The University of Virginia on Tuesday announced it would freeze hiring and salaries and institute pay cuts for leadership as the university wrestles with coronavirus-created financial impacts of shuttered classes, canceled celebrations and refunds to students.
The school will try to avoid layoffs, furloughs or job cuts as long as possible, officials said.
Also on Tuesday, Gov. Ralph Northam said that Virginia’s state income in March was robust but that April’s income would likely be a bust. He predicted tax revenues will fall during the social distancing orders and the state’s coffers could lose about $1 billion.
UVa’s announcement came the day after the Board of Visitors met in an executive session to discuss the financial impacts of COVID-19, the pandemic disease caused by the virus SARS-CoV-2.
The board also met behind closed doors on March 30 to discuss the financial impacts on the UVa Health System and medical center as well as the academic and business sides of the school.
The health system has been hard hit due to the freeze of elective surgeries and the closing of clinics to meet social distancing requirements, officials said.
University officials did not release figures regarding the school’s financial losses. They did say that the university has “already suffered major financial losses in its academic division and UVa Health [System]” and “expects more revenue shortfalls from all of its funding sources, including tuition, state funding, clinical care, research grants, endowment returns and philanthropy.”
“The challenges presented by this crisis are difficult to exaggerate,” UVa President Jim Ryan said in a letter to the university community. “The pandemic has not simply made fulfilling our core mission more difficult. It also has had, and continues to have, serious financial consequences for the university.”
The letter also was signed by Provost Liz Magill; Executive Vice President for Health Affairs Dr. K. Craig Kent; and Executive Vice President and Chief Operating Officer J.J. Davis.
Actions announced Tuesday include freezing the hiring of open faculty, staff and health system positions with approval of executive leadership; a freeze on merit increases for the next fiscal year, beginning July 1; and the cutting or elimination of all non-essential expenses.
UVa’s executive leadership team — Ryan, Magill, Davis and Kent — will take a 10% salary reduction, the school announced.
An estimate of the savings created by the executive pay cut was not immediately available.
In a memo to university leaders, officials said capital projects already in design or under construction with full funding would continue. Other projects will be reevaluated and funding will need to be reestablished before work proceeds. New feasibility or design studies will be put off.
Ryan wrote that the university will try to avoid shedding employees.
“We remain committed to avoiding furloughs or layoffs for as long as possible and to utilizing them only if absolutely necessary” Ryan wrote. “That said, the health system may have no choice but to turn to these steps sooner rather than later given the serious financial situation they are facing because of the significant disruption to clinical care.”
Ryan and his management team said in the letter that the financial future’s forecast is mostly cloudy.
“While the full costs are not yet known, they are large and will grow over the next few months, especially in the health system,” the letter states. “At the same time, the economy and financial markets remain volatile, and there is a good chance of a sustained economic downturn.”
Ryan wrote that the university and its employees need to prepare for further disruptions.
“For all of those reasons, we are going to have to tighten our belts, just like other organizations and universities across the country. We also have to be prepared to absorb additional disruptions to our operations and finances, especially if we cannot resume normal operations next fall,” he wrote. “Although we hope to restart normally in the fall, it is still too early to know if that will be possible.”
UVa took early steps when the pandemic became imminent, shutting down classes and moving courses online for the rest of the spring semester and through the summer as well as canceling graduation-related events and exercises.
The school also gave prorated refunds to students to cover a portion of spring semester housing and dining costs those forced to vacate residence halls.
Earlier this month, UVa created a $2 million emergency assistance fund for furloughed contract workers and UVa employees facing unexpected costs due to the crisis. UVA also contributed $1 million to the Charlottesville Area Community Foundation.
“The global economic and public health impact of the COVID-19 pandemic has the potential to have the most disruptive consequences of any downturn any of us has experienced in our lifetimes, reshaping how the university undertakes its missions of teaching, research, service and patient care,” UVa officials said in the memo to leadership. “As further implications come into focus, we may need to take additional steps.”
In Richmond, Northam said that payroll withholding and individual income tax payments began to slow at the end of March after he put stay-at-home orders into place.
On a year-to-date basis, collections of the payroll withholding taxes that make up 62% percent of the state’s general fund revenues increased 4.8%. Sales tax collections, about 17% of the general fund revenues, increased 8.4%.
“While March collections reflected our strong economy, April revenues will begin to reveal the effects of COVID-19 on payroll withholding and retail sales tax collections,” Northam said. “The most important thing to focus on right now is the health and safety of all Virginians, and we expect the April results will be disappointing.”
“With the COVID-19 outbreak affecting employment and businesses, payroll withholding and retail sales tax will be closely monitored as we expect them to decline by approximately $1 billion in the final quarter of our fiscal year.” said Secretary of Finance Aubrey Layne.