Stanford University, projecting a $267 million loss from the first six months of the coronavirus shutdown, is planning for program reductions, layoffs and budget cuts in the next fiscal year.
In an announcement issued Wednesday, May 27, President Marc Tessier-Lavigne said that the university has been hit by declining revenue and increasing costs, trends that he anticipates continuing — and worsening — well into the next fiscal year.
"We are now coming to a greater understanding that the effects of this crisis on the university's finances will last well into the future. We must plan not just for a temporary budget blip that disappears by this fall, but rather an ongoing challenge that requires us to re-set expectations and chart a new steady state for the university's operations," he said.
Housing revenue will remain low due to fewer students living on campus; events and programs that generate revenue will continue to be limited by gathering and social distancing limitations; and income from clinical, research and philanthropic work "will be challenged," he said, while expenses in some areas, such as student financial aid, will increase.
Stanford's $27.7 billion endowment will continue to be affected by "market volatility," the president added, "given the seismic disruptions occurring in the national and global economies."
Stanford has to date taken one-time measures to address its budget shortfall, including tapping reserves; instituting a salary freeze, hiring pause and pay cuts for senior leadership; reducing departments' discretionary spending; and pausing approvals of all new capital projects.
Looking ahead, Stanford has asked all university units to prepare budget plans based on a scenario with a 15% reduction in funding from endowment payout and a 10% reduction from general funds. Stanford plans to provide final allocations from the endowment and general fund by June so budgets can be finalized in July.
Tessier-Lavigne expects this will result in program cuts as well as layoffs, some temporary and some permanent. The university will release more information about job cuts in late July.
"We don't yet know the scale of job reductions. We hope they will be limited, but they will be driven by the program needs and budget capacity of individual units," he said.
Stanford plans to continue pay for all benefits-eligible university employees through Aug. 31, the end of its fiscal year. Employees who lose their jobs will receive information about severance, subsidized health insurance, benefits continuation and outplacement services.
The anticipated budget cuts, while painful "will allow us to sustain Stanford's mission of teaching and research for a world that desperately needs it – the mission that brought so many of us here to begin with," Tessier-Lavigne said.
Tessier-Lavigne and Provost Persis Drell will discuss the budget issues and take questions during a virtual "Conversation with the President and Provost" on Monday, June 1, at 1 p.m., which is only open to members of the Stanford community.