5 Ways to Financially Survive the Pandemic

Higher ed leaders must have the vision and moral compass to develop creative, ethical and responsible strategies to mitigate the effects of any short-term budget deficits, writes Kavita Daiya.

October 5, 2020
 
 
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Higher education in the United States, more than in most other countries in the world today, finds itself in the midst of fiscal challenges that threaten to permanently alter or destroy many institutions. As colleges and universities battle budget deficits, it has become increasingly obvious that administrators will need to think outside the box to successfully steer their institutions through this storm.

Different institutions have tried different strategies. For example, the University of Massachusetts at Amherst initially took various steps to avoid layoffs, like salary cuts for senior administrators, while the University of Maryland at College Park has trimmed the compensation of people making more than $150,000.

Other institutions have inflicted 10 percent salary cuts across the board. Such moves are unwise and ineffective. Cuts to faculty compensation and staff layoffs are simple, knee-jerk reactions and conventional go-to measures more typical in the business world: reorganize units and departments, cut salaries or fire workers, claim that the “consolidation” is more “efficient,” and count the money raised from such cuts as “profits.” While such slash-and-burn approaches have decimated companies and made consultants along with shareholders rich, they cannot, and do not, work in higher ed.

Although many college boards of trustees and senior administrators have increasingly been treating their institutions like businesses, many critics have challenged such corporatization efforts. And in this particular moment, it should be more evident than ever that colleges and universities are not businesses and that higher education leaders in the United States will have to exemplify ethics and courage in the face of a pandemic that is predicted to kill more than 300,000 by December.

Five Key Steps

Which college leaders have the capacious vision, moral compass and expertise that enable their institutions to survive will become clear next year. Right now, however, instead of laying off low-paid facilities staff or eliminating contract faculty positions, as many institutions have done, college and university leaders must come up with more creative, ethical and responsible strategies to mitigate the effects of any short-term budget deficit. I offer the following five steps that every responsible and ethical college president should take.

First, before cutting staff and faculty positions, administrators who earn in excess of $300,000 should take a temporary pay cut of 50 percent for the rest of the fiscal year. As a recent article put it, “The Biggest Cuts Need to Come From the Top.” That means starting with the president, who should ideally forgo their salary for one year in a show of solidarity and commitment to the institution. In May 2020, Southern Utah University’s president, Scott Wyatt, did exactly that, making good on a promise he had made a month earlier to give up his own salary before announcing any layoffs. Similarly, Hampshire College president Ed Wingenbach took a voluntary 50 percent pay cut.

As the research shows, in the last two decades, college presidents’ salaries have reached astronomical levels: indeed, many make twice as much or more than the president of the United States. As the authors of one 2017 study remarked, “College Presidents Are Being Paid Like Fortune 500 CEOs.” But college presidents are not CEOs on Wall Street and should not be treated as such. Nor should the CFO, provost or those in other positions in the executive leadership ranks receive sky-high compensation these days.

It is the fiduciary responsibility of the boards of colleges to remind presidents of their responsibility: at a time when campuses claim to have financial crises, the president and administrative team should be taking large cuts to their own salaries before any layoffs and cuts to faculty compensation. That would demonstrate good faith and fiscal sense. More important, it would send a powerful message of solidarity with their colleagues and signify to all stakeholders -- faculty, staff, alumni, donors, students and parents -- their ethical commitment to the institution they lead.

Second, given their fiduciary responsibilities, board members should contribute financially to their institutions over and above their regular annual contributions. Many wealthy trustees are in a position to contribute significantly; now is the time to ask them to step up to the plate.

Third, given how relatively well the stock market has performed recently despite historic levels of unemployment and disease, many colleges and universities are in a position to draw down larger sums from their endowments. Some institutions, like Northwestern University, are already spending their endowment at a slightly higher rate, and while that is unusual, there are two sound reasons to do so: the mass-scale trauma of the global pandemic and the fact that endowments in many ways exist to tide colleges over in such world-changing crises. As a Stanford Social Innovation Review paper noted, "Half of all colleges have endowments that could withstand 13 years of rainy days."

If a college’s endowment is well managed, and the stock market continues to reap strong returns for it, those earnings could even offset a 1 percent increase in the drawdown should an institution need that. Other strategies, given that gifts are often restricted, include using excellence funds, deploying unspent funds and temporarily altering solicitation toward a current-use strategy. When institutional leaders take such steps after having cut executive pay, it exemplifies ethical commitment and fiscal vision -- which will inspire confidence in current and future donors.

Third, colleges should renegotiate external contracts through a careful vetting of vendors of all services, from learning management systems to health insurance premiums. For example, while some institutions have excellent health-care plans for their employees, others have poorly negotiated ones that cost much more money than they should. Now is the time to renegotiate any such inherited agreements from previous leaders and save millions of dollars. A caution: colleges and universities should not use health-care costs as a hidden way to instigate a salary cut for faculty members by changing providers and plans in ways that lower their contribution while passing on additional expenses to the faculty and staff.

Finally, if temporary cuts to faculty and staff benefits or salaries are still required even after these measures, administrators must make those cuts in a staggered mode instead of unilaterally. In other words, the highest earners -- be they provosts, athletic coaches or other administrators -- should take the biggest pay cuts. In addition, administrators should clearly tell any affected constituents that such losses will be for a specified amount of time, and they should plan to pay it back when things have resumed normalcy. Systematically studying salaries, making cuts to the largest salaries first and making subsequent cuts in a progressive mode will maximize returns on these measures. They will also protect the lowest-paid people in the staff and faculty ranks, as well as those most impacted by the pandemic -- often women and members of BIPOC groups -- from falling into precarity.

Relatedly, after all these steps, if the livelihoods and jobs of employees need to be reviewed, college leaders should embrace a humane approach: prioritize furloughs over layoffs to allow impacted community members to retain health-care benefits in this pandemic.

We all recognize that presidential leadership styles are different. But as an American Council on Education study showed, successful and effective presidents are those who embrace shared governance and “see shared governance as an opportunity rather than a challenge.” They are also leaders who understand that “success on any campus is dependent on effective communication, decision-making and implementation campus-wide. They create and empower teams of talented, knowledgeable, and functional administrators who they rely on to carry out their visions.”

Colleges and universities are complex ecosystems that create knowledge and offer education -- a public good that fosters the social, cultural, economic and scientific advancement of society. It is time for administrative leaders as well as boards of trustees to treat them as such: to resist corporatization, respect shared governance and exemplify ethical responsibility to their communities. Their students and donors are watching.

Bio

Kavita Daiya is associate professor of English and director of women’s, gender and sexuality studies at George Washington University.

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