Update on the Impact of COVID-19

A Message from President Dwight A. McBride
and Board of Trustees Chair Linda Rappaport
April 24, 2020

To the members of the New School community,

On behalf of the Board of Trustees, as well as the university's leadership team, we want to thank you for the flexibility, resilience, and care for one another that has been evident in this community's extraordinary response to the coronavirus pandemic. Guided by the urgent need to protect public health and safety, you have transitioned quickly to remote learning and virtual gatherings in a deeply thoughtful, collaborative, and creative way. We are inspired by your dedication to each other, to this institution, and to the academic, cultural, and intellectual mission that sets The New School apart.

While the separation from our campus and from each other is difficult, we are strong and will persevere. COVID-19 has presented an enormous public health challenge that has required all of us to respond rapidly, practically, and in ways that, to the extent possible, minimize disruption to our daily campus lives. At the same time, it has created an economic crisis that we are all feeling acutely.

How the COVID-19 Pandemic Is Impacting the University's Finances

As is the case at nearly every other college and university in the United States, the consequences for The New School's finances are significant both now and for the future. Our analysis predicts that the university can expect a cumulative loss from the pandemic of approximately $130 million between now and the end of the 2021 fiscal year.

Amid sharp drops in revenue, we anticipate increased requests for financial aid to support our student body. Charitable giving is also expected to dip substantially as alumni and educational and creative partners see their own resources diminish because of the pandemic. As at other institutions, record-breaking drops in the stock market this year have significantly diminished the value of our endowment, the interest on which provides a modest but important part of our annual operating budget and an essential base of funding for future priorities.

While The New School is a fundamentally strong institution – committed to maintaining our role as a preeminent creative and intellectual center – we have a responsibility to our entire academic community to adjust to this new reality. We must address these financial challenges and uncertainties thoughtfully, strategically, and always with the long-term interests of our students and academic programs at the center of our decision-making.

Steps Already Underway to Address This Challenge

The university has committed to a freeze on tuition increases for next year, and we have put on hold a variety of projects, research initiatives, and public programs. Now, with the guidance and direction of our Board of Trustees and with input from academic and administrative leaders across the university, we are moving immediately to implement a series of carefully considered, short-term actions to help us weather this unprecedented situation:

1. We are instituting a university-wide hiring freeze on faculty and staff positions, and pausing all merit pay increases for full-time faculty and non-union administrative staff through the end of the 2021 fiscal year. All vacant faculty lines have been frozen except for those deemed essential by the President and Provost for the maintenance of our high-quality learning experience.
2. We are putting in place immediate pay cuts of 12% for the university's entire leadership team and a number of other senior-level employees, as well as 15% for both the President and the Provost. We are also halting their retirement fund contributions, which is the equivalent of a reduction of an additional 10% in compensation. Both changes will continue through the 2021 fiscal year.
3. We are stopping all spending that does not support or fall into one of the following categories: teaching and learning; financial aid; student support services; health and safety; payroll and benefits; and pre-existing contracts and obligations.
4. We are halting all capital projects across The New School that are not essential to current operations.
5. We will keep nearly all campus buildings closed (except for essential services) until further notice.

Additional Changes We Need to Make

While substantial, the savings from the steps outlined above are not enough to keep us secure during this crisis. As a result, we are preparing to make some additional painful but necessary changes that will affect compensation for many and jobs for some. In making these decisions, we have focused on solutions that ensure that we continue to meet the university's mission, maintain preeminent academic programs, protect fellowships, and support students, faculty, and staff.

By taking the following actions, we are able to lessen the need at this time for more substantial permanent job reductions and avoid salary cuts for those at the lowest end of the salary range. With this in mind, we will be making the following changes at our New York City campus:

1. Temporary, tiered salary reductions for full-time faculty and staff, except those making less than $75,000 per year. These reductions, which will be effective June 1, 2020 and remain in place through June 30, 2021, are as follows:

   - Employees earning less than $75,000 per year: 0% reduction
   - Employees earning between $75,001 and $150,000 per year: 3% reduction
   - Employees earning above $150,001 per year: 6% reduction

2. A temporary halt to retirement fund contributions for all full-time faculty and non-union staff from July 1, 2020 through June 30, 2021. As mentioned above, retirement fund contributions are also being halted for the university's entire leadership team. This represents an additional reduction in compensation of between 7% and 10% across the board.
3. Temporary, full-time furloughs for some staff, primarily those whose work cannot be completed remotely, effective May 16, 2020 through August 16, 2020. Furloughed employees will continue to receive their New School health benefits, and the university will be paying each affected employee's full health insurance premium during the furlough period. Furloughed employees are also eligible for full unemployment coverage.
   
   We expect the furloughs will include approximately 260 employees from across The New School in a range of administrative areas, including Security, Maintenance, Library Services, Computer Labs, and Health Services, among others. This represents approximately 7.5% of the university's total staff (excluding student workers and temporary employees). While we hope to bring each employee back on board at the beginning of the new semester, the length and dates of the furlough may change as plans for the next academic year become clear.
4. A very small number of carefully considered layoffs for administrative personnel and in areas where operations have been or are expected to be significantly reduced during the pandemic and recovery period. This is a separate group of employees from those in the furlough program.

We anticipate that the changes we are announcing today will save approximately $75 million over Fiscal Years 2020 and 2021 and put the university in a stronger position to confront the immediate, urgent, and unpredictable realities of the pandemic. As significant as these changes are, we still expect a shortfall of approximately $50 million for this fiscal year and next, and cannot yet fully anticipate the impact of challenges that may be developing for the coming academic year. As conditions and planning – including the extent to which we are able to open our main campus for the upcoming semester – become clearer, it is likely we will need to consider additional measures. We will keep everyone updated.

It is also important to note that we will draw upon the endowment to help address our immediate challenges. The purpose of our endowment is to provide a steady, sustainable source of income to support The New School's mission and programs in perpetuity. It is not intended – nor is it legally allowed – to be used as an emergency reserve fund. While the Trustees intend to access significant funds from the endowment to help address needs created by the pandemic, they cannot do so without limits and will not do so in a way that jeopardizes the long-term interests and needs of the university.

The Path Forward

There are still important questions about the path forward, and while it is simply too early to know if or what additional actions may be required, we want to assure you that the Board's and the leadership team's unrelenting commitment is to do what is best for The New School and this extraordinary community.

Our ambitious planning for the future will continue throughout the summer, drawing on input from throughout The New School. In addition, a team from across the university is hard at work considering how and when we will be able to return to campus. We expect to have decisions about plans for next semester by late May.

We know you will have questions about how these changes will affect you, your colleagues, and The New School overall. As a follow-up to this message, each Dean and senior university leader will be holding Zoom meetings later today or Monday to discuss these changes with their respective Colleges and departments. They will be in touch shortly with scheduling information.

Thank you again for the outstanding work you are continuing to do, not only to learn, teach, and create, but also to take care of each other under these incredibly difficult circumstances. We know that together we will get through this, and we will emerge from this unprecedented crisis resilient, proud, and steady and with our unbridled innovation and creativity as strong and distinct as ever.

Stay well and keep each other safe,