USC has been severely impacted by the COVID-19 pandemic, but we are committed to supporting our people, protecting the excellence of our programs, and ensuring a strong future for USC while also undertaking the financial steps necessary to stem our losses.
We are taking another step to help us close a potential budget gap of $300 to $500 million in FY 2021. The gap arises from lost revenues and increased costs associated with COVID-19. We are preparing for a prolonged economic recovery that could impact our finances for several years. We remain confident that we can close this gap for FY 2021, and over the next year, develop plans to emerge stronger from the pandemic.
On April 3, we outlined several measures to help offset this shortfall. These included pauses in hiring and merit increases, reductions in travel, and salary reductions by President Folt (20 percent), the provost, deans, and senior vice presidents (10 percent) during the upcoming fiscal year. In addition, vice presidents will take a 5 percent salary reduction.
Beginning in January 2021, we will suspend employer contributions for one year to the university’s retirement plan for faculty and staff to help fill the FY 2021 gap. This move will generate a cost savings of approximately $130 million. This action does not affect any employee’s ability to make pre-tax contributions. It is only the university’s employer contributions to these plans that will be suspended.
See the FAQs below for additional information regarding the university’s financial situation. Although the challenges ahead are daunting, we remain confident in our collective capacity to emerge from this period in a strong, highly competitive position.
How is the university making decisions about its financial situation, including the pause on retirement contributions?
We constantly evaluate our financial situation. Based on the projections showing a gap of $300 million - $500 million for FY21, we consulted extensively with faculty, staff, and student leaders to gain input that greatly informed our decision making. We engaged with the executive board of the Academic Senate, met with deans and school faculty councils, and consulted with individual faculty members. More than 1,000 faculty members attended the provost’s all-faculty meeting. We met with the Staff Assembly to discuss the financial actions under consideration and with elected student leadership. We value the input of all members of our community and will continue to seek that feedback.
We are looking at other actions that we can take to help ease the financial burden of COVID-19. We have asked the schools, academic units, and administrative offices to review their budgets for potential efficiencies that do not involve additional compensation changes beyond those discussed here. We are looking at options we can take centrally, including procurement, information technology, professional services and other areas. We already implemented hiring and merit increase pauses, senior leadership compensation reductions, and pauses on travel, discretionary spending, and capital projects. The university will continue to evaluate this evolving situation, consult with faculty, staff, and student leaders and communicate any future actions that may be necessary.
The USC endowment works to ensure the stability of our institution in perpetuity. It has grown through the generosity of a series of individual donors. The majority of these gifts are restricted, designated for a specific purpose. These gifts cannot legally be diverted to other purposes. USC, as with all universities, has established strict policies to ensure a sustainable endowment spend over the years.
Yes. The president is taking a 20% reduction in salary; the provost, senior vice presidents, athletic director, and all deans are taking a 10% reduction in salary; vice presidents are taking a 5% pay reduction as well. They are also participating in the retirement contribution pause.
USC will not be borrowing funds to cover the financial gap resulting from COVID-19. The university recently borrowed funds when interest rates were low in order to increase liquidity and ensure the university is well positioned to pursue new strategic opportunities. Borrowing now to close the financial gap would trigger higher interest rates and significantly weaken the university’s financial position.
USC has refinanced current loans twice in recent years, and this is not an option at this time. We will examine this again when the time is right.
The university is fundraising during this time. We are receiving donations for research projects and educational programs, we are helping to support the needs of our neighbors, and we are providing emergency funds to support the needs of our community.
We always want to maximize the value of our assets. However, asset sales are likely to suffer large losses in this economic climate. We will be reexamining this possible course at the appropriate time.
We are looking at all the ways the university can be more efficient. All academic and administrative units are examining their budgets to determine potential 5%, 10%, and 15% reductions. All budgets are currently under review.
We want to resume our merit raise program as soon as it is possible to do so. We will continue to update you on this.
Partnerships cannot be changed at this time because they are under contracts. They can only be changed when the contracts are up for renewal.
Every year, the university renegotiates rates with all of our health plan carriers and makes plan design changes. This is currently in process for the upcoming open enrollment season. We will provide updates as soon as we can.
This action will create significant savings to help the university close the COVID-19 financial gap.
Retirement contributions will be frozen starting on Jan. 1, 2021 for a year. Employees may increase their contributions to retirement plans in accordance with federal regulations during this time.
The pause in university-paid contributions affects all administration, faculty, and staff employees, with the exception of Keck Medicine of USC employees, and faculty paid from clinical revenue generated through the CHLA medical group, the LA County contract, and USC Care medical group who spend the majority of their time in patient care activities. We are developing a separate clinical financial plan to close the gap for those in the health system.
Your USC retirement accounts provide free access to financial advisers. If you wish to discuss your current situation, contact your retirement provider – they are offering virtual and phone appointments now:
Fidelity scheduling link
USC scheduling link
Vanguard scheduling link
Please visit the USC Retirement Benefits page for additional information.