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Boston University to halt contributions to employee retirement funds due to Covid-19 issues
By adamg on Tue, 05/19/2020 - 5:54pm
Boston University President Robert Brown today told professors and staffers that uncertainties and new expenses caused by Covid-19 are forcing the school to stop contributions towards their retirement - in addition to instituting a previously announced salary freeze.
Brown wrote that the end of retirement payments, which goes into effect July 1, should save BU some $84 million in the coming school year - but even that wont be enough:
Even with the salary and retirement plan contribution freezes, and other savings we have already identified, we anticipate a total budget shortfall of between $70 million and $150 million, based on our estimates of how many students will enroll this fall. We have asked managers to propose reductions that will allow us to balance the Fiscal Year 2021 budget, and this is going to require that we make some very hard decisions.
Brown said that the school has seen good news in enrollment - the number of accepted freshmen sending in deposits has exceeded university goals and that graduate enrollment is showing strong numbers as well. But, he continued:
We do not know, for example, if the pandemic’s trajectory over the summer will end up giving students greater confidence or elevate their anxiety about attending a residential program when it is time to make a final decision in August. Nor is it clear how many students will have to postpone their education because of the economic dislocation that they and their parents are experiencing. And we simply do not know how easy or difficult it will be for our international students to get to Boston in September because of either travel restrictions or the possible unavailability of visas.
Even if all the students do continue with BU, keeping them safe - and enrolled - in a Covid-19 world could prove expensive, he wrote:
For the coming fiscal year, there are a number of sources of revenue that will either be reduced or eliminated entirely, including those from events, conferences, and some of our academic programs that will necessarily be shuttered for the foreseeable future. We also are looking at significant new expenses associated with our plans to reopen our campuses and resume residential operations. Those plans, whether for classroom, research, residential, or community-building elements of the University, have to measure up to the highest possible public health and safety standards. This is both necessary and costly to implement. We must also plan for an increased need for financial aid as the recession caused by the pandemic deepens.
Brown also laid out a four-phase strategy to re-opening the school's campuses, starting with the reopening of research and clinical facilities.
Phase 2, which we hope will start later in the summer, will include the return to campus of a small number of students and limited in-person instructional activities, most noticeably for our medical and dental students. Phase 3 is the essential step in which we repopulate with a measured and deliberate return of our undergraduate and other graduate students and faculty and staff to the campus. Only when this phase is complete will we be able to reach the “new normal”—a residential campus community in a world with COVID-19.
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 Brown's letter | 75.2 KB |
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Comments
The "very hard decisions"
As a recipient of the letter, this was what initially stood out for me:
Is Brown taking a pay cut?
Given that he is one of the highest paid college presidents in the world, it seems like the place to start.
Yes
He and the Provost took 20% cuts. VPs took 10%.
Yes
He will take 20% salary reduction for FY 21. Same for the Provost, with Deans and Vice Presidents taking 10% cuts.
800K instead of 1 million.
That's gonna hurt.
What about the extra 600K he gets in "other compensation"?
Source for salary:
https://www.boston.com/news/education/2018/12/10/highest-paid-college-pr...
I'm on it
setting up a GoFundMe page for him right now.
More than RPI's president...
who thankfully agreed to take a 5% paycut from her 5.8 million dollar a year salary....
RPI's president is a real piece of work
We decided my kid wouldn't apply there when we learned what an adversarial relationship she had with the faculty and students.
Well Endowed? Appearantly not.
Given they have a $2.3b it seems like they’re opting to pass the hurt along to the employees rather than shoulder the cost and retain good staff. I know if I were still there I would consider this reason enough to leave once I found a job elsewhere. And when will they resume contributions? Never?
BU faculty have long self loathed
BU faculty have been treated poorly going back to the Silber years, and they stick around for more.
They wouldn't have treated
They wouldn't have treated Isaac Asimov poorly!
Oh, wait - they did!
Good!
He was a creep and honestly, wildly overrated as a writer.
And a lech
As was discovered by any teen girl who had the misfortune to meet him at a convention. Very well known in the SF community.
Known in the SF community as
Known in the SF community as a lech?
No! Can't be!!! He was a family man! He was stable! I specifically recall reading that he had a family - a wife and two children - already when he began a years-long adulterous relationship with a younger female SF fan and aspiring writer for whom he would later divorce his wife!
...
As to his (sci fi) writing... Maybe not the greatest, and personally I never felt a draw to search out his stuff beyond a couple of classics, but - good, undoubtedly pioneering...
-
... and the BU conflict was rooted in mundane "teach" versus "research" tension.
Not all Endowments are Equal
There is a common misconception that an Endowment is a large pot of money which a U or a MFA, BSO, MOS, etc., can dip into at will
Not at all true even for the Big H [aka WGU] with an Endowment of the scale of some small country GDP. A lot of an Endowment is tied-up in various funds restricted [by their donor] to application only to specific purposes. For example the BSO has a whole lot of "Fully Endowed in Perpetuity" Chairs of the various sections -- well that money is tied to paying that particular person seated in the chair and probably their retirement fund -- it can't be used for paying the electrical bill at Symphony Hall or the grass cutting at Tanglewood.
Presidents of U's are constantly seeking Unrestricted Donations -- but most donors [even small ones] think that they are better placed to decide what is needed than the U's administration and they put money into a fund established by their Class or Department or some athletic team, drama club, hobby shop, etc.
Some of these individual funds allow surplus income to be considered as if it were Unrestricted Donations -- but many are not so lenient.
Anyway you slice it -- having a negative tens or hundreds of millions is a big hole to fill no matter how large the Endowment.
On the other hand the Politicians and Bureau-Technocrats who are Calling for Bunkerization to Continue are in NO Danger of Losing even a Nickel from their quite adequate incomes
Keep that in mind when you hear a Political Hack, or even one of our sainted Gov't Science Guides tell us to be cautious in how we open-up -- they are feeling no pain at all!
Endowments
Most endowment money is either earmarked for a specific purpose (professorships, scholarships) or else has donor restrictions on it. Other parts are locked up in long-term investments like annuities. An endowment isn't some massive slush fund that can be used at will.
And endowments are a kind of
And endowments are a kind of trust fund where the principal can't be used, only the interest earnings. Considering current interest rates, it takes a lot of principal to get a decent income off of it.
Endowments
The suggestion that they don't have anything to fill these funding gaps is misleading at best. BU's 2019 annual report (publicly available) shows that they earned $38MM of dividend and interest income that was not donor-restricted and $12MM of dividend/interest that was donor-restricted. This presumably comes from university investments, i.e. the endowment. Assuming that the two pools of assets paying these dividends are similarly allocated, that means that there is about a 3:1 ratio of unrestricted to restricted assets that the university could monetize in some way.
I'm not sure what you mean by "annuities" but if you mean insurance-type products, those are likely a very small portion of the university's assets. Instead, they are probably, like most universities, weighted towards public securities with a smaller amount of private/alternative investments. I didn't look far but BC's allocations were easily available on google: 29% foreign equities, 25% domestic equities, 21% hedged strategies, 19% private capital, and 6% fixed income.
Nearly all of that can be sold in order to fund university overhead, which would include employee retirement benefits. Some investments could be sold quicker than others, but it is a myth to say that any endowment is simply unable to find cash anywhere to fund overhead. Instead, they will continue to prioritize their existence as an investment platform that also offers degree programs for a mere $216,000.
Agreed
This is the correct take on endowments. Questioning why they are not drawing down a line of credit or otherwise obtaining a loan with today's low interest rates and using the funds to take better care of their people is perhaps a better question. But maybe they are doing these things and this is still where they ended up. Either way it's unfortunate to see this happening to people.
"locked up"
Every time endowments come up I feel like people are playing word games.
When you say "locked up" is it that there simply isn't a way these funds can be touched?
Or they can be touched but it involves a haircut of some type (financial penalty, poor market timing)? In that case it isn't so much locked up as the "long term investment" isn't going to work out because the money is needed right now.
The colleges can't be in the position of having their investments essentially guaranteed.
locked up=can't be touched except for its specified designation
Which is why I almost always make my donations to any charity or university as "unrestricted".
If BigCheese makes a zillion dollar donation to build the BigCheese science building, that's the only thing that money can be used for. If it's to endow the BigCheese Institute for Cheesy Things, then the interest/dividends off that money can be used to pay for the institute's expenses but the principal can't be touched. Big donors like to have their names on things.
The. Endowment. Is. Not. For. You.
For those who think universities should cover their budget shortfalls from their endowment instead of cutting salaries and benefits, here's a great explanation why that isn't possible:
https://www.mcsweeneys.net/articles/a-university-president-responds-to-t...
FY2021 only
The "freeze" is for FY2021. Not 2022. If they made this permanent they would lose their top talent - faculty and staff - as soon as the economy improves. The only way I could see this extending to FY2022 is if we are still unable to have on-campus classes in 2022.
I am not happy about this at all, but I can understand why they did it. That said, it's enough for me to consider other opportunities.
Johns Hopkins and Georgetown have done this too, and I am wondering if we will see other Universities follow suit.
Not that easy to find a job elsewhere, maybe
Pretty much every higher education institution is doing some amount of cost-cutting right now, so I'm not sure there will be places to jump to that are a lot better for a lot of people. It might be possible for some in administrative jobs like IT or maintenance, but people more directly involved with teaching/learning/etc may not have many other options to switch to.
I'd also point out that a lot of schools did very similar things in 2008-2010 due to the recession - as far as I know, most were able to get back to normal after that period. But it's hard to say when that will be given that we don't know what things will look like in a few months, much less in a year or two.
Obscene
These aren't institutions of learning.
These are for-profit, lightly taxed businesses that CAN afford to keep staff on but instead are trying to save on payroll taxes during a once-in-a-century pandemic.
I have an idea, ASK YOUR ALUMNI!!!
Ya know, the ones who became leaders of the world and just got a gigantic, ill advised, economy destroying tax-cut? THOSE PEOPLE!
Among their graduates, Boston University's 491 wealthiest individuals alone are worth a combined $38 billion.
Maybe ask them before picking the bones of your already struggling staff.
I'm disgusted.
University Layoffs across Boston and Cambridge
Other Universities will be doing the same. Hoping to at least keep my job, but these times are brutal!
I'm not sure
that depending on the benevolence of the wealthy is a great model for budgeting here.
Here's a better idea - maybe we could have some larger organization compel these ultra-wealthy to give up more of their money, and then that money could be given back to institutions that provide valuable services to our country such as education and research?
Nah, that's crazy socialist talk.
Tough Times ahead in the private sector
For people in the private sector wage freezes, layoffs, furloughs will get worse in the coming year. In the public sector the gravy train at the State universities, MBTA and MASSPORT will continue to roll down the tracks.
It’s not even 401k related.
It’s not even 401k related. Doesn’t seem like a huge deal.
UHub commenters applaud the
UHub commenters applaud the lockdown and then cry about the results. Hypocrisy at its finest.
You people living in rainbow land are in for a world of hurt over the next five to ten years. I hope you have set of required skills or talents. Your Arts History degree from a Simmons isn’t going to save you.
lol
talk about the pot calling the kettle black.
conservatives: oh look, a science based response to a crisis has created economic hardship so serious that the impacts are more deadly than the virus itself.
let’s change our response to the disease instead of the economic system, because america!
Yeah dude
You might be happy to sacrifice other people's lives for your job but most people aren't. Would you agree to die so that everyone else could keep their jobs as normal? Didn't think so.
Read carefully Dog. I 100%
Read carefully Dog. I 100% agree with the steps taken to flatten the curve, maybe we could have done more with the facts that we have available now.
The problem is you can't have things both ways. This site keeps encouraging the flattening of the curve in one story then whines about the economic results in the next one.
And your point is...?
Yes, things that are otherwise good can have bad side effects. Most of us learned this the first time we had to take gross-tasting medicine as small children. There's nothing hypocritical about wanting to save lives while also worrying about other potential issues once those lives are saved.
The real question here is, why are you so excited about the prospect of people losing their jobs, just so you can feel superior to some random commenters on a local blog?
lockdown was "treatment"
The lockdown was a treatment for an escalating crisis. The treatment has some terrible side effects. That does not mean the treatment was wrong - it means we need to look at mitigating the side effects.
How about the hypocrisy...
of complaining about the lockdown, and then applauding that a bunch of people might lose their jobs as a result? That's some real compassionate behavior there.
How wonderful would the
How wonderful would the economy be if everything was open, but a good percentage of workers and customers were sick or dead?
As a longtime BU professor
As a longtime BU professor used to say, "there is a right way, a wrong way, and a BU way of doing things."
He passed away some years ago but his quip's as true as ever.
Gee...
I wonder if this has stopped their profligate spending on black car services for the trustees? I spent many a night with about 15 other cars in front of the President's house on the clock while they dined.
Did they bring out a plate for you....?
?
Food for the help? Pshah.
But how much did the limos cost? What did that money represent in untaxed income? Imagine how much of that money could have been spent on police details to protect the limos?
Somebody got cheated!
Feds have caused a lot of U's Bloated Budgets
Most U's with roughly the same number of students and faculty as say 10 years ago have grown their staff significantly
Some of that staff is associated with specific research programs conducted at various institutes and centers sometimes completely funded by NSF or NIH and sometimes only seed-funded by such.
However, many of the additions to the staff have come from various Federal Regulations focused on PC related matters. In some cases there are now U Vice Presidents devoted solely to compliance with Federal Regulations -- will they be at risk -- I doubt it
There also has been only marginal if at all decrease in the paper-shufflers despite the fact that essentially all of the paper-shuffling can be done electronically and often by the Principle Investigators themselves.
So there is some fat in the U's that can be cut [e.g. every other VP and the associated offices, all of those various gender and race-related official re-segregation programs] before the teaching or research faculty and staff [the U's Muscle and Bone] are effected
so TL:DR
they are using the current job market and the threat of losing your job to use their staff's retirement funds to pay for current shortfalls.
I'm really tired of the endowment conversation but they do have other means of getting funds (low interest loans, gov't assistance, etc). Or how bout tapping the taxes they're not paying to the city? Retirement funds work because of compounding interest on the contributions - matching funds were used to lure staff to work there vs other places. They are taking money from these people for literally the rest of their lives with this, even if it only lasts for 2021. Not a good look.