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Facing a shaky financial future, Stanford projects budget cuts, layoffs

University to announce details about reducing workforce in July

Stanford University has taken one-time measures to address its budget shortfall, including tapping reserves, as a result of the coronavirus shutdown. Weekly file photo by Sinead Chang.

Stanford University, projecting a $267 million loss from the first six months of the coronavirus shutdown, is planning for program reductions, layoffs and budget cuts in the next fiscal year.

In an announcement issued Wednesday, May 27, President Marc Tessier-Lavigne said that the university has been hit by declining revenue and increasing costs, trends that he anticipates continuing — and worsening — well into the next fiscal year.

"We are now coming to a greater understanding that the effects of this crisis on the university's finances will last well into the future. We must plan not just for a temporary budget blip that disappears by this fall, but rather an ongoing challenge that requires us to re-set expectations and chart a new steady state for the university's operations," he said.

Housing revenue will remain low due to fewer students living on campus; events and programs that generate revenue will continue to be limited by gathering and social distancing limitations; and income from clinical, research and philanthropic work "will be challenged," he said, while expenses in some areas, such as student financial aid, will increase.

Stanford's $27.7 billion endowment will continue to be affected by "market volatility," the president added, "given the seismic disruptions occurring in the national and global economies."

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Stanford has to date taken one-time measures to address its budget shortfall, including tapping reserves; instituting a salary freeze, hiring pause and pay cuts for senior leadership; reducing departments' discretionary spending; and pausing approvals of all new capital projects.

Looking ahead, Stanford has asked all university units to prepare budget plans based on a scenario with a 15% reduction in funding from endowment payout and a 10% reduction from general funds. Stanford plans to provide final allocations from the endowment and general fund by June so budgets can be finalized in July.

Tessier-Lavigne expects this will result in program cuts as well as layoffs, some temporary and some permanent. The university will release more information about job cuts in late July.

"We don't yet know the scale of job reductions. We hope they will be limited, but they will be driven by the program needs and budget capacity of individual units," he said.

Stanford plans to continue pay for all benefits-eligible university employees through Aug. 31, the end of its fiscal year. Employees who lose their jobs will receive information about severance, subsidized health insurance, benefits continuation and outplacement services.

The anticipated budget cuts, while painful "will allow us to sustain Stanford's mission of teaching and research for a world that desperately needs it – the mission that brought so many of us here to begin with," Tessier-Lavigne said.

Tessier-Lavigne and Provost Persis Drell will discuss the budget issues and take questions during a virtual "Conversation with the President and Provost" on Monday, June 1, at 1 p.m., which is only open to members of the Stanford community.

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Facing a shaky financial future, Stanford projects budget cuts, layoffs

University to announce details about reducing workforce in July

by / Palo Alto Weekly

Uploaded: Thu, May 28, 2020, 9:17 am

Stanford University, projecting a $267 million loss from the first six months of the coronavirus shutdown, is planning for program reductions, layoffs and budget cuts in the next fiscal year.

In an announcement issued Wednesday, May 27, President Marc Tessier-Lavigne said that the university has been hit by declining revenue and increasing costs, trends that he anticipates continuing — and worsening — well into the next fiscal year.

"We are now coming to a greater understanding that the effects of this crisis on the university's finances will last well into the future. We must plan not just for a temporary budget blip that disappears by this fall, but rather an ongoing challenge that requires us to re-set expectations and chart a new steady state for the university's operations," he said.

Housing revenue will remain low due to fewer students living on campus; events and programs that generate revenue will continue to be limited by gathering and social distancing limitations; and income from clinical, research and philanthropic work "will be challenged," he said, while expenses in some areas, such as student financial aid, will increase.

Stanford's $27.7 billion endowment will continue to be affected by "market volatility," the president added, "given the seismic disruptions occurring in the national and global economies."

Stanford has to date taken one-time measures to address its budget shortfall, including tapping reserves; instituting a salary freeze, hiring pause and pay cuts for senior leadership; reducing departments' discretionary spending; and pausing approvals of all new capital projects.

Looking ahead, Stanford has asked all university units to prepare budget plans based on a scenario with a 15% reduction in funding from endowment payout and a 10% reduction from general funds. Stanford plans to provide final allocations from the endowment and general fund by June so budgets can be finalized in July.

Tessier-Lavigne expects this will result in program cuts as well as layoffs, some temporary and some permanent. The university will release more information about job cuts in late July.

"We don't yet know the scale of job reductions. We hope they will be limited, but they will be driven by the program needs and budget capacity of individual units," he said.

Stanford plans to continue pay for all benefits-eligible university employees through Aug. 31, the end of its fiscal year. Employees who lose their jobs will receive information about severance, subsidized health insurance, benefits continuation and outplacement services.

The anticipated budget cuts, while painful "will allow us to sustain Stanford's mission of teaching and research for a world that desperately needs it – the mission that brought so many of us here to begin with," Tessier-Lavigne said.

Tessier-Lavigne and Provost Persis Drell will discuss the budget issues and take questions during a virtual "Conversation with the President and Provost" on Monday, June 1, at 1 p.m., which is only open to members of the Stanford community.

Comments

Terry Terraceter
College Terrace
on May 28, 2020 at 10:41 am
Terry Terraceter, College Terrace
on May 28, 2020 at 10:41 am
11 people like this

Santa Clara County should have taken Stanford's land use proposal when it was on the table last Fall. Now the county will never get anything close to that deal. Good job Joe Simitian!


dontliveinCA
another community
on May 28, 2020 at 10:45 am
dontliveinCA, another community
on May 28, 2020 at 10:45 am
7 people like this

Sad but not surprising....the pandemic is affecting all aspects of our lives....take care and good luck.....and wear a mask!


Online Name
Embarcadero Oaks/Leland
on May 28, 2020 at 11:03 am
Online Name, Embarcadero Oaks/Leland
on May 28, 2020 at 11:03 am
13 people like this

If it's so broke, maybe they can stop their incessant expansion and, for example, its new housing project off Alpine Road that the neighbors have been protesting.


Bob Gleason
Old Palo Alto
on May 28, 2020 at 11:18 am
Bob Gleason, Old Palo Alto
on May 28, 2020 at 11:18 am
38 people like this

What is the purpose of such a large $27.7B endowment? Take .9% and take care of the deficit including your staff, their jobs and salary..

Come on


Keith
Old Palo Alto
on May 28, 2020 at 11:27 am
Keith, Old Palo Alto
on May 28, 2020 at 11:27 am
26 people like this

The value of Stanford's endowment has likely hardly dropped at all. The markets are near their all-time highs. The necessity of drastically cutting disbursements from the endowment seem overblown. And, Stanford's business model is wonderful - subsidized by government money and tax deductions at almost every turn (no property taxes paid even for off-campus Stanford owned housing), contributions to Stanford are tax-deductible, and most of their research work is government funded. I went to Stanford - which offers a lot. But, they're whining about how difficult things are for them is overblown in my opinion. Few organizations have $28B or so in available assets. And, Stanford likely has very little debt. They could borrow at an extremely low interest rate if cash is a consideration (and probably get a higher return investing it).


Stanford Inc
Adobe-Meadow
on May 28, 2020 at 11:51 am
Stanford Inc, Adobe-Meadow
on May 28, 2020 at 11:51 am
27 people like this

Is this supposed to be a tearjerker? Sorry, I have zero sympathy for one of the richest universities in the world. Stanford is sitting on billions of dollars and it is obscene. It sure has evolved into acting like any other huge for profit business organizations. Such entities as Stanford surely should not be tax exempt.


Anon
Another Palo Alto neighborhood
on May 28, 2020 at 1:08 pm
Anon, Another Palo Alto neighborhood
on May 28, 2020 at 1:08 pm
8 people like this

>>and pausing approvals of all new capital projects.

It sounds like Stanford has figured something out that Palo Alto hasn't.


Come on!
Menlo Park
on May 28, 2020 at 1:41 pm
Come on!, Menlo Park
on May 28, 2020 at 1:41 pm
10 people like this

This is like 1% of the endowment. Instead of laying people off which will result in ruining peoples' lives and hurting the local economy, Stanford should do the right thing and spend a little of their huge reserve on the actual human beings that work hard for them.


Wondering
College Terrace
on May 28, 2020 at 2:35 pm
Wondering, College Terrace
on May 28, 2020 at 2:35 pm
19 people like this

??? What? What happened to those huge multi-million dollar gifts to Stanford from various alumnae, benefactors, billionaires, millionaires, etc.?


wander3r
Another Palo Alto neighborhood
on May 28, 2020 at 3:16 pm
wander3r, Another Palo Alto neighborhood
on May 28, 2020 at 3:16 pm
14 people like this

@Wondering,
The multi-million dollar gifts are almost always earmarked by the donors for something specific at a university. They are not unrestricted. Somebody gives $25 million to a university, they want to say what it will be used for. And they rarely—if ever—want their money to go toward operating costs and salaries, which is usually the largest expense.


dontliveinCA
another community
on May 28, 2020 at 3:33 pm
dontliveinCA, another community
on May 28, 2020 at 3:33 pm
8 people like this

as someone who attended Stanford on almost a full scholarship, I take some offense at the comments that imply only rich folks go to college there.....Neither of my parents attended college.....I was thankful I got into Stanford....I try to give a small donation every year to help low-income students like I was....Just sayin'. Last I read, Stanford still does "need blind" admissions.


TimR
Downtown North
on May 28, 2020 at 4:55 pm
TimR, Downtown North
on May 28, 2020 at 4:55 pm
11 people like this

But given the stock market's performance, the Stanford Endowment must be doing fine, and maybe even showing a bit of a gain for the year. So it's not like they have an actual financial problem, just a cash-flow one.


Anonymous
Duveneck/St. Francis
on May 28, 2020 at 9:28 pm
Anonymous, Duveneck/St. Francis
on May 28, 2020 at 9:28 pm
8 people like this

In fact, Stanford has one of the largest endowments of any university in the world. In view of that, they can and should dip into it in these unprecedented times. Or is it because senior administration, governance, finance officials have incentives to keep the endowment high for their own performance goals related to their OWN compensation?! The reality is they van afford the pandemic while many smaller, regional colleges and universities are in a true challenging situation.


Paul fisher
Adobe-Meadow
on May 29, 2020 at 6:26 am
Paul fisher, Adobe-Meadow
on May 29, 2020 at 6:26 am
9 people like this

Interesting to see that all those institution that have fostered the progressive thought movement are not willing to use some of their wealth to actively participate in sustaining jobs during the crisis.
The true face of progressivism is showing itself during adversity.
Time for the people to stop supporting the aberration that the Standford like institution perpetrate. Stanford is the emblem of elitism, privilege and for profit education


aanonomous
Old Palo Alto
on May 29, 2020 at 8:30 am
aanonomous, Old Palo Alto
on May 29, 2020 at 8:30 am
14 people like this

In my humble opinion a University with 27.7 billion dollars available it is irresponsible to lay off workers at this time. People could be repurposed in their duties on campus or in the community, or paid until the crisis abates. There is no reason that Stanford requires such an enormous sum as a "cushion". It seems entirely appropriate to use some of the money to invest in it's people.


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