Editor’s note: The following is a transcript of a presentation given at November Faculty and Staff forums regarding the current state of the College’s finances, and forecasts for FY21 and FY22. It has been lightly edited for punctuation.
Good afternoon everyone, thank you all for participating in today’s Staff Forum.
For the next few minutes, I will give an overview of our financial affairs, touching on three fiscal years: the one that just ended this past June (FY20), our current fiscal year (FY21), and the one that starts next July (FY22). Each of these years, in some way, has or will face the effects of COVID. I am also going to talk briefly about medical costs, open enrollment, and will touch on the recently completed staff pulse survey.
To sum up the state of Emerson’s finances in a word or two: While we are on solid ground, we remain cautious. We came into this fiscal year prepared, focused on the challenges of the coronavirus-impacted fall semester, and hopeful that our planning and readiness efforts wouldn’t be upended by a force majeure we could not control. Thus far this semester, so far so good – accompanied by a loud proverbial “knock on wood” – that the next few weeks will stay the same.
Reflecting back, the spring of 2020 will be long remembered for the coronavirus, for national and worldwide economic devastation and shutdowns, and for illness, and most sadly, death. But in terms of our financial affairs, if fiscal year 2020 were only remembered for the modest-yet-meaningful financial result we achieved, it would belie the truly remarkable achievement of successfully navigating a once-in-a-century and still ongoing COVID-19 pandemic.
We ended fiscal year 2020 with a slight surplus, but some would argue, for all the wrong reasons. On its face, that result fails to represent our financial accomplishments finishing the year strong: covering many millions of dollars of lost housing revenue when we shut down our residential operations; making significant investment in near-immediate online learning preparedness to finish out the spring semester; overcoming lost net revenues from the cancellation of our international study abroad programs; and missing opportunities for profitable summer sessions and conferences. In response, with near-immediate cost controls, a complete pause on capital projects to preserve cash, and a near-total campus shutdown (something you all experienced and continue to feel the effect of), we were able to fund millions of dollars toward the necessary investments in [personal protective equipment], testing, contract tracing, hybrid teaching, and the expansion and de-densification of our campus, fundamental to our planning for what has become the story of fiscal year 2021.
Let me take a moment to remind you of what our FY21 plan represented, and where we are hopeful to end up. You may recall that as we planned out this year, we mapped out various scenarios, everything from a “normal” return to campus to an online-only scenario, with financial consequences ranging from a low-$30 million loss to upwards of $100 million loss for this year alone.
After careful, detailed, and intense consideration, we settled on our One Emerson Flex Plan, a hybrid academic model that includes online and in-person experiences. To respond to challenges for students, both domestic and abroad, we offered an online-only option, and we also leveraged relationships with international partners, focused on meeting the needs of our international student base who faced unprecedented challenges getting back to the U.S.
We focused on details designed to maximize our enrollment and revenues, and achieved a record level of first-year students, by making the necessary investments to attract and retain students, while instilling confidence [in] our community – from students and families to faculty and staff — that Emerson College was a safe place to return to and that we had a responsible plan to open.
We strived to achieve what we refer to as the “90 percent plan”: getting 90 percent of our freshmen, sophomores, and juniors, and 100 percent of our seniors, enrolled for the Fall. We planned for a de-densified residency level that met the health and safety guidelines. We added hotel rooms at the W to support our dorm capacity, and other academic space at hotels and in our theatres to support a safe academic experience. You should know that between the Fall and Spring semesters, we will have spent more than $5 million on coronavirus testing and millions of dollars more to expand, de-densify, and ready our dorms, classrooms, and buildings, and on everything from masks to plexiglass. We have attended to the needs of our community and followed public health guidance, including all the necessary cleaning, PPE, and other health-focused investments.
All of the above has made a difference. We’ve done incredibly well, reaching a remarkable 98 percent enrollment for the Fall through flex and online, but like so many peer institutions, our residency levels fell far short of our goal. Both our LA campus and Kasteel Well were unable to open, further adversely affecting our financial position.
[A]ll in, as of now, we are on pace to achieve what was the most optimistic of our financial scenarios. But let me caution you, even that plan, at its best, will result in more than $30 million in lost revenue and increased COVID-19-related expenses this fiscal year. And a further note of concern: To achieve the result I mentioned — $30 million of COVID-related losses — we need a good Spring, meeting our enrollment and residency expectations (which we are poised to do) and continuing our investment in testing and hopefully achieving results on par with this semester’s very low positivity rate.
Without proper planning and foresight, $30 million of losses would be a devastating outcome. But, as you know, to meet these losses, we put in place a comprehensive list of actions, cost-saving measures, and some revenue enhancements to responsibly address the significant financial consequences of the coronavirus.
We promised a responsible, measured, and humane approach, and in particular, one not reliant on layoffs or furloughs. I am glad to say that we are not expecting to change that course and, barring any unforeseen and devastating effect from the virus, we are doing everything possible to commit to that for the entirety of the fiscal year. Again, a cautiously optimistic position. We have been diligent on cost-control measures, getting all the necessary cooperation from our campus colleagues, and we are on track to meet these expectations for cost reductions. We continue to diligently hold back on hiring, with only the most essential positions being filled [and] we have curbed spending in many areas and will continue to seek efficiencies in this “new normal” remote work environment.
I am pleased to report that as we see it now, the combination of mitigating actions, above plan revenue gains, and a continued focus on health and welfare — the key to a strong Spring — gives us a fair shot at a break-even year, offsetting the consequential losses in a way that keeps our financial affairs healthy without doing lasting damage to the foundation of our college. But, as I’ve said, there’s a long way to go. Caution prevails.
We are keenly aware that a consequential amount of savings comes from actions affecting employees; to many this has been significant. Let me take a moment to thank you, and also to thank you for the questions that I received, in advance of today’s meeting. And let me take a moment to address two of them: salary increases and retirement plan contributions.
Realistically, at this point, we should not count on salary increases this year. As disappointing as that may be, we are simply far too early in the year, and months away from seeing how the Spring semester will turn out, for that to be considered. And … the same is true for retirement plan contributions; there is simply no guarantee I can offer that we can commence those this year, even at reduced levels. If there is any chance to do that – if the Spring goes exceedingly well, if revenue exceeds our projections, if we save more on expenses to offset any losses — we will certainly give every consideration to doing so. But, being cautious, there’s just too many hurdles ahead, given that we’re only in November.
This seems like an appropriate time to also mention cost increases to our medical plans. We recognize how important it is to have high-quality and affordable health benefits; we strive to continue to offer a comprehensive and competitive benefits package for Emerson staff and faculty.
This year, we did not make any significant plan design changes. Importantly, we maintained the 75 percent/25 percent employer-employee premium cost share. This year, like last year, we are feeling the continuing effect of increasing medical and prescription drug costs. These trends are national, affecting millions of workers across the country, and local, based on Emerson employee’s utilization of medical services and purchase of prescription drugs. Unfortunately, we will experience a 9 percent increase in health care costs next year, with Emerson picking up 75 percent of the increase. I do hope you know that we are committed to stemming the tide of these increases as we look to the future. We will also continue to work with the staff and faculty union leadership, as we did this year, on helping to bring down these costs.
Since we are in the midst of open enrollment, I would like to ask Ann-Marie Driscoll, director of compensation and benefits, to say a few words. Ann-Marie …
…Thank you, Ann-Marie.
Let me briefly return to the College’s finances.
We are prepared for Spring, as you’ll hear further from Michaele, but with two more months before the semester begins, there’s a long way to go amidst a now-raging pandemic to be anything but cautious and concerned. Still, we believe we’ve put strong plans in place, and thanks to our colleagues in Enrollment Management, we are optimistic for a strong Spring, and in conjunction with Campus and Residential Life partners, are preparing for a safe but higher residency level on campus, here and hopefully at ELA.
In partnership with our faculty, we anticipate a strong Winter Session, and both hybrid and online teaching modalities in the Spring semester. At the same time, we continue to make significant investments in campus health and wellness, including increased COVID-19 testing, tracing, de-densification, cleaning, and PPE. Face masks, social distancing, hygiene, and all the other health guidance will continue to be the order of the day.
Lastly, let me say a few words about FY22, and in particular, the semester that begins next Fall.
One thing you should know about this year is that, appropriately and strategically, we lowered the rate of increase for tuition and room and board rates. As part of our COVID planning, again with an eye towards maximizing our enrollment, we lowered our rate increases to 2 percent, reducing our revenues by about $3 million from what a full increase might have yielded. While this helped us achieve strong enrollment, it’s significant in that it will be effectively a permanent base reduction in anticipated revenue, all other things being equal, in years ahead. And as we move into the detailed planning for FY22 … we will need to be realistic in what our expectations for future tuition increases may be, given that the economic effects of COVID are still being experienced.
Importantly, we did not reduce our financial aid budget this year, an important and strategic measure to be able to attract that record large class I spoke about earlier. Continued pressure on our financial aid budget, particularly given diverse recruitment goals, will be another consideration. And with no guarantee of a “normal” enrollment level or a “normal” campus residential density, we will proceed cautiously as we think ahead to FY22.
We have every confidence that the Enrollment Management team will continue to recruit strong cohorts of students, but it is also reasonable to assume that COVID will continue to be with us, that investments in testing and other health and safety measures will be needed, and that expense controls will likely continue to be in place. Again, the key word at this point is “caution”.
On perhaps the brightest of notes, most notably just after the close of the fiscal year, we were able consummate the Marlboro Alliance, bringing more than 50 students from Marlboro College to Emerson, allowing us to recruit 14 new Emerson students to the Institute, adding 18 faculty members and more than $22 million of endowment funding to support our newly branded Marlboro Institute for [Liberal Arts and] Interdisciplinary Studies. Let me assure you that this alliance will have no adverse consequence on Emerson’s budget. Conversely, we have added important programmatic resources to the College, giving us another platform from which to grow.
Finally, I’d like to talk about you, the remarkable staff of Emerson College. We have all worked hard this year, under difficult, stressful, and adverse conditions. We all appreciate the collective efforts of this great body; a most sincere thank you to all of you. We have also worked hard this year to communicate with Emerson staff quickly, transparently, and clearly. In our recently distributed Staff Pulse Survey, we asked you how we were doing on that front, and here’s how your responded:
More than 350 of you, about 90 percent of respondents to the survey, were either neutral, satisfied, or very satisfied, with the timeliness and clarity of our COVID-19-related communications. We are proud of this result, and will continue to focus on this as we head into Winter and Spring semesters.
By comparison, we know that 48 percent — nearly half — were neutral to dissatisfied with our communications around how COVID-19 will affect the viability of Emerson College. We hear you, and will work to provide you with more information about the macro impacts of the pandemic. Hopefully today is progress in this regard.
Lastly, we also asked you about your longer-term preferences when it comes to work arrangement. An overwhelming majority of you – about 89 percent of respondents – prefer a work arrangement that includes regular, weekly remote work days. We don’t plan to make major changes while the pandemic continues, but we are having conversations about the long-term plan for remote vs. in-person work, and will continue to ask for your input and will share plans as they become available.
And now, for further reflection on the survey, I’d like to turn this over to Caitlin DiMartino, our director of learning and development in HR.