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Dear ǻ Community,
Thank you for your thoughtful and constructive comments following our recent budget sessions. Your views on proposed mitigation options and new ideas for consideration are helping shape our efforts on these difficult matters. While we continue to address the many impacts from COVID-19, we heard your requests for additional information in the near term. While we are still evaluating a number of potential actions discussed in the budget presentation, today we are sharing details about the university’s contribution to employee retirement plans, additional compensation reductions by university leaders, and the furlough week we announced in June. As we outline our next steps in these areas, we wanted to provide important context for our financial actions.
Living Our Values
ǻ is dedicated to living our values, among them integrity, human dignity, inclusive excellence, and community. We heard from you about the importance of these values in our response to the challenges of COVID-19. They are at the heart of our decisions as we work to secure our future.
We have employed a thorough, strategic approach to the financial issues that is grounded in data and assesses the impact on our community before every choice. Those choices already include investing in our people by avoiding large scale layoffs, retaining our team members to the greatest extent possible, and funding benefits for our contract workers. They include utilizing more than $40 million in budget reserves and endowment income (approximately 44 percent of our total savings) to mitigate shortfalls before asking more from our community. We intentionally avoided actions that offer simpler answers for the bottom line, but place the burden on small segments of our community in ways that do not align with our values. Other institutions have made different choices and we know there has been significant impact on employees across higher education.
Our approach requires time, thoughtfulness, and shared sacrifice. Choosing mitigation steps that seek to limit the impact on our people means that everyone in our community will have to be part of the solution. The challenges of COVID-19 affect all parts of the university and there will not be a quick return to the way things were before the pandemic. In fact, one of the important outcomes of the pandemic is that we are adapting and building on our strategy for a stronger future. But it is a future that will be different. The universities that thrive in the post-COVID world are the ones that will embrace that reality now, and we are proud that ǻ is doing just that.
Moving Forward on University Finances
As part of our overall approach, today we are sharing details of two previously announced steps in addressing the FY 2021 financial shortfall and an additional contribution to our efforts by university leaders.
Extending the Suspension of University Contributions to Employee Retirement – We initially suspended the university matching contribution to employee retirement accounts for six months. We sought to avoid a longer suspension and the related impact on our people before it was clear if it would be needed. With the additional revenue shortfall from the fully online fall semester (including the 10 percent Community Care fall tuition discount) and as outlined in the , the assumptions that enable us to reach $104 million in savings include extending the suspension for a full year. Since the suspension began in August 2020, university contributions will remain suspended through July 31, 2021 to reach the full twelve months. We understand the impact of this step on our ǻ family and appreciate the sacrifice from the community. We plan to revisit this measure next year as soon as the financial conditions allow. Questions about retirement planning can be sent to myBenefits@american.edu.
Compensation Reductions by University Leaders – In addition to the compensation reductions for the president and Cabinet announced in April, our deans, former deans who have returned to the faculty, former provosts, and our former president will also reduce their compensation. This reduction is on top of all university leaders participating in other measures such as the furlough. We heard the request for progressivity in our financial actions and our leaders are demonstrating their ongoing commitment to the ǻ community.
Implementing the ǻ Furlough – One of the most discussed issues in the budget sessions and email comments was the furlough. As you know, in June we announced preparations for a one-week furlough, possibly to occur the first week of January 2021. Based on your feedback and evolving information about universities finances, we will implement a furlough in the following adjusted manner:
- Length of the Furlough: 5 unpaid days off.
- Affected Employees: Full-time ǻ employees (faculty and staff) earning more than $40,000 per year as of June 19, 2020 (the initial furlough announcement) will participate. The June effective date exempts any employees who previously earned $40,000 per year or less but moved above the threshold with merit increases that remained in effect for that group. This effective date is not related to hire dates and any full-time employee who started after June 19 and earns more than $40,000 will participate in the furlough.
- Flexible Scheduling for Unpaid Days Off: We heard the feedback for flexible scheduling, and employees will work with their managers to choose the unpaid days. All 5 days must be taken between November 1, 2020 and March 12, 2021 (the last business day of main campus spring break). The unpaid days do not have to be taken consecutively and employees can take any “paid” workday, including university holidays and the winter break week, as a furlough day. Managers will approve the selected unpaid days for employees.
- Managing Workload: Employees will not work in any capacity during their 5 unpaid days off and voluntarily performing a work task on an unpaid day does not create an exemption from the pay reduction. Departments and managers will ensure coverage of mission critical work and address any emergencies that may require an employee to work on a scheduled unpaid day. Managers will collect the preferred days from each employee, assess overall coverage in their department, and work with individual employees to address any gaps. If it is necessary for an employee to work on an unpaid day in response to an unforeseen situation, that day will not be counted toward the employee’s required five days. The employee and the manager will identify a future date for the employee’s rescheduled unpaid day. Employees may contact employeerelations@american.edu if situations arise where they may feel obligated or pressured to work on an unpaid day without an emergency.
- Impact on Salary: The unpaid days are a temporary measure and do not reflect a permanent salary reduction. Employees will receive a personal notification outlining the short-term adjustment to their compensation for the unpaid days in FY 2021. The 5 unpaid days represent approximately 2% of an employee’s base annual salary.
- Affected Pay Periods: The reduction in compensation will appear in employee paychecks (biweekly or monthly) over a two-month period in January and February 2021. The amount will be equally spread across each pay period. There will not be a reduction in November or December 2020 paychecks.
- Additional Furlough: At this time, we are not instituting a second university-wide furlough. Depending on evolving conditions, an additional furlough could be needed, but no decisions have been made.
We developed initial frequently asked questions (FAQ) about the furlough that can be found on the COVID-19 Resources page. Additional information will be posted in the future and HR will be working with managers to facilitate implementation.
To help provide clarity and certainty, we wanted to share this information as soon as possible as we continue to consider potential additional financial measures detailed in the presentation. This includes analysis for possible extended furloughs for positions that are not fully utilized in our extended telework environment. Based on current enrollment levels, the financial shortfall and our savings are in line with the projections shared last week. To maintain this progress, we must keep our focus on retaining our students. The work in this area has yielded important results so far, and your continued efforts in the ongoing initiatives to engage current, deferred, and prospective students are vital.
Thank you again for your hard work and contributions to our community’s continued strength. While these steps are difficult, they are a measured approach that reflects our values and supports our people. Our teams continue to perform at exceptional levels under challenging circumstances, and we appreciate the dedication across the ǻ community. We will continue to update you on financial matters in the coming weeks.
Be safe and be well.
Sylvia M. Burwell
President
Peter Starr
Acting Provost and Chief Academic Officer
Fanta Aw
Vice President of Campus Life and Inclusive Excellence
Matt Bennett
Vice President and Chief Communications Officer
Traevena Byrd
Vice President, General Counsel, and Board Secretary
Seth Grossman
Vice President, People and External Affairs & Chief of Staff and Counselor to the President
Doug Kudravetz
Chief Financial Officer, Vice President, and Treasurer
Steve Munson
Vice President and Chief Information Officer
Courtney Surls
Vice President, Development and Alumni Relations
Billy Walker
Director, Athletics and Recreation