A Budget Message from President McInnis
August 12, 2020
Dear Stony Brook Staff and Faculty,
It will surprise no one to hear me say that 2020 has been a year of unprecedented challenges. Our world, our country, our state, and our University have been tested like never before, and I am proud to say that Stony Brook has risen to the occasion with grace, empathy, and courage. Over the past few months, I have seen evidence of our community’s ability to come together, collaborate, and work as one campus in building on our history of excellence. Stony Brook’s response to the COVID-19 pandemic is one of the best examples of these attributes coalescing — a testament to the dedication of all our medical and research teams, the brilliance of our faculty and staff, and the determination of our students.
But of course, the year 2020 also has put additional strain on already existing pressures for our University. Stony Brook is by no means the first university — or the only large public institution — to be financially challenged in a time of global upheaval.
The Short-Term Challenge
In addition to the strain COVID-19 has placed on our normal ways of operating, including the mental health and well-being of our staff, faculty and students, it also has created a significant financial toll. Based on current estimates, COVID-19 costs at the hospital and clinic through the end of June have topped $58 million after all offsets and federal support are included.
COVID-19 costs to the academic and research campus topped over $74.6 million in the past financial year and include:
$34 million in refunded fees (including housing fees, dining fees, athletic fees, study abroad fees, etc.);
$12 million in additional lost revenue (including cultural programs and facilities rentals);
$9.6 million in extra expenses, including additional cleaning and supplies, student quarantine costs, and technology costs.
How have we addressed this shortfall? We’ve been innovative, flexible and resilient. Loans on student housing have been refinanced, both lowering interest rates and deferring payments, saving $18.7 million in 2020; we instituted a hiring and purchasing freeze and we used $13.4 million in federal support to defray some costs.
Unfortunately, however, this pattern is continuing into our current financial year. The hospital and clinic are anticipating an additional loss of between $60-$80 million in this fiscal year due to COVID. While New York as a state seems to have the virus under control more than most, the situation remains tremendously fluid and unpredictable. The economic havoc COVID has left in its wake will be significant and long-lasting, and it is impacting Stony Brook’s financial health in multiple ways:
Declining state support: We have been told to expect a 20-30% cut in state funding this year, or $25 million. We also have been informed that our allocation for last year was retroactively cut – to the tune of $19 million. It is unclear when, if ever, our funding will return to current levels, let alone the levels of support we would ideally receive as a top research institution in the region.
Changing student mix: Restrictions placed by the federal government on travel and visas over the past few years coupled with COVID impacts will result, we anticipate, in a significant decrease in the number of international and out-of-state students who will study at Stony Brook in the years to come. This year alone, we are anticipating a 17.5% drop in out-of-state and international students — a loss that not only negatively impacts the level of diversity and intellectual rigor but also results in a $20 million reduction in revenue.
Costs of fall semester reopening: Based on registration information received this week, we now know that the number of student residents on campus this year will decline from our planned capacity of 10,000 to an expected 6,000, creating an estimated loss of $38.9 million. This decline in student residents will also impact other operations (e.g. FSA, transportation, Athletics) where reduced fees will result in additional losses.
Difficult but Necessary Stop-Gap Decisions for FY21
The bottom line: We know we have at least a $109.6 million deficit this year on the academic and research side, and it could become significantly worse, depending on the future impact of COVID-19 in our state and on our campus. We have been working over the past several weeks and months to identify ways to close this gap such that it limits the impact on our academic excellence and our students’ success. These stop-gap approaches are difficult but critical. They include:
A continuation for this financial year of our current hiring freeze for both new positions as well as those that become open due to natural staff and faculty attrition. While not sustainable over the long run, this is a necessary and prudent step at this specific moment in time — saving a combined $20 million;
One-time benefit of the student housing refinancing, saving $31.1 million in FY21;
A continued freeze on increased “out of pocket” expenses covering costs for things such as service contracts, supplies and equipment and travel — anticipated to save approximately $2.3m;
A $2 million cut to the Athletics budget; and
A 10% pay cut that senior campus leadership has volunteered to take along with a permanent hold back of any 2% raise for all Management Confidential employees.
In the broader context of our economy and in higher education itself in which layoffs, furloughs, and program cuts have become common, these are relatively modest, albeit unwelcome, changes. We anticipate that these measures will save us over $55 million. Regrettably, these steps do not get us anywhere near closing our budget gap, and the options we have to do so are extremely limited.
Over the last five years, our central reserve fund, or our savings account which is both our “rainy day” fund and our reserve to support potential investment, has averaged $80 million or between 8-10% of our total academic and research operating budget. This is in line with minimum requirements for an organization of our size. At this time, we have no other options available to us and so must use this fund for a one-time offset of our losses. This will result in a reduction to our central reserve fund of over 50% in just one year, which is completely unsustainable.
Which brings me to a final and larger point.
I wish that COVID-19 was the full extent of our financial challenges but, as I have come to learn in my first days here, Stony Brook’s bigger budget picture is far more complicated. We will have difficult decisions to make not just now but into the future. Given that, it is vital that we all be on the same page regarding Stony Brook’s financial health—not just relative to COVID but relative to unsustainable longer-term trends including:
Declining per-student state support: The continued erosion of state support is a challenge to institutions of higher education across the country. Here In New York, direct state support has declined since 2008 (from $190.4 million to $147.7 million last year and even less this year) and on a per-student basis (from $9,570 per student — including direct aid to students — in 2008 to $6,995 in 2020).
Inability to raise tuition and fees: At the same time, tuition — our other primary source of funding — has increased only modestly, unlike in other states. In fact, this year’s expected marginal increases in tuition and the Academic Excellence fee, which was established in deference to the additional costs that research universities must bear, have not at this point been approved by the SUNY Board. An education at Stony Brook is remarkably affordable for a top research institution. While this is helpful for our families, there are consequences to having almost the lowest tuition in the AAU. Increasingly, our dual commitments of affordability and excellence are becoming difficult to balance without robust state support or cohort-level tuition.
Unfunded contractual salary increases (CSI): Our faculty and staff are the heart of this institution and always will be. But, the well-deserved multi-year contracts negotiated by the state that govern faculty and staff pay have not been fully funded, creating an additional cost of $10 million in FY20. This increase, which compounds each year, totals $54 million over the next 5 years. For this year, we have tried to soften the impact to individual units by paying the $9.7 million scheduled CSI raise out of our fast-depleting central reserves, rather than asking units to find the required cost-savings.
Unfunded mandates: Additionally, the fact that the Tuition Assistance Program is set by New York State at 2010 tuition levels means that Stony Brook funded a $9 million “TAP gap” in FY20, a level that will only continue to increase in FY21. Additionally, we were recently informed that the state supported Tuition Assistance Program will only be funded at 80% of what we award to N.Y. State students who rely on this program to access higher education and that the Excelsior Program may not accept new students this year.
It is critically important that everyone understand the facts about our budget. We’ve created a webpage that provides detailed information about our current budget and key data points covering the past several years. I encourage you to visit and review the information. I believe that it is only by being open and candid and providing clear information that we can come together as a community to tackle our shared challenges. While you will notice that the majority of information focuses on the Academic and Research budget, it is my intention to soon share a similar level of detail and clarity on the finances of the Hospital and Clinic side.
Beginning August 13th, we are also going to hold a series of virtual “campus conversations” where we will provide more details and context and answer your questions. You may sign up for one of these community conversations and submit questions here.
Short-Term Fixes Aren’t Going to Solve Long-Term Budget Challenges
To successfully address our budget over the next several years, we can’t rely on short-term stop-gap measures but need to identify long-term solutions. We must, as a community, begin a more substantive series of conversations and discussions across our campus. It is important that we have active participation and engagement from faculty and staff. We need to be strategic, collaborative, open, and future-focused. I look forward to sharing more information with you in the coming weeks and to hearing your ideas.
I fully recognize that you are operating in one of the most difficult environments any of us has experienced. And, we are going to have to bring the same level of collaboration and innovation you brought at the height of the COVID-19 response to our systemic budget challenges. We have a University of world-class educators, dedicated scholars, committed staff, aspiring students, and inspiring community support. We are a dynamic, creative school that has a history of looking at challenges with clear eyes and determination. We must work together, share the best ideas, challenge assumptions, and build on the excellence of Stony Brook University in order to continue to move this great institution forward.
I truly appreciate your continued support, understanding and commitment to this institution.
Maurie McInnis, PhD