Financial Impact

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The impact of the pandemic on our finances will be significant. Although we are fortunate to be starting from a position of strength, having reduced our operating deficits to nearly zero while paying down our long-term debt, we will not be returning to business-as-usual anytime soon.

With the long-term financial effects difficult to predict—it will be some time before we fully understand the magnitude of this public health crisis—we have focused our financial projections on the near-term: through June 30, 2020. We have also begun modeling what we think fiscal year 2021 could look like, and will be reporting out on that at a later date.

We estimate that we will have a total revenue shortfall related to COVID-19 of $17.3 million in fiscal year 2020.

The breakdown looks like this:

  • Undergraduate student refunds for unused room and board: $7.9 million
  • Refunds for Study Abroad students: $0.9 million
  • Projected fundraising shortfall in the fourth quarter of this year: $7.5 million
  • Lost revenue from auxiliary sources: $1.0 million

In addition to the lost revenue, we are incurring new expenses related to COVID-19 of $800,000.

We plan to offset the $17.3 million revenue loss and the $800,000 in new expenses incurred this year by significantly curtailing spending on operations that are unrelated to compensation and benefits. We implemented a hiring freeze and estimate that savings from food (since we have a fraction of our students on campus), travel, and other operating costs could amount to $7.5 million, and possibly more. In addition, we are receiving $1.8 million in federal stimulus support.

This nearly $9.0 million net impact from COVID-19, when added to a $4.0 million deficit we had earlier anticipated for this year, results in a projected $13.0 million deficit for the year ending June 30, 2020.

We will cover this deficit by drawing on reserves from the endowment, an action that must always be considered carefully and undertaken rarely. The endowment draw will be coupled with savings across all our budgets: We will ask employees to discontinue discretionary spending, halt services that are not currently under contract, and postpone purchasing until fiscal year 2021. We firmly believe that with these measures, the total amount of loss will be manageable and allow us to remain committed to our core value of wage continuity for our faculty and staff.

Read more in a statement from David Provost, executive vice president for finance, and treasurer.

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We plan to offset the $17.3 million revenue loss (see details in question above) and the $800,000 in new expenses incurred this year by significantly curtailing spending on operations that are unrelated to compensation and benefits. We implemented a hiring freeze and estimate that savings from food (since we have a fraction of our students on campus), travel, and other operating costs could amount to $7.5 million, and possibly more. In addition, we are receiving $1.8 million in federal stimulus support.

This nearly $9.0 million net impact from COVID-19, when added to a $4.0 million deficit we had earlier anticipated for this year, results in a projected $13.0 million deficit for the year ending June 30, 2020.

We will cover this deficit by drawing on reserves from the endowment, an action that must always be considered carefully and undertaken rarely. The endowment draw will be coupled with savings across all our budgets: We will ask employees to discontinue discretionary spending, halt services that are not currently under contract, and postpone purchasing until fiscal year 2021. We firmly believe that with these measures, the total amount of loss will be manageable and allow us to remain committed to our core value of wage continuity for our faculty and staff.

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Middlebury has made a commitment to continue to maintain wages for all benefits-eligible employees through June 30, 2020, regardless of an employee’s accrued Combined Time Off and Sick Leave Reserve.

We understand that by calling out June 30, many employees might feel that something dramatic will happen after that date. And while we cannot guarantee that that will not happen, we are naming the date because it is what our best budget projections allow us to say at this time.

We know there are insecurities and stresses around the continuity of wages. They are real, and we wish we were in a position to guarantee wages indefinitely. However, the economic challenges and shifting circumstances are considerable. We have done our best to ensure that the actions we see being taken today by so many educational institutions—furloughs, reduced salaries, layoffs—are not now occurring at Middlebury.

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We will continue to monitor developments concerning the pandemic and its impact on Middlebury—our campuses in Vermont, Monterey, and around the globe—and on our communities, the nation, and the world at large. We are hopeful that conditions will stabilize and begin to improve over the next eight weeks. At the same time, we will plan conservatively in developing the fiscal 2021 budget, adjusting our expectations for budget growth and asking department heads to consider how we can reduce expenses without affecting our ability to deliver the Middlebury experience, in all its forms.

This is work we must do in partnership, and we will rely on input from our faculty, staff, and students as we build our financial strategy. We will then ask our Trustees to support our collective recommendation on how we can best navigate the year ahead.