property for at least one year.
  • All Divisions and Departments must forgo all non-essential expenditures and avoid significant new financial commitments until notified otherwise. If you need assistance with determining how to deal with a contract or other purchasing activities, please contact AVP of Finance Mary Calarese.
  • The hiring freeze for new or vacant positions announced on March 18 will continue until further notice.
  • We are eliminating the formal performance review and salary process this year.
  • There will be no salary increases or promotions on July 1, with the exception of faculty who were already promoted as previously announced here. Those faculty promotions with commensurate compensation increases will proceed as planned.
  • Finally, leadership will contribute personally: In addition to a previously identified 18% reduction in compensation, my direct reports have accepted a salary cut of 10% for 6 months, and I have asked our Board of Trustees to reduce my compensation by 25% for 2020.

I appreciate that these steps are significant. However, until we better understand the impacts of the current situation, some shared sacrifices are needed to ensure that we can create the highest likelihood of keeping our WPI family together for the long-term.

Given the uncertainties in what lies ahead, it is possible that we will need to take further action as the situation unfolds over the coming months. I commit to keeping you informed of our thinking and will do my best to address your fears and concerns in a timely way.

In closing, thank you again for your deep commitment to this community – most importantly to the health and safety of our students, staff and faculty, and to all of our families. Thank you for your understanding, flexibility, and willingness to work responsibly together to meet this challenging moment.

While difficult, I remain confident that we will come through this with all the grace, strength, and shared commitment that is the hallmark of WPI.

 

Stay safe and well,

Laurie